Guess who’s back..?

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FOMO! The most overused headline in real estate journalism throughout the boom of 2014 – 2017 was FOMO. For the unacquainted, FOMO is an acronym that stands for the ‘Fear Of Missing Out’, and you couldn’t turn on a television, open a newspaper, or scroll through Social Media without seeing a story that contained the narrative around FOMO, and the critical part it played in driving property price growth throughout Sydney (and, much of the country).

The abridged version: Interest rates were (are) at historic lows, meaning many people could afford to borrow and repay more money than they ever could before. When a property hit the market, buyers with access to this money were outbidding each other to secure that asset, and a lot of the time that bidding was reaching irrational levels.

Properties with reserves of $800,000 were regularly selling for $1,000,000. If it had a $1.5m guide, it was a chance of scraping $2m by the time my gavel fell. That’s not to say that the owner wouldn’t have accepted the guide price, it’s just that the FOMO was strong. The thought process was “we’d better buy now before prices keep skyrocketing”. The momentum was entirely self perpetuating. Everything was selling, and for big money. And then…

Lending starts to get tighter. Lower rental yields meant investor activity started to disappear. First home buyers were priced out of the market. Competition starts to dissolve. Fewer buyers means owners are more willing to negotiate. The market starts to organically correct itself as it always does.

So, we’re now in 2019, and with prices at their lowest levels in 18 months, why is FOMO charging back into the narrative? Because it’s evolved!

FOMO has now turned into the Frustration Of Missing Out. #FOMO2019 y’all!

If a vendor is on the market in 2019, unless they’ve been living in a cave somewhere, they know about the correctional phase that the market is in, and the price drop in their area. If they’ve owned their home for longer than 5 years, they’ve likely seen its value increase by 50% before more recently coming back down to Earth to the tune or around a 15% drop. Having factored this into consideration, the asking prices we’re seeing in the market at the moment are very much attuned to the 2019 real estate environment.

So, why the FOMO?

Land with auction guides of $530,000 is selling for $555,000 on auction day.
Units with auction guides of $750,000 are selling for $775,000 on auction day.
Houses with auction guides of $1,250,000 are selling for $1,280,000 on auction day.

Every weekend, there are buyers waking up on Sunday morning and seeing that the property they loved (but didn’t bid on) has just sold for bang-on its guide. Or, maybe $20K, $30K, $50K above its guide. Every Monday morning, buyers are ringing agents saying “Oh, we’d have paid that!” or “We thought it would go higher than that so we didn’t register“.

There is a huge sentiment of frustration seeping into the marketplace, and it’s the frustration of missing out.

To a degree, I get it. There has been a recent pattern of auction guides being smashed, and it felt like every auction sale was a record of some type. That’s simply not the market we’re in now. Sellers understand this, and are being realistic when it comes to their expectations around sale price.

Right now is THE best time to buy and THE best time to upgrade that I’ve seen in the last decade. Sellers are realistic, and in the overwhelming majority of cases, so are their reserves. If you’re looking to buy, give yourself the best chance at taking advantage of the market. Offer pre-auction, or register to bid at auction. There’s going to be a tonne of people in 2021 looking back wishing they bought in 2019. The FOMO is real.

Dear Barry

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The C bomb. Commission. There, I said it.

For homeowners and property sellers, a real estate agent’s commission has never been as scrutinised as it is in 2019. Disruptive models are entering most facets of our lives, and in the majority of instances, their existence is meant to make our lives easier. Most do.

Social Media v traditional media. Uber v taxis. Air BnB v hotels. Artificial Intelligence v Support staff. Spotify v radio… the list goes on.

Undoubtedly, the majority of these disruptors are successful because they provide a different, or ‘better’ user experience. That is to say, the user benefits from the model. The model makes life easier.

Keeping this user experience in mind, any change to the way in which we sell houses would have to provide a benefit.

Purplebricks, for example, is one of a long line of ‘flat fee’ disruptors in the real estate space. They are not the first, and certainly won’t be the last.

There will also always be traditional agents who cut their commission to hold market share (1% fees instead of 3% fees, as an example). I think there’s merit in talking about the commission structure for both, which I will cover off on shortly.

To be clear, my only reason for bringing up Purplebricks is because they’re very topical right now. Spearheaded by Barry Du Bois, familiar across Australian television screens as the host of Channel 10’s lifestyle program The Living Room, the company is spending up big on a very aggressive, controversially worded television, radio and social media campaign to deliver the following message:

“Real estate’s changing. Compare Purplebricks to an old fashioned “commission collector”: Purplebricks have expert agents that get great results, but for a fair, fixed fee… So what’s the difference? The commission collector takes a massive chunk of your sale price – does that sound fair? Sell smarter, and pay less with Purplebricks.”, proclaims Barry.

Is it that simple?

In paying any agents’ commission, first and foremost you should be paying for an expert negotiator. Someone who is at the top of their game, has the record to prove it, and who you know has everything to gain and prove from selling your home for the highest possible price in any given market. That person must also have a database of buyers and contacts to leverage in your advantage. Ideally, they will have a team of people working to market, show and sell your home. Impeccable photography, brilliant copywriting, creative Social Media. They should also be experts in styling, landscaping, dabble in psychology and practice Zen Buddhism. In terms of what a traditional agent vs a disruptive model agent might offer, for the sake of the exercise I’ll call this one a wash, and assume that in all instances, we have a level playing field.

That being said, you mustn’t treat the sale of your home lightly. It is the sale of the most valuable asset that 99% of people will ever own or sell. Getting the absolute best result is critical, and can be the difference in whether you can truly afford that upgrade, whether you have to get a bigger mortgage than expected, or whether you end up staying put because you’ve chosen so poorly that your home never had a chance in hell of selling for the price you were promised.

Real talk: Who you choose to represent the sale of your property can have a profoundly life changing result, good or a bad. That sounds dramatic, but I’ve seen both outcomes.

So, do you pay a flat fee up front, go with a cheap agent, or do you incentivise your agent with a percentage of the eventual sale price?

Do you remunerate an agent before the property has sold, or do you remunerate them only after they sell your house? How about you, personally? Would you do a better job at anything in your life if you knew it would increase the reward?

It is my experience over 20 years in the industry that a traditional agent who discounts their fee does so for a reason. They will insist that they have lower overheads and that they pass that saving on to you. Nice line. Newsflash: If they could charge more, they would. If they can’t demonstrate and validate their own value with conviction, how do you expect them to demonstrate and validate the value of your home with conviction?

Let’s (very) conservatively suggest that an incentivised agent can add just 5% to the eventual sale price of a home whilst charging 3x the fee of a cheaper alternative, whilst also charging a marketing levy:

1% fee on a $1,000,000 sale (+ free marketing) = $10,000 agent fee.
$1,000,000 – $10,000=
$990,000 to the owner.
—–or—–
3% fee on $1,050,000 sale (+ $5k marketing) = $36,500 agent fee.
$1,050,000 – $36,500=
$1,013,500 to the owner.

$1,013,500 – $990,000 = $23,500.

This seller is +$23,500 better off despite paying 3x as much in commission AND $5k in marketing!

If you price your home right, you’re a chance at selling. If you choose the right agent, you’re a chance at selling for an exceptional price.

There are great agents in every category of our industry, but you mustn’t simply focus on the saving. You owe it to yourself to work out the potential loss. The cheapest agent is the one who gets you the highest price. Employ the best negotiator, regardless of fee… it’s too expensive not to.

Sincerely,

An old fashioned commission collector.

First impressions count

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When talking about presenting a property to the available marketplace in its best possible light, the phrase “You never get a second chance at making a first impression” could not be truer when it comes to the impression a property can make on a potential buyer at very first sight.

As well as its structural condition and level of basic maintenance, the way a property is presented and styled will also have a huge impact on the perceived value of the home.

It is natural for buyers to look around a property and look for discounts; things that they will need to do to the property for them to feel happy with their purchase, and to see themselves living there. These things start adding up, and they do so in the form of perceived discounts –  costs that are factored in to any eventual offer. Some examples could be:

“The home needs a bathroom makeover… that’s $30,000 I can negotiate off the price guide.”
“The home needs new carpet… that’s $10,000 I can negotiate off the price guide.”
“The home needs fresh paint… that’s $8,000 I can negotiate off the price guide.”
“The home needs a modern front door… that’s $2,000 I can negotiate off the price guide.”

When it comes to negotiating with this particular buyer type, if they haven’t already been turned off the project altogether, they have most certainly been given the leverage to negotiate south of the asking price. If you find yourself in this position as a seller, don’t be offended – haggling or finding common ground is a natural part of the negotiation process, and it happens across all categories. Cars, boats, business… heck, we’d haggle with the menu at McDonald’s if we knew we could. Everyone wants to feel as if they got ‘a win’, but if you have a proven negotiator on your side, you’ll be okay to a degree.

In mentioning this, if you are considering selling your most valuable asset, it is critical that you discuss whether your home is ‘market ready’ with your agent prior to listing it for sale. They are, after all, your local property expert. Being familiar with the market, comparable property sales, and the behaviour of buyers in your price point, you can work with them to proactively minimise possible objections. Even if it means you wait a few more weeks before listing for sale (in order to complete your checklist) it will be time well spent.

Perhaps you can afford to get the checklist done in its entirety. Maybe you can only tick a few things off the list – every tick helps.

There’s always a chance that you might only financially ‘break even’ having done these improvements, but even breaking even and making that money back is better than having to negotiate south from your asking price.

There are agents in most marketplaces whose hallmark is essentially ‘Don’t renovate before you sell, any agent recommending this just wants their marketing campaigns to look better at your expense.’ Ummmm okay. These agents play on the emotional attachment that most people have to money, rather than focusing on things that can make the owner more of it. The fear of loss is a strong one, so be mindful of an agent who will try to leverage that fear to their advantage.

An un-renovated, unmaintained property will result in low offers, low competition, and a low sale price. Easy work for the agent when all they have to do is deliver bad news and wear you down. I’d rather the contrast – deliver the agent a beautifully presented property and give them every reason to get you the best price.

Like anything, the best results are arrived at via competition. The fewer things ‘wrong’ with your property, the higher the likelihood of it appealing to more buyers in its price bracket. It will photograph better. Better photographs will lead to more enquiry. More enquiry will lead to more inspections. More inspections will lead to more bidders at your auction. The numbers game. Your agent’s ability to get you the best possible price in the current market is greatly influenced by the property’s ability to make a lasting impact. Be ‘that property’ the buyers keep coming back to.

Around 18 months ago I was scheduled auction a house. I ended up being booked to auction it twice, for 2 different agents.

The owner and been renting it out, and the first time around they showed it as an empty, soulless, rental property. No investment into styling, no care for presentation. Unsurprisingly, it passed-in at its first auction after failing to reach its reserve. 8 weeks later and with its second agent, the owner had invested $8,000 into styling, had the driveway pressure-washed, and the gardens tidied up. The property was sold pre-auction for $65,000 higher than the reserve price just 8 weeks prior. Spend $8,000 to make an extra $57,000? Sign me up!

If you can’t see the value of investing in your home, you can’t expect buyers to, either. Like most things in life, you get out what you put in. Style and present your property as best you can, heed your agents’ advice, and give yourself the best opportunity at achieving the highest sale price you can. Trust me, it’ll be worth it.

In real estate, local matters

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As home sellers, we select local agents for many reasons. As real estate professionals, the term ‘you don’t just buy a home, you buy a community’ is often thrown around, and it is true. When a buyer goes to inspect a property, they take note of the surrounding streets on their drive toward the signboard. What type of houses did we drive by? Is it close to schools, and did we pass any shops? Yes, the property itself has to tick many boxes in order for an offer to be made, but it also isn’t on an island, so its community matters. Unless it is on an island… but that’s another blog!

This is where the value of employing a local expert to negotiate with your buyers comes to the fore. A local agent will not only be able to validate value based on comparable property sales, but also tell a buyer the quickest way to avoid the traffic light log-jam at 7:00am on weekdays. Where the best coffee is. They’ll be able to genuinely recommend local schools because either their children go there, or they have friends whose children do. Restaurants? Tell them what you like, and a local expert will point you in the right direction. Parks and recreational things to do? They know, because they use them.

When it comes to employing an auctioneer, all of the above is critically important as to how they will resonate with the bidders at your action. We have a short opportunity to make a big impact. An auctioneer who possesses true empathy – a love and passion for the area he or she is representing – can absolutely ensure that their emotion is transferred in that very small window of public negotiation. That transferal of love and passion for the home and its community can be pivotal to engaging bidders on the auction floor, making them feel comfortable in an unnerving situation, empowering them to make that one more bid, and validating why that final bid will be worth it. Evoking passion in others comes from a place of honesty. It can’t be fabricated.

You can pick an out-of-area auctioneer a mile off. They rattle off their robotic scripts, feigning insincere adoration of schools they’d never heard of a year ago, café’s they’d never normally frequent, or local amenities they’ve never, ever used. Cliché-filled introductions. ‘Insert school name here’, ‘Insert shopping centre here’, and ‘Insert notable transportation method here’. Soulless scripts used at every. Single. Auction. It’s the auctioneer equivalent of hiring an out-of-area agent to sell your home. It discounts the value of local, and implies that anyone can do it. Maybe, but not better. Why settle for maybe, but not better?

As the owner of a local auction business, I implore you, our local home owners and real estate agents, to please continue to support local. Local matters, and you best of all know it.

As a baby I was brought home from hospital to my first home on Cross Street, Baulkham Hills. I learnt to swim in North Rocks. Mayor Dr. Geoff Brooke-Cowden was our family doctor. Mayor Bernie Mullane (MBE) was my mum’s boss at Baulkham Hills’ first ever pharmacy. Mum, also a pharmacist, eventually owned and ran Dural Village Pharmacy until her retirement. Kellyville Public School and Crestwood High School educated me. So too did the Castle Hill Tavern. My eldest two children were born at Baulkham Hills Private, my youngest two born at Norwest Private, all now educated at Our Lady of The Rosary in Kellyville. You’ll find my family at the Hills Basketball Stadium, Kellyville Netball Courts, Bernie Mullane Soccer Fields or Annangrove Swimming Centre almost every morning or night of the week. We live local, are invested local, shop local, spend local and always, always support local.

Whether choosing an agent or an auctioneer, please support local. Local matters.

You can’t sell a secret

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There is no doubt about it – the cost of property advertising has changed. A listing upgrade on one of Australia’s two dominant property portals, Domain and realestate.com.au (REA), would have set you back around $200.00* per portal just 10 years ago. Today, that same upgrade costs around $1,200 per portal, and to many working-class families, this is a lot of money to contribute to a marketing campaign. My counter argument is always – can you afford to not be leveraging these mediums?

Whilst it is clear that the cost of these advertising platforms has increased over the last decade, so too has your bang for buck. Once upon a time, these sites would brag about audience numbers in the hundreds of thousands per month. Now, we’re talking millions. What used to be a desktop search is now predominantly App based. When it comes to Apps, consumers are moving towards brand loyalty, and don’t often duplicate category apps. In Layman’s terms, that means that a property seeker won’t have both Domain and REA apps on their smartphone, tablet or smart watch, they’ll have one or the other. Their personal preference based on functionality, design and user experience.

Like anything, personal preference is… well… personal. The job of these portals is to encourage downloads, as well as increase traffic and engagement whilst continually generating new audiences for your property. This is where the increase in cost comes from; their focus on growth.

Drive down the M2 and you’ll see both companies vying for your attention via digital signboards. Go and see a Sydney Swans game and you might be sitting in REA’s ‘Front Yard Footy’ section of the Sydney Cricket Ground. If you’re a fan of Channel 9’s reality television series ‘The Block’ (I know a really handsome auctioneer who was on that! Lives in Kellyville, great guy. Humble, too.) you’d be blind if you didn’t hear or see Domain being name dropped throughout the filming and also during the ad breaks, as one of the programs major sponsors. Domain will also have naming rights to this Summer’s Ashes cricket test versus England, whilst fans of Three Birds Renovations will be familiar with their REA sponsored and wildly popular property renovation web series.

We’re also talking about technology, so the evolution is infinite, and happening in real time. Their apps and websites are updates almost hourly with new code, functionality improvements, bug fixes, new operating system preferences… heck, whilst I’ve been writing this Apple has released 2 new iPhone models. These business work closely with the giants of tech and social, namely Apple, Google, and Facebook, to continually operate at the forefront of trend. Not just reacting, but predicting.

Why do I mention all of this? How do YOU find property? What’s YOUR preference? It’s probably different to mine. Our preferences are probably different to the 120 people we want to get through your home before auction day. Spread the net as far and as wide as you can get. A decent agent and auctioneer *cough* combo will get you back every dollar you spend advertising your home. Think of that money as a very short-term investment. This is money you’ll see again, hopefully tenfold, in just a few weeks. Shout it from the rooftops, from device to device! You can’t sell a secret.

*based on Hills District prices

Hindsight and crystal balls

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Every 7 to 10 years, the property market endures a correctional phase. You might think that’s a throw away phrase, as it is one that agents use often, but the numbers back it up. There are many valid and understandable reasons for this; some sneak up on us uncharacteristically quickly, and others are odds-on predictable, but we’ve seen them all – in one shape or form – before. I’ve been in this industry for almost 20 years, so you can trust me when I say that this is not unchartered terrain, albeit a different path.

Before we delve into the intricacies of what’s going on, lets take a look at a ‘typical’ Hills District suburb growth chart over the past few years. Prices are approximate to show flow.

2010: $800,000
2011: $850,000
2012: $925,000
2013: $1,000,000
2014: $1,150,000
2015: $1,350,000
2016: $1,500,000
2017: $1,400,000
2018: $1,325,000

Undeniably, 2014-2017 saw most property values in the Hills District grow faster than they otherwise had been in the preceding years (not that they were too shabby themselves). Many homes saw a 50% increase in their value in a 48 month period! A lot of this growth was due to skewed supply/demand ratios – there simply weren’t enough houses being sold to keep up with the demand, which created heated competition for the fewer properties that were being sold. Whilst this trend was Sydney-wide, The Hills was a huge beneficiary.

Historically low interest rates during this period meant that money was, for want of a better term, easier to get due to the typical mortgage repayment being lower than it had been in a generation. This not only led to a surge in people upgrading their property, but also a rise in investor activity, attracted by not only rental yields but also the newfound spike in asset growth. Add to this a perfect storm of positive bureaucratic and legislative activity as the Hills District was finally benefitting from decades’ worth of Government(s) promises of infrastructure such as the North West Rail Link, road upgrades and land re-zoning. Shops and schools started popping up, and Sydney’s growth corridor was, as they say, hot property.

Seeing the house down the street sell for big bucks encouraged an onslaught of property to come onto the market in an attempt to take advantage of the high prices. Whilst completely understandable, the result was an oversupply of both sales and rental stock. Buyers were now spoiled for choice. If they missed one, they could just wait for the next. They could haggle. Similarly with the rental market, lower rental yields began deterring some investors.

I believe that prices today are exactly where they should be. The prices of 2014-2017 were abnormal. An unsustainable spike.

Sellers, I urge you to stop punishing yourselves by looking back at 2 year old prices and suggesting that, by selling for what your house is now worth in 2019, you’re somehow losing money. I could sit here and say that I lost $1m by not putting $10K on the winner of the Melbourne Cup the day after the race. Not only are you talking with 20/20 hindsight, the windfall is completely hypothetical. You didn’t list then. You didn’t sell then. With all markets being relative, any ‘bonus’ money you may have received by selling in 2016 would have been spent covering the increased value of the house you would have also needed to purchase in 2016.

Unless you bought between 2014-2017 with the hope of turning a quick profit, the majority of home owners in the Hills are still making a great deal of money when selling today. Real estate should always be a long game. Over the long term, you just can’t beat it. There is great value in the Hills market, and if you’re buying and selling at the same time, then it’s all relative. Don’t let the media deter you. The sky isn’t falling. Buyers are still buying, and houses are still selling… for what they’re worth in a 2019 market.

Auction time is any time

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There is a very common misconception in the real estate space that seems to suggest that the auction of a property can only happen on a Saturday. Based on the level of booking enquiry most auctioneers receive, it would also seem to suggest that around 11am of a Saturday morning might give one the best chance at transacting unconditionally under the hammer.

And that couldn’t be further from the truth.

At Benson Auctions, we are continuously reaffirming our ethos to anyone who will read or listen, and that is to ‘Trust The Process’. In saying this, we mean that selling any property via auction is to do so via the application of a few things that work regardless of what day an auction is called, and indeed the time of that day.

Auctions are, for want of a better description, a formula for selling assets. Auctions invite anyone with a particular budget who is in the market for a particular asset to participate in the opportunity to determine the value of said asset.  Auctions also encourage transparent competition to arrive at what might be deemed ‘current market value’ for the asset, and this is achieved in a public arena so as to reaffirm that the price has been dictated by the marketplace, not the selling agent. When applied to real estate, the buyer has (generally) 28 days to look at comparable property, conduct pest and/or building inspections, and talk to their lender to secure finance. In the same window of market exposure, the seller will receive market feedback from their agent around price validation, and come auction day that feedback will be used to set the reserve of the property, and the decision making on the day should the property fail to meet its reserve but come close enough to consider a measured reaction.

All of this can happen anywhere, any time. “Oh honey, this home is perfect! It has everything we could ever want or need! It’s a shame we can’t buy it because the auction is on a Thursday night” said no one, ever. If a buyer genuinely loves a property, it is genuinely within their budget, and they genuinely would like to try and buy it, then they will be at your auction. Anyone using the day or time of an auction to not attend is not a genuine buyer. Even buyers who can’t be at auctions due to things like having to attend weddings, or family holidays, are able to arrange proxy bidders, or to bid via the telephone. Genuine prospective buyers do this weekly.

Travel around Australia’s current auction markets and you’ll see proof of the process working on many different days and times. Head to Adelaide on a Friday, and you’ll hear auctioneer Bronte Manuel’s voice booming throughout the streets and suburbs of the City of Churches as he and the Toop & Toop team expertly apply the process to daytime, on site auction sales. Fly to Brisbane’s trendy New Farm district on a Tuesday night, and you’ll likely see legendary QLD auctioneer Haesley Cush auctioning 20 odd homes and apartments at the well renowned ‘Auction Under the Stars’ summer auction events. If horse racing isn’t your style, Sundays around Melbourne’s prestigious Caufield district is a hotbed of auction activity for the team at Gary Peer & Associates, a strategy that allows them to accommodate the transactional preferences of their areas high proportion of Jewish ownership. Mid-week daytime auctions are a staple for Commercial property sales, just as mid-week evening auctions held ‘in rooms’ are ever popular Nationally. Looking locally, the highest price achieved by public auction throughout the entire Hills District in 2017 was a 5 acre block of land in Dural, sold at 11am on a Sunday!

An agent who believes in the auction process and is able to use its structure to deliver its benefits to both seller and marketplace knows that the best time for an auction is the time it’s scheduled. Any property, any day, any time… trust the process.