Property musings on Facebook - 15th August

by Alistair Helm in


Here are the articles posted on Facebook over the past week - short, spontaneous insights and observations which I felt needed immediate discussion and didn't warrant long-form articles written.

Test drive a luxury home for sale


Real estate agents fondness for auctions may be their downfall

by Alistair Helm in ,


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There was a time back in 2005 when the real estate industry despite buoyant sales at the time, monetarily feared that their future was in jeopardy as Trade Me started to offer private sellers the opportunity to marketing their homes for sale in a way that could reach as wide an audience as the mainstream print media could do for licensed agents.

Further, home owners found that Trade Me could facilitate online auctions which generated genuine bidders and completed sales. At that time the selection of properties for sale on the site was purely limited to private sellers; as real estate companies saw no interest in what they saw as a “bargain hunting style site” in their view, hardly a credible place to advertise a property for sale by a professional agent.

Trade Me over the next 12 months made a strategic decision that was to lead to their future success and has contributed to the hugely successful listed company that it is today with a market cap fast approaching $2 billion. That decision was to withdraw from its role of endeavouring to reinvent the real estate industry through facilitated private-sale online auctions and instead focus on attracting real estate companies to advertise their listings on the site. A decision that in today’s market generates around $20m a year representing a large part of the $100m or so of marketing spent by the real estate industry each year.

 

Archived page from Trade Me real estate section from January 2005 shows only private sales with bids active for one of them via web.archive.org

Archived page from Trade Me real estate section from January 2005 shows only private sales with bids active for one of them via web.archive.org

What is interesting is that the decision did not in any way hamper the site from becoming the most important marketing platform for all property whether for rent or to sell, for private sellers or licensed real estate agents. And whilst the cost of advertising a single property for sale may have risen from $0 for a private seller back then to close to $400 today there is no doubt that the value for private sellers in having this ‘level playing field’ is immeasurable.

To advertise a property whether it be a private listings or an agent listing achieves the same level of interest on Trade Me as the detail below shows.

 

The 'level playing field' for the marketing of property online has been established, especially as Trade Me dominates the viewing audience with somewhere around 1.8 million unique visitors a month to property online vs. around 450,000 for Realestate.co.nz.

However as I have often stated, to sell privately is not simply about marketing your property online. The sale only occurs when the buyers have been corralled to front up with an offer, and this is where the professional real estate agent trumps private sellers as their experience and skills matched to their ‘thick skinned’ tenacity drives them to bring buyers to the table to sign an agreement.

However that marginal, yet significant point of difference, in my view is being undermined by the very tool agents seem to be in love with these days – the auction.

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Auctions are the preferred method of sale by agents, they have really taken off in the past couple of years amounting to over 40% of Auckland sales and ever and ever shorter auction periods which in my view they are simply getting out of control. Ironically it could be this ‘lemming like’ magnetic attraction to auctions that could ‘level the playing field’ of the selling process to match the ‘levelled playing field' of marketing property created by Trade Me.

Examine for a moment the components of an auction process run by a licensed real estate agent and contrast it with that undertaken by a private seller – because private sellers are turning to auctioning their homes.

  1. The property is advertised on Trade Me Property

  2. The auction date is set and a licensed auctioneer is booked

  3. The open home times are displayed

  4. Open homes are held

  5. Interested prospective buyer details are collected

  6. Interested prospective buyers are contacted (email / phone) to answer questions and remind them of the auction date

  7. Follow up contact is made of prospective buyers close to auction date

  8. The auction day arrives and the auction is held undertaken by a qualified auctioneer

  9. The property sells at auction or is passed in for further negotiation

  10. The legal agreement (the Sale & Purchase Agreement) is signed and the deposit paid

The 10 steps of the process to sell a property at auction. Nowhere in that list of 10 steps is there any difference what-so-ever between what an agent would do and what a private seller would do. There is no extensive facilitation or skilled negotiation, there is no time spent chauffeuring people around open homes or acting as a courier of sale and purchase agreements.

Auctions have been proven by the real estate industry to be an efficient process to sell a house. Auctions though are not the exclusive domain of real estate professionals. Auctioneers are a separately regulated profession governed under the 1928 Auctioneer Act. They oversee many forms of auctions from car auctions to art auctions to industrial materials auctions – all are professionally licensed and could turn their hand to sell a house by auction in exactly the same method as a real estate professional.

In my view the real estate industry has driven itself blindly down an alley that destroys the very essence that is their unique point of difference that distances a professional operation from a private seller; that of facilitating and negotiating the sale of the property. Yes, I can almost hear the cries from within the real estate industry as to the value of market knowledge and market appraisals to guide the seller. However ask the question of an agent of a property going to auction – “so what will it sell for?” – guess the reply… “ah that is what the auction will do, let the market decide, the process will establish the true market value!


Here is a selection of current private sale listings to be auctioned from Trade Me Property

 


Advice for property buyers

by Alistair Helm in


In addition to my articles here on Properazzi I am also working with John Bolton at Squirrel, the property and mortgage experts. I am contributing some regular articles on subjects of interest to property buyers and sellers.

I thought I would highlight my most recent articles which I think are of value especially to buyers at this time and state of the property market: 

 

Auctions - some thoughts on psychology

If you have ever attended a property auction you are sur to have though about the best way to approach bidding and the right tactics to use to win on the day. I was watching an intro video to an auction recently and it finished by saying "good luck" in today's auction - I thought you should never rely on good luck. So here is an article about what I see as the psychology of bidding at auctions and some tactics to try - not full-proof or guaranteed for success but worth going for!

 

As a buyer what should you expect from your agent?

I think we all know (or we should know) that agents work for vendors because they are retained and paid by the agent a commission on the successful unconditional sale of their property and therefore always have the vendors best interests uppermost. For the buyer it is very important to know what to expect from an agent in the NZ property market, so here are some tips and advice in this article now published on the Squirrel website

 

 

Don't hibernate as winter weather approaches - be a smart buyer

We are a nation of propert hunters who love to flock round open-homes on sunny afternoons, as a serious buyer don't get drawn into this behaviour, be a contrarian, pound the streets on cold rainy wet winter days as this could be the best time to search for property and is a smart time to buy. Property sales don't fluctuate much over the winter months despite what you may think and whilst many sellers wait until the spring weather arrives before listing their house, there are many houses to choose from that get listed during the winter months, many by people who are to use the phrase "seriously motivated" to sell - have a read of the full article 

 


When is an auction not an auction?

by Alistair Helm in , ,


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The Real Estate Institute of NZ stated in their April property report press release that “Auctions are progressively becoming the favoured sales method in certain centres”. They went on to say that properties sold by auction represented just under 1 in 5 in April. In Auckland which they described as “dominating the auction market” 37% of all sales were by auction.

In Auckland their figures stated that 1,045 properties were sold by auction last month. As we all know Barfoot & Thompson is the largest real estate company in Auckland representing around 40% of the market. As their advertisement in a recent property magazine states they reported 593 successful auctions in April. That would mean that Barfoot & Thompson represented 56% of all Auckland auctions which clearly shows that this is without doubt their favored method of sale.

 

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However if you read into the advert a little deeper, the headline figure seems to be somewhat misleading.

The facts state that only 410 properties sold under the hammer. To this final total of 593 “Successful Auctions” they have added 15 properties sold before the auction; 25 properties sold on the auction day (but not under the hammer) and a further 143 sold after the auction (and not on the day of the auction).

I was interested to see if I could find a definition as to what is an auction in the context of real estate sales. I chose to turn to the government body tasked with regulating and administering the industry – The Real Estate Agents Authority. In their auctions information sheet accessible as a download pdf document on their website they state:

 

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My clear interpretation of this is that a property that is sold in a private agreement between a buyer and a seller after the “passing in” of a property at an auction is not an auction sale, despite the fact that the property was marketed as an auction. The same goes for properties sold before an auction. A successful auction is defined and assumed to be an unconditional sale on the fall of the hammer in an open process.

Therefore rather than the claimed 593 “Successful auctions" by Barfoot & Thompson in April, the reality was that just 410 successful auctions were achieved in the month. It further means that of the 707 completed sales which had been marketed as auctions in the month – 58% were sold successfully at the auction; whereas more than 4 in 10 of the properties marketed as auctions did not sell “under the hammer”.

The fact is that only Barfoot & Thompson publish this degree of insight into their auctions, I congratulate them for their openness. One only wonders as to the number of real estate companies who submitted statistics to the Real Estate Institute stating for auction sales in April making up the total of 1,045; as to how many actually sold under the hammer as a true auction. Maybe, just maybe, the statement made by REINZ should be restated as “Property marketed as auctions  is becoming the favoured marketing strategy in certain centres”.