Selling your home - a personal perspective: 1. Method of sale

by Alistair Helm in , , ,


By the way - this is not our new house or our old house - just a nice pic of a house!

By the way - this is not our new house or our old house - just a nice pic of a house!

Recently we have completed a complex, emotionally charged, time consuming and potentially life-changing process - we have moved house!

Much like 80,000 other people this year, we have sold our existing house and bought a new house to call our home. However unlike the vast majority of these other buyers and sellers I have an insight and knowledge of the industry, and the property market that gives me somewhat of a unique perspective of the process. A process I am keen to share, providing some observations and insight, now that we have successfully completed the move.

I decided to wait until we had finally completed the process before writing what I intend to be 4 separate articles which break the process down into what I see as critical components (i) the decision around the method of sale - agent or private sale, then (ii) choosing an agent (iii) the marketing and finally (iv) the completed sale.

I will be completely up-front at the start and declare that the process was highly satisfactory. Not only that, but the experience has, I am pleased to report (and to the pleasure I am sure of 10,000+ real estate agents) significantly changed my views, presumptions and appreciation of real estate agents. 

In selling our house we followed a path trodden by over 90% of people selling their home. We appointed a licensed real estate agent, who marketed the home and undertook to facilitate the process with consummate professionalism and delivered for us a result which met our expectation. 

We paid a market rate commission which in the cold light of day is a large amount of money, however whichever way I look at it, the outcome is the most important thing - we sold our house without undue stress. We were therefore able to move on to our new home in a timely manner and naturally get on with our lives.

The starting point to this whole process was the decision around the Method of Sale - the 1st chapter:

 

Method of sale

Deciding to move house is not something that comes to you in the middle of the night as a bolt from the blue and drives you to call up a local agent the very next morning. Like most people we began thinking about moving around 8 months before we actually put the house on the market. I suspect that this time period, whilst a long time in absolute terms is neither uncommon, nor unrealistic. We wanted to ensure our house was in top condition before we started marketing it and we knew there was some work to be done, added to which we wanted time to check out the options for a new location and a new house.

With the house completed to our satisfaction earlier this year, we looked at the various options to the process of selling the house. In my mind, and with my experience, there were three valid options which I wanted to sit down and seriously consider with my partner.

1. We could undertake the whole process ourselves as a private sale or as the American’s love to call it a FSBO (For Sale By Owner). The attraction of FSBO is saving money. In NZ that saving of the fees of a licensed real estate agents run into the tens of thousands of dollars. This is a sum worthy of serious consideration.

2. We could experiment with a new model of real estate - using a licensed real estate for a fixed fee and a undertaking some of the work ourselves. This model lead by the innovative service of 200Square certainly appealed to me.

3. We could appoint a local licensed real estate agent. Make them accountable for the outcome of a successful sale and pay them a commission fee at a market rate.

Irrespective of which of these 3 options we chose, I knew for certain that there were two elements of the process that were not negotiable - we would use a professional photographer and we would market exclusively online.

A professional photographer would be engaged to undertake a complete photo portfolio of the property together with a set of floor plans - an absolute must in my opinion. When it comes to online marketing the listing on Trade Me Property was a must, together with premium featuring to ensure we stood out from amongst the other properties on the market. If we went with a licensed agent then coverage online would include Realestate.co.nz as a complementary platform.

So the first issue in preparing to put our house on the market was which of these three options we would choose.

Selling privately naturally has a significant attraction in financial terms, this coupled with its ability, through the use of Trade Me Property and a professional photographer to achieve exactly the same level of market impact, viewing and potential open home traffic as any licensed real estate agent, makes it a serious consideration for many. However the fact is that marketing your home and selling your home are as separate as buying the ingredients and serving a gourmet meal. There is so much more to the process required to bring people to the point of being able to make a decisions which eventuates in a sale and purchase contract  being signed is subtle, hidden and challenging for the average person. I have gained an insight into this extensive process over the years I have worked with real estate and I can see just how complex and under-appreciated is the process of hand-holding that is required to get people to make a serious move to buying a property. It takes a certain type of personality to be at the same time persistent, forceful, cajoling, pleasant, empathetic and ultimately results-driven to get a successful sale. We can all identify a real estate agent. They stand out from the crowd. It is that personality type that makes them effective at what they do and the rest of us, pretty poor at trying to do their job!

So having decided not to go for a private sale, the simple question then was, the traditional model of real estate agent or the new innovative model? Stacking up the similarities and differences only makes the decision that much harder.

Traditional agents and innovative real estate companies such as 200Square both operate under the laws of the Real Estate Agents Act. Both services would be handled end-to-end by professional agents with many years of experience and success behind them. Both would be able to market the property as well as each other. Both would work to succeed and earn a fee / commission on successful sale.

The only difference is really that 200Square does not physically meet you at your house, they do not have a high street office in your suburb (not that makes any difference), they do not manage the open homes; they judge that is something you can do just as well or better, and if you want someone to do it for you then can arrange it. What they do better than any traditional agency is an online dashboard putting you in the driving seat as to the progress with the sale of your house, not only the data of online viewings but an insight into the lead management and the negotiation process.

Most striking of all though is the fact that they do not charge a commission based on a percentage of the selling price which for most agents amounts to around 3% plus GST. 200Square charges $4,500 - a flat fee irrespective of the value of your property.

That comparison creates a tough challenge. 200Square has a good track record, they have been operating for over 3 years and have sold many more houses in that time than the local real estate agent, right across the country - can’t be bad.

However at the end of the day when we as a couple sat down and weighed up the decision it came down to one factor.

When my wife asked me - putting aside the costs, could I in all good consciousness tell her that there wasn't any risk in using 200Square? - I could not. Not that there is any risk at all, they are a licensed real estate agent. The issue comes down to trust and like it or not - local agents sell local houses and in our area; nobody has used 200Square in our area and therefore that presents a risk. A risk which when it comes to selling your home becomes far more amplified than for many other decision. 

The one thing which in my mind is bigger than anything else in the process of selling a property is reducing risk. That is it; and to be honest the cost of reducing that risk can be pretty high, but it is easy to justify it at the end of the day.

Future Chapters:

2. Choosing a local agent

3. The marketing process

4. The sale!


Just how competitive is real estate in NZ?

by Alistair Helm in , ,


On the face of it the NZ real estate industry is incredibly competitive. There are over 10,000 licensed agents  all fighting for just 76,000 property sales a year. That’s barely one sale per agent every 6 weeks of work, one income bearing sale - lean pickings indeed!

Some might argue that there are too many agents fighting for a slice of the real estate cake. That might well be true, but on the face of it, it certainly looks to be a highly competitive industry. Further to support this belief is the extent of marketing undertaken by individual agents eager to secure your business, all showcasing their skills and experience.

The differentiation of one real estate agent to another, or one real estate company to another in NZ is paper thin - they all have a list of glowing referrals as long as your arm and offer "Free Appraisals" as if this was a compelling point of difference.

However when was the last time you saw a NZ real estate company undertake this type of advertising?

I am grateful to Robert Brown who snapped this photo from a train in Kent, England.

For clarity let me share the text of the advert:


You wouldn't take a slow train, so why us a slow agent?

"Strutt & Parker sells houses faster than any other agent in Sevenoaks. And Whether in town or country, we achieve on average, 99% of the guide price".


Now that kind of messaging in advertising certainly gets me interested. 

To have this type of insight and performance metrics to guide my decision as to which agent to use would be far more powerful from endless testimonials that all praise the agents to the skies. 

The problem with testimonials is that they are curated. When was the last time a testimonial expresses anything but glowing endorsement? In today’s world negative reviews as part of an open dialogue of customer feedback is far from being viewed as the death-knell of a business, far from it as the honest balanced feedback is judged positively. Having rich comparative data on agent performance would be a great competitive advantage for any real estate company or individual agent.

A NZ real estate company that could deliver this performance as demonstrated by Strutt & Parker would not only be able to gain new customers, it could also attract the best agents. Such competition would certainly force other real estate companies to seek to better understand why their performance lagged behind the leader. This would engender competition in the industry. Drive efficiency and enhanced customer satisfaction.

Whilst I am sure there will be detractors to this article and this fundamental question, there is no denying the fact that real estate has metrics. Be it the days-on-market, the asking price to sales price ratio, the marketing investment vs return, or the market share of a real estate company (there is one company for which such data exists - Barfoot & Thompson). The key question is, do real estate companies hold themselves accountable to these metrics, do they want to from a public accountability perspective?

The Real Estate Institute as the industry association with the majority of licensed agents and offices as members has within its Code of Agency Practice the following clause:


Clause 9.
Ensure that all advertising and marketing materials and conduct of the Agency Member and their employees is a fair representation of all relevant facts, and therefore not in breach of any relevant statutory requirement (such as the Fair Trading Act 1986 and the Commerce Act 1986). 
Ensure advertising and marketing content does not denigrate other competitors or the wider real estate profession or practitioners. 

The second paragraph is the key as the industry interprets this (or has agreed to interpret this -based on conversations I have had within the industry) as companies and agents should not use data from the Real Estate Institute published sales data to undertake comparative advertising which would "denigrate other competitors".

We live in a digital world, one in which we can evaluate our tradespeople, our local cafe and every product we want to buy. We can use the collected wisdom of the global community to guide our decisions, so why is it that the decision to seek to find a professional to facilitate the largest transaction of our lives cannot be better informed through access to performance data?

This is not to say that the decision of the choice or agent or real estate company should be a purely objective decision, the feel and fit of the right agent is also key as are referrals but a third leg to the decision stool adds stability and surety to the decision.



Do agents warrant such front page public censure?

by Alistair Helm in , ,


Waking up to the headline of the Herald on Sunday this morning, I was confronted with the story that must be the worst nightmare for a real estate agent Agent put pressure on widow to sell!

Real estate agents rely on their reputation, as there is very little else to differentiate the services of one agent to another or one real estate company to another, and in this world where the right to be forgotten is wholly unworkable the real estate agent involved in this matter is likely to suffer significantly greater loss than the $2,000 he was fined by the Real Estate Agents Authority.

It was in fact the scale of the fine that peaked my interest and stirred me to look a little bit deeper into this matter as the authority has the jurisdiction to fine an individual licensee up to $10,000 and up to $20,000 in the case of a company - Bayleys, the company in question was fined just $1,500 in this case. Objectively then it is clear this case is by no means at the most extreme end of the criteria of unsatisfactory conduct. It should be noted that the finding in this case was unsatisfactory conduct not the more serious finding of misconduct for which the fines are up to $15,000 for an individual or up  to $30,000 for a company

I have faith and belief in the role and effectiveness of the Real Estate Agents Authority as clearly, through their complaints procedure they have found the licensee agent and the company guilty and certainly the complainant did have due cause to complain. My concern though is with the reporting of this case in the media which I think does not in anyway match the scale of the complaint.

The readership of the Herald on Sunday as the newspaper publisher so glowingly highlighted the other day is 371,000, add to that an even larger audience online and the fact that this article is already the most read article of the day; and I would judge that this is effectively a public flogging and humiliation of an agent far more severe than is fairly justified.

 

Lets examine the facts which I have done so that transparency can aide an objective evaluation. (The full details of the decision by the Complaints Assessment Committee can be read here).

Firstly this headline and front page article is not actually news. The auction to which the complaint relates was held in March 2012, the complaint was heard and adjudicated upon on the 29th November 2013 and the fine was imposed on the 6th March. The article is published here on the 1st June 2014. So the newspaper has been sitting on this article in reserve for 3 months waiting for a quiet-news-day when they could roll this out in an attempt to fill a void as there is nothing remotely newsworthy (in the context of current) about this - it was news on the 6th March.

 


The complainant made 6 complaints against the company and 7 complaints against the agent 

 

The complaints against the Licensee can be summarised as follows: 

 1. The Licensee had a conflict of interest when assisting the Complainant to obtain finance in September 2011: 

The complainant approached the licensee in November 2011seeking to borrow $10,000 to undertake renovations on her home. The licensee advised  the Complainant that this was not possible, but provided the Complainant with contact details of a mortgage broker who could possibly assist her in obtaining finance - appropriate and professional advice

Complaint dismissed

2. The Licensee failed to allow the Complainant to run an onsite auction with her preferred auctioneer Mr. S:

The Complainant signed a listing authority which featured an onsite auction with the preferred auctioneer in December 2011, however that authority was cancelled by the Complainant some hours after signing it.

Complaint dismissed

3. The Licensee applied pressure to the Complainant to list the Property for sale with the Agency:

There was no evidence of pressure. The agency listing agreement was signed by the Complainant after a 24 hour period had elapsed during which the Complainant had reviewed and consider the agreement and the auction as part of Bayleys “Big Call” auction campaign.

Complaint dismissed

4. The Licensee presented offers to the Complainant from potential purchasers which were in the region of $370,000.00 (being the Government Valuation) when instructed by the Complainant not to do so:

The licensee presented offers of between $367,000.00 and $405,000.00 and in the words of the Complaints Assessment Committee report were “therefore below the Complainant's price expectations (but) was beyond the control of the Licensee and no fault of the Licensee.

Complaint dismissed

5. The Licensee arranged to sell the Property to a personal acquaintance:

The Complainant alleges that the eventual buyer of the Complainants house was a personal acquaintance. The Complaints Assessment Committee received statements that disproved this as the eventual buyer had only met the Licensee at open homes

Complaint Dismissed

The final two complaints were upheld as unsatisfactory conduct and reading the evidence it is clear that the agent failed to act at all times in the best interest of his client, especially considering the age and emotional state of the client.

6. The Licensee applied undue pressure on the Complainant to sale the Property to the purchaser following the auction; 

7. The Licensee’s conduct, during the course of selling the Complainant’s Property and as a result of the outcome, caused the Complainant pain and stress and reduced her financial security for her retirement years;

 


The 6 complaints against the Agency: 

1. The Agency had a conflict of interest in assisting the Complainant to obtain finance in September 2011 to carry out renovations on the Complainant’s property (the Property):

Complaint dismissed based on the same evidence for the Licensee complaint

2. The Agency did not allow the Complainant to run an onsite auction with her preferred auctioneer Mr. S:

Complaint dismissed based on the same evidence for the Licensee complaint

3. The Agency did not provide the Complainant with adequate time to sell her property:

Complaint dismissed based on the due process was followed in the signing of the agency agreement and the professional manner shown by members of the Bayleys team and the auctioneer particularly at the auction.

4. The Agency’s auctioneer failed, prior to the auction, to read a statement prepared by the Complainant pointing out the Property’s selling points:

Complaint dismissed as the auctioneer presented the property in a professional manner to the ultimate benefit of the client

5. The Agency charged the Complainant an excessive commission:

Complaint dismissed based on the very clear detail provided in the listing agreement as to the commission and the ultimate sale

6. The Agency sold the Property for $451,000.00 when it had a true value between $480,000.00 - $520,000.00, thereby causing the Complainant substantial financial loss:

The Licensee appraised the property for sale in November 2011 fro between $440,000 and $470,000, it sold for $451,000. The figure if $520,000 was presented by the Complainant as a value estimate based on the view of another real estate agent who valued the property at $550,000

Complaint dismissed

 

The Agency was though found guilty  of unsatisfactory conduct  as “on balance, the Committee (took) the view that the Agency had ample evidence of the distress of the Complainant and the actions of the Licensee. In these circumstances the Committee view(ed) that that the Agency should have intervened and properly supervised the Licensee." 

 

This brief summary of this case seeks to present a fuller picture surrounding this case rather than the truncated version presented in the headline story.

The fact is that the transaction of a property is an emotionally charged undertaking, even more so in the case of an auction. The process needs to be given the care, time and consideration by all concerned - both the agent and client. It is also logical that if the client is elderly and / or emotionally upset that the process should be handled with appropriate care. This was done by Bayleys and their team, however the agent in question did not apply the necessary care, and through the requirement of the oversight, Bayleys are found to be guilty on this matter.

This case is being appealed as per the article in the paper - as to the decision of the penalty, as opposed to the determination of the Complaints Assessment Committee.

The agent in this complaint Mark Birdling has only this one disciplinary complaint against him. He has been in real estate for over 9 years and has over that time sold many properties for which I am sure there have been many satisfied customers. He has been in my view wrongly singled out for headline-grabbing attention when the other 34 such offences of misconduct or unsatisfactory conduct in 2013 have been largely ignored. Sure the media have a responsibility to report what they see as stories and news of importance to their readers. However you have to seriously ask, is the headline story in today’s paper appropriate to the conduct or is it as so often happens and as I contend, a cheap media grabbing story where the short term profit motives of the media company rides rough-shod over the career and reputation of the real estate agent concerned.


TV advertising in real estate

by Alistair Helm in ,


TV in this country is still the number one media-of-choice when it comes to advertising; accounting for just over a quarter of all advertising spend in the past year. However it is fast being caught by online which sits just over 20% and has risen from less than 1% nine years ago. In dollar terms over the period from 2004 online has gone from a spend of $15m to $471m; whilst TV has gone from $643m to $634m!

Having foretold the potential demise of TV advertising, there is no doubt it remains a very creative medium, ever more so these days as the content has effectively become detached from the delivery medium be it TV, YouTube, Facebook or just viral social sharing.

When it comes to the real estate industry TV or at least video as a package appears to be being used more and more. I commented recently on the advertising campaigns being undertaken by both Trade Me Property and Realestate.co.nz, neither of which for me really made an impression, certainly not enough to make me want to share the content or discuss with friends. 

Over the past month I have been aware of a number of differing approaches to video/TV adverts within real estate across the world, I thought it would be fun to share these and comment on the execution.

 

Let's start with a real estate company TV commercial. Coldwell Banker is one of the heavy weight players in the US as well as operating in over 51 countries.

Simple concept - take decent handful of happy people enjoying life around a house, add slick editing and slow motion effects place over classic Motley Crue track "Home Sweet Home" and bake in the editing suite for 20 minutes!

This advert has to be the best example of the pure generic advert where the brand is lost and instantly forgettable - switch out the end-frame and you have a commercial for any real estate company, or a life insurance company for that matter. Sure every real estate company would like to think that every one of their clients wants to think, look, feel and live like the actors in the commercial, but the emotion created in the advert is for the home, not the agency. 

Here on the other hand is a very different approach from a UK based real estate company Douglas & Gordon. Created a couple of years ago now and made entirely for online sharing this spoof parody of a real estate firm is distinctly memorable, although again a generic spoof with no brand reference!  

The recurring issue for real estate companies in their advertising is how to establish a point of difference. The feelings they want to engender in their clients has nothing to do with how they operate and everything to do with the outcome of the new home.

 

From real estate companies, lets turn to property portals. I mentioned earlier the two recent campaigns from NZ; in the USA the market is likely to be heating up significantly with two of the leading players Zillow and Trulia about to slug it out with a total war chest between them of close to US$100m this year alone!

Trulia rolled out their campaign with what they call "Moment of Trulia".

There are many of the same issues here as with the Coldwell Banker advert - what you might call "The path to happy house buying". Trulia does deliver mobile searching and insights into neighbourhoods but the message is till wrapped in the slick edit of "happy home owners".

Zillow began their heavyweight campaign last year with a 'tear-jerker' of a commercial which certainly had in equal measure fans and distractors.

I thought it was a great advert, loads of functional features that make Zillow a great tool for home finding and discovery, love or hate the ending I think the advert works and would make me use Zillow.

From the slick and some would say somewhat 'sickly' US commercials here is a new commercial from the leading Indian property portal MagicBricks. Be aware the advert is not in english but I think you will understand the message pretty well.

I think there is a smart campaign idea here, an iconic and somewhat spoof real estate person and his sidekick James Bond to be the super sleuth of property search pitched against the insight offered by MagicBricks - distinctive, memorable and funny! It is distinctive and for advertising to be effective it needs to create "cut-through" and be memorable and distinctive - this one gets my vote.


From property portals lets look at another side of the industry, that of organisations. Here I think I have found an excellent advert from Canada from the Canadian Real Estate Association.

It is different and the message comes across so well to me - why take a risk of not using an agent?!

And finally to end on a upbeat and happy note - the new industry organisation for young professionals in real estate (YPIRE) have developed a wonderful take on a popular music video by Pharrell Williams - Happy. The video is not trying to send a distinct message but for me it made me think for a minute about the image of real estate agents - no they can't all be like those in the video, but real estate is all about emotion and the best emotion is happiness!