Methods of sale and what do they say about the property and/or the state of the market? (Ep.159)

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In this week’s episode, Dave, Cate and Pete take you through:

  1. A question from our listener. Hi guys, thank you for such an informative, but entertaining podcast. I’ve just listened to the episode on “off markets”. I am just wondering if you can offer some insights into how to navigate when a property is “on market” but is listed as EOI (expression of interest), rather than a price range? Why might a vendor do this? Do you put your best price forward and declare all your cards, or is there still an opportunity to negotiate? Is it a case of Pete’s rotten apples potentially? Thanks team
  2. What are the typical methods of sale around our nation? Cate takes our listeners through a brief recap of the various different sale methods used and what factors impact the choice of sale method.   
  3. Best and highest offer – should you show all of your cards or go for baby steps? The trio discuss what happens when the highest offer is actually really low and the vendor isn’t happy with the outcome and Cate shares her tips on when you should actually submit your best and highest.
  4. Why wouldn’t you auction a property? The trio discuss the market conditions and reasons why a property is selected to be sold via auction. More importantly, when you should not sell a property via auction.
  5. As a vendor, what sort of guidance and rationale should you be looking for with your agent when you are considering the various methods of selling? The trio discuss how to field real estate agents and the key questions to ask.   
  6. What does it mean if the price guide changes? Listeners beware! Cate reveals what a reduced price actually means (and it’s not more dollars in your pocket).  

Resources

Show notes

A question from our listener
Hi guys,
Thank you for such an informative, but entertaining podcast. I’ve just listened to the episode on “off markets”.
I am just wondering if you can offer some insights into:

  • how to navigate when a property is “on market” but is listed as EOI (expression of interest), rather than a price range?  
  • Why might a vendor do this?  
  • Do you put your best price forward and declare all your cards, or is there still an opportunity to negotiate?  
  • Is it a case of Pete’s rotten apples potentially? Thanks team 

 What are the typical methods of sale around our nation?

  • Private sale with; Range, Set price, No price 
  • Sale by tender/Expressions of interest/set sale 
  • Auction 
  • Off-market 

What factors make these types of sale methods vary?

Type of property, calibre of proeprty, seasonal, types of buyers, market sentiment. If in seller’s market, you’d treat differently than in a buyer’s market. You wouldn’t put an EOI campaign on something that’s a dime a dozen and affordable. You’d put it on a unique property that has a chance of getting a stellar offer that surprises everyone. Generally speaking a vendor with an EOI campaign is looking for a happy surprise. 

 What happens if the high offer is really low

  • Campaigns could change, auction campaigns change, goes to private sale. Expressions of interest come with a deadline – about a month. Underwhelming offers, they may convert to private sale or auction. Is something wrong with it? Do you show all of your cards and go for baby step? Best and highest, one offer – then the agent calls you and asks if its really your best. This happens greater than 50% of the time. Sometimes they’re fishing to look like a hero, and sometimes they are actually being honest, sometimes trying to create competition with a boardroom auction.  
  • Social proof might be what’s required to get a higher offer.  
  • Every case is different, how badly do you want the property, how much competition is there? 
  • If I don’t know the agent very well and they say best and highest, will give the best. If they say, give us something good and we’ll call you back – that means there will be another opportunity. If they say we’ll get the top 3 and speak to everyone.  
  • I won’t tell you the other offers, but if there is a higher one, we’ll give you an opportunity to increase.  

Why wouldn’t you action a property?

Key reason to go to auction is if there are multiple buyers who are keen on the property. Competition through bidding that will push the price up through the process. If you’re worried that there will only be one or two or maybe none, then there is greater risk in taking it to auction.

As a vendor, what sort of guidance and rationale should you be looking for with your agent when you are considering the various methods of selling?

  • When selecting a real estate agent, what is their preferred method of sale – auction or private treaty? What do you think is the best method of sale, and then research the real estate agents.  

Price guides

  • If the price guide changes for expression of interest or auction – what does it mean if it is reduced or increased. Now we’re seeing reductions, last year we saw step quoting.  
  • Sometimes because the agent is honestly thinking that’s where it sits.  
  • Sometimes there is a property that attracts more interest.  
  • If it shifts down, it means they want to get more people through the door. 

Gold Nuggets

Cate Bakos – The Property Buyer’s Golden nugget: My gold nugget relates to people who have the feeling of trepidation when they see EOI or set sale or sale by tender, because they can panic. What do we pay and how can we buy it without having a crazy margin between us and the other people. Do your research, knowledge is power. Do your comparable sales analysis, you will then have a good idea of where it sits. Often these are rare properties, how do you put a value on something so scarce? Ask yourself: how important is it for me to have this scarce product? You need to be prepared to pay a premium. You need to be really certain that you can cover all of it, finance and buffers in case the bank doesn’t agree with what you’ve paid. If in doubt, talk to a friendly opposition agent to help you out.

Peter Koulizos – The Property Professor’s Golden nugget: When you go to an auction, if you’ve come up with a round number, encourage you not to stop at the round number, you should go to 1,005,000 or 1,015,000. But also have a number in mind and that’s where you stop. Auction is based on emotion, you can think what’s another $5,000 and end up paying way more than it’s worth.

Market Updates

  1. NSW state budget announces introduction of annual land tax to replace stamp duty. Stamp duty has already been abolished in Canberra, but Canberra only has one hundred thousand homes. It will be interesting to see how Sydney fares on a much larger scale with one million dwellings. The introductory measures will be in place for first time buyers only, who can opt to pay land tax annually of $400 + 0.3% of the property value.
  1. Attitudes towards the property market diverge. The reality is that there is a segmentation in the market currently between those who haven’t ever experienced interest rate increases vs those who have. Cate explains how this affords great opportunity for anyone who is willing to take the plunge in certain segments of our market.
  1. Crypto currencies take a dive. Increasing inflation has led towards large rate hikes in the US, with the most recent 75 basis point increase announced this month, which is the highest rate increase in 29 years. This in turn puts pressure on shares and crypto currencies. Bitcoin has fallen by 70%, whilst some crypto exchanges have ceased the ability for people to access funds and make redemptions, almost like a bank denying withdrawal of funds. This is a sure sign that the crypto currency market is facing some serious headwinds. Dave shares the potential upside that these falls represent for those who own property.   

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