Succeeding in today’s market: Advice for buyers and sellers

The amount of property on the market in Perth has ballooned over the past six months. There are now 17,000 homes, units and town houses for sale on any given day. Although buyer demand is positive, it has not grown to match the recent dramatic increase in sellers coming on to the market. But as we know, the market can change from one week to the next. So how can buyers and sellers stay ahead of the curve?

At the height of the Western Australian property boom in 2006, there were as few as 5000 properties on the market day to day. This lack of supply, along with low interest rates, played a large part in creating the dramatic price increases that saw the median Perth house price soar above $500,000.

Today there is more than triple the number of properties for sale creating an abundance of housing, and with a steady number of properties entering the market every day, last quarter’s statistics show a current median sale price of $457,000.

This is having a flow on effect for sellers – their homes are staying on the market for an average duration of 71 days. This is far from ideal and leads to a compromised sales price.

So what can both sellers and buyers do in this current market to maximize their position. Here's some tips for both groups:

Sellers

Ideally, your property should sell while it is still “fresh” on the market, i.e. between 30-45 days. To ensure your agent is focused on this outcome, employ the following tactics:

• Insist on a bold, multi-media marketing campaign that showcases your property and generates buyer excitement – quickly in a crowded market

• Only sign up with your agent for 60-day authority. This is the prime window of opportunity in which to achieve a premium price. After 45 days on the market, your property will appear “stale” against new stock in your area

• Insist that your agent provide detailed written reports on buyer feedback and interest each week. This will help you tailor your campaign and make any necessary adjustments to the price or presentation of your property.

Buyers:

The current market is well suited to buyers, even if interest rates are the highest they’ve been for 10 years. Here’s what prospective buyers should be thinking about:

• There is a unique range of choice in Perth’s property market today with 50% more stock on offer than “normal”. Properties and opportunities that would not normally be available are being flushed into the market place

• Sellers are more likely to be reasonable in their price expectations and terms and conditions. Opportunities to buy “fairly’ are increased.

• There has been a lot of talk about interest rates and their steady increase over the past year, but with median prices decreasing at 2.7%* last quarter buyers need to see the clear offset in house price (savings that may be in the tens of thousands) against the interest rates which are now likely to remain steady for some time going forward.

Both buyers and sellers need to have a clear plan when entering the property market. A good agent will provide sellers with the most up to date information and statistics enabling the vendor to make realistic pricing decisions.

And buyers need to remember that the market can change very quickly – almost from one weekend to the next. The data we are seeing today is already “old” and if demand builds up again, the next rise in the cycle will kick in. Now is the ideal time for buyers to capitalise.

* Source: REIWA

Demand more from your agent

Realmark has bucked the trend for lengthy sale periods in the current slow market conditions, selling properties almost a full month quicker than their competitors – scoring an average 44 days on market for March.

Realmark properties are averaging just 44 days on the market while REIWA recently announced that the average home is taking 71 days to sell.

I believe that while the Perth real estate market is in a period of uncertainty, sellers should not accept a slowing market as an excuse for lengthy sales periods.

At Realmark we are selling homes in a third less time than our competitors because we have adapted to the changing climate.

Seller’s really need to be aware that time on market is a critical factor in terms of achieving a favourable selling price, a lengthy sale period can result in the loss of tens of thousands of dollars.

The best advise I can give is sellers need to make their agent accountable, when signing an agent, do not issue them with an authority of longer than 60 days, if they can’t find the right buyer in that time, you need to reconsider your position.

Many agents use the market as an excuse, but the fact is for an agent to survive they need to be able to sell in both the good times and the hard times – unlike Perth’s recent boom years, homes no longer sell themselves.

Agents have to employ a strategic range of initiatives which takes the market situation into account and offer sellers effective solutions.

My 5 key points of advise for sellers;

1. Only issue your agent with a 60 day period to sell your home to ensure they retain focus and remain accountable.
2. Do not accept that market conditions are an excuse for lengthy sales periods – time on market is critical to price.
3. Find an agent with a strong track record, a detailed knowledge of your suburb and positive seller testimonials
4. Understand the value of investing in good quality, strategic buyer attraction marketing with a point of difference.
5. Expect weekly written reports from your agent detailing buyer feedback

Your comments and/or questions regarding this post are most welcome.

Private Treaty: Going, going, gone…

Western Australia, unlike its brother and sister states in the east, is fixated on Private Treaty as a method of selling property. But why? In today’s information age, buyers hold the power. So why haven’t sellers and agents adjusted their approach to make it work for them?

Ask most Perth real estate agents which method they recommend when selling a property and the answer will almost always be “Private Treaty.” But does it necessarily deliver the best result?

Western Australian’s have always been hooked on Private Treaty while most other states in Australia have a more balanced approach with at least 50 per cent of suburban property being marketed without a fixed price, culminating in an auction or tender process.

The essential difference between these two approaches comes down to setting the price.
Using private treaty requires the seller to set a fixed price for the property and making that price public knowledge. This sale price is often based on their real estate agent’s recommendation.

In fact, sellers often mistakenly select an agent purely based on the price that the agent forecasts and agents are tempted to quote sellers a price they want to hear!

Alternatively, going to market without revealing a set price means the market place (i.e. buyers) bid for your property to the maximum price they are willing to pay.

The Real Estate Institute of Australia lists the differences between the two approaches however, important issues for a seller include:

Set Price
also known as Private Treaty or Open Market
• No set settlement period
• No set terms of sale
• Price that is attacked by buyers
• Buyer is in control

No Set Price
also known as Auction, Tender or Offers Invited
• Set settlement date
• No price barrier
• Set sale terms
• Seller in control

I believe Perth’s fixation on Private Treaty is based on an era when buyers didn’t have easy access to market information and real estate agents controlled that data. Today, buyers are very well informed and have access to ample market data. They are capable of making their own decisions about the value of a property. The no set price approach, especially when combined with the auction sale process, brings a concentrated and defined marketing campaign to a climatic conclusion where buyers are forced to offer their best price.

Agents need to let go and encourage sellers to ‘take the lid off’ and let the market decide. You want buyers to compete. The result may exceed expectations.

And sellers remember, even at an auction, you don’t have to sell unless the result is right for you.

Don't follow the herd!

Despite economic uncertainty and a turbulent equities market, the real estate market continues to offer opportunity. Scratch the surface of the most recent statistics and you’ll find that the volume of property in WA exchanging hands has been consistent for the last three quarters signalling steady supply and demand. Smart buyers will stay ahead of the pack and look for opportunities – now.

There’s no doubt that any changes on the global economy and the local markets causes anxiety for both investors and the general Australian public. There is a general “sense” out there that things are “a little unstable.”

This might be causing some prospective real estate buyers to sit back, waiting for the bottom to fall out of the property market. I believe the data we are seeing is actually telling a different story. Since the June 2007 quarter, we have seen a consistently healthy level of supply and demand.

In fact, around 13,000* properties have changed hands each quarter, which equates to approximately 1000 per week. This indicates that there are still buyers out there. And if buyers are astute, they will move to buy now. There is a steady amount of stock offering excellent choice and the potential for good value as well as the potential to negotiate fair terms and conditions.

Interestingly, the type of buyer in the market place has changed a little over the past few months. The number of investors and first home owners has decreased by 5% while those buying their second or third home represent an increase of 5% in the market.

No doubt this is because the higher interest rates are impacting some investors who may be paying more to borrow money and may have been too confident in the value of their assets. But if people can get over the current sense of economic anxiety and affordability issues, it’s never been a better time to buy – and buy well!

The real estate market will always peak and trough and admittedly we have seen some very strong growth up until last year. But overall, the WA economy is very strong and is likely to be for the mid to long term. Furthermore, the demographic data indicates that housing demand will continue to grow. Similarly, the real estate market data tells us things are also consistently positive.

So our message to buyers is “don’t hold back" waiting for a dramatic negative change in the market that is unlikely to happen. Be confident and take the opportunity while it exists today.

“Stay ahead rather than follow the herd.”

* Source REIWA Market Update