Selling your home - a personal perspective: 4 - The Sale!

by Alistair Helm in , ,


The critical day arrives. Probably second only to a wedding or other significant event, is the day your home finally sells. In the case of our home, that day was the day of the auction on that Wednesday afternoon. Nerves were evident, as were the usual questions:

  • Would the prospective bidders our agent had identified be there?
  • Would there be sufficient interest to generate a bidding war?
  • Would bidding exceed our reserve?
  • Would anyone turn up?

These are the common questions asked by anyone about to sell their house by auction or in fact almost any forms of sale.

But before detailing the outcome of the sale let me recap. As chronicled in prior articles I have over a series of 4 posts detailed the processes and decisions we had gone through in identifying the method of sale, choosing the agent and establishing the marketing plan for our house. Overall a carefully planned programme designed to ensure that our property was presented to potential buyers in the most appealing manner to generate interest and stimulate demand, and ultimately sell our home. 

One aspect of the whole process that most impressed me and strangely (given my experience in the industry) surprised and delighted me, was the very detailed and intimate understanding we gained through our agent as to the prospective buyers. I do not know if this degree of detail is common practice but as a seller it was vital to a sense of connection to the process.

At each meeting with Blair in de-briefing the weekly open homes as well as interim meetings and chats, he shared insights and feedback on each of the key prospects he had identified from enquiry and open home visits. He referred to these prospective buyers by name. He provided insight as to their personal situation, where they lived, what they were looking for, what their expectations of price were and what aspects of the house they most liked and disliked.

Over the 3 weeks of the campaign leading up to the auction we saw insight into a total of 5 couples. The insight was not intrusive nor in any way a breach of privacy or personal confidences,  but provided us with a great ability to manage our expectation and in so doing I believe added credibility and professionalism to the role Blair played. As I say, if this is common amongst agents then these smart agents in my view do themselves a disservice in not highlighting this value they bring to the process. In my opinion it is vital and truly valuable part of the real estate process.

Through the 3 weeks of the campaign we had what amounted to a virtual leaderboard ranking of prospective buyers with some surprising movements. Barely 7 days into the campaign we had what both Blair and ourselves though were the perfect couple as buyers. Cashed up from selling a property in the South Island and frustrated at living in rented accommodation, this couple ‘fell in love with our house’. They visited  a couple of times and Blair talked to them about making a pre-auction offer of which they were engaged around the idea. We even were able to verify their seriousness as we witnessed them bidding at an on-site auction at another very similar property in the neighbourhood. Then things went quiet with them for 5 days only to discover that in those intervening days they had not only found another very different style of property, but had actually attended and bought it at auction! It just goes to show how little you can tell of people’s real interest or intent.

We heading into the last 7 days leading up to the auction with what Blair believed were two strong potential buyers. The property ticked all the boxes for them and they had both seen the house a couple of times. They appeared to have done their due diligence. Based on this and the belief that you have to take the market for what it is, we sat down with Blair coming up to the final weekend of open homes. Our question was ‘why do we need to do these final weekend open home viewings?’ - it seemed to make no sense, who would suddenly appear out of left-field 3 days before the auction? Blair convinced us against our better judgement to go ahead, so dutifully we tidied up and prepped the house again for what we thought would be a quiet viewing.

How wrong could we have been. A new buyer appeared, or at least a relative of a prospective buyer. They loved the house and wanted their relatives to view the house when they came up to Auckland on the Tuesday (the day before the auction) - not a problem we thought, can’t do any harm. Little did we know that this prospective buyer would go on to buy the property!

A key step before the auction was the setting of the reserve with Blair. Naturally we had developed our own view of the expectation of price and what we would be prepared to accept. As a point of note I choose not to reveal the reserve or the selling price - this is not the essence of this article. This is a matter we as sellers choose to remain confidential. The reserve we agreed on was surprisingly aligned with Blair's recommendation, or maybe it is not surprising as through the 3 week campaign he had provided a clear view of the expectations of the prospective buyers, accepting as always that buyers never want to truly show their hand when it comes to price.

The reserve price was set at a level at which we would be satisfied. Like all sellers we would wish to be blown away by frenzied, manic bidding with a stunning resultant price, way above the reserve but you have to be realistic. At the end of the day the difference between our reserve and Blair’s recommendation was less than 5% - naturally we were higher!

An unusual set of circumstances arose in relation to the actual auction day and time which meant that my wife could not attend. This troubled us as to how we would cope if we could not both be there as joint owners of the house. Our immediate thought was how to facilitate the signing of the Sale and Purchase Agreement - would we have to get a power of attorney for me to sign for both of us?

Again this is where you can be surprised about how little you know of the process. In an auction you as the sellers completely sign over the sale to the auctioneer who through a right of representation acts legally on your behalf to transact the sale at a price at or above the reserve. This document was signed the day before the auction effectively leaving us both out of the process.

This is a very interesting situation and something I sought advice on from an independent and experienced agent. His advice (somewhat surprising) was that you as sellers should not attend the auction! The logic being that in this way you insulate yourself and thereby avoid the pressure coming from the auctioneer and agent trying to encourage you to compromise on the reserve if the bidding fails to reach reserve. This is a very interesting strategy and something I had never considered. If the role of the auctioneer is to sell the property at or above the reserve and this is your wish then not being present has its merits (and some degree of risk as I am sure many agents will tell you).

So the auction time duly arrived and I was alone at the auction rooms with my wife on standby via text message (she was actually doing a presentation!)

Blair had told me in a pre-meeting that he knew that there were definitely two serious buyers in the room.

I won't take you through the chapter and verse of the actual auction suffice to say that the auction lasted 5 minutes and 24 seconds - I know that because I recorded it on my iPhone - captured for posterity! There was as anticipated, two genuine bidders. Once of the bidders clearly had a threshold which he stuck to staunchly despite the best skills of the auctioneer. The property reached a final bid which was just below the reserve. So with a pause in proceedings, the auctioneer began a somewhat lengthy and protracted process of negotiation with the highest bidder with a clear instruction staunchly adhered to from me that the reserve was fixed and not up for negotiation. The end result was that the auction was recommenced and called and the property sold "under the hammer!"

In my opinion the outcomes was a satisfactory conclusion, whereby as I have often said the price expectations of us as sellers was met by the preparedness of the buyers to pay that price - I felt that the outcome was fair and open; and neither party should have any reason to feel aggrieved nor triumphant.


So after a number of weeks of tense anticipation and nervous expectation we sat back at a well deserve celebratory dinner (actually pizza and a beer at 4 in the afternoon!) and reflected over the process. We had in our hand a signed unconditional agreement for the sale of the our house, with the deposit already transferred from the buyer to the agency rust account; thereby allowing us to move on with our lives and to close a chapter on both the ownership of this house and the selling process.

When it came to reflecting on the cost / benefit analysis of the process we did not (as is universally accepted in the process) physically write a cheque for the commission fees paid to the agency company. We did not feel the ‘pain’ of that large amount of money leaving our bank account, it was seamlessly deducted from the balance of the deposit paid by the buyers. However, we have reflected often on our decisions and the process, and we do not in any way begrudge the fee we paid for the services provided by Blair. We felt that we were professionally guided through the process without undue stress. We discovered great insight from the process and were delighted with the outcome. That chapter of our lives is over and a new chapter begins.


Selling your home - a personal perspective: 2. Choosing an Agent

by Alistair Helm in , ,


We have recently moved house and with the heartache and stress behind us, I felt that now was the time to examine and report on the process in order to provide an opportunity to, from a personal perspective, share observations and opinions on the whole process.

I have broken down the process into what I see as 4 key steps from the starting point of judging the right method of sale (private sale or with an licensed agent), through choosing the agent, the marketing and then finally the negotiated sale.

In the first article I shared the decision making process in judging the right method of sale, whether to try and sell privately, use a traditional licensed agent or try an new emerging online solution.

This next section details the process of selecting a traditional agent.


Choosing a local agent

Our choice of an agent was extensive, as is common to sellers in major cities and towns throughout the country. The major real estate brands within the industry are all well represented with offices in the local suburb. However the local office presence was of little interest. Our interest was in the individuals rather than the companies.You don’t deal with a company, in the real estate process you deal with the individual agent.

We decided that we would select 3 local agents and invite all of them to visit the property and to get them back to present their proposal as to their recommendation for the best approach to marketing and selling our home. Naturally as part of the process we would be interested to learn their assessment as to the value of the property. I think too often people treat the decision making process of choosing an agent as a mock auction with the adjudication based on the appraisal value. The agent isn’t offering to buy your house at that price, so their assessment is nothing more than conjecture - based on professional skills, I accept.

 

So which 3 agents to choose?

This is the approach we took. Firstly we would invite the agent who sold the house to us. I am sure this is an often chosen route. They were successful in selling the house last time, they are active in the market, they know the house and they would appreciate better than anyone the changes and improvements we had made. The agents concerned were Marty Hall and Heather Lanting from Ray White - Ponsonby.

 

Our second choice was an local agent that we had met at numerous open homes we had visited. We liked his approach and were avid readers of his weekly market report email which provided a great weekly insight into the new listings and sales of property in the area. This agent was Kirk Vogel from Barfoot & Thompson - Grey Lynn.

 

Our third choice was again a local agent that we had met on occasions whilst viewing open homes. What most significantly drew us to him was the fact that he had in the past few weeks sold a very similar property in the area and this we judged was an excellent opportunity to leverage this specific knowledge as well as the contacts of prospective buyers who may have missed out on that property. This agent was Blair Haddow of Bayleys - Ponsonby.

 

We ensured that prior to inviting these agents to visit the house we had prepared it to the same presentational standard that we would judge, you would expect from an open-home visit. In my opinion the presentation standard is as important for impact for the agent to experience as it is for potential buyers. There is a sense of wanting to capture the attention and commitment of the agent to want to represent us and our house, as much as us selecting them. Each agent was invited to meet us at our house as a fact finding step, for us to assess them and for them to see the property. Each was then asked to go away and provide a proposal to us as to the approach to selling the property including the recommended method of sale, marketing programme and an assessment of the likely sale price of the property.

Allowing time for them to respond, we scheduled sequential meeting times for all 3 parties to present their proposal to us on the same afternoon, thereby allowing us the opportunity to be able to easily assess them, and for us to make a decision and get the property on the market.

I can say that the decision of which agent to choose was not an easy decision. I have decided to be very open in detailing not only who was our chosen agent but also to highlight which were the agents who we shortlisted but who did not represent us. In doing so I wish to remain objective.

In terms of local presence Ray White Ponsonby and particularly Marty and Heather have a very high profile in the area having sold many houses around our location. Comparing them to Kirk at Barfoot & Thompson and Blair at Bayleys they were the more ‘visible’ option. Having said that our decision not to choose them came down to the accuracy of their appraisal for our property. They neither over-pitched nor undersold the prospective value assessment of the property. However their assessment lacked the contextual relevance that the others did. They benchmarked our property against properties that were significantly different and their range of selling prices spanned too broad a spectrum. This left us with a degree of an unclear picture as to how they came to the conclusion of a property value range which was in its self in our view too wide.

Barfoot & Thompson are a strong player right across the Auckland market and across all types of property and prices. However the fact was in considering Kirk Vogel we were selecting him and not Barfoot & Thompson. In that regard we were concerned that the types of properties that he had sold over the recent year were not in the same price range as ours and whilst he had a strong command of the local market intelligence as to what had sold where and by whom when it came down to it he had not sold a “house like ours”. This factor above all others drove our decision not to appoint Kirk to represent us in the sale of our house.

Our chosen agent was Blair Haddow of Bayleys. This decision was not made as a result of the exclusion of the other two contenders, far from it, Blair was our clear choice once we had seen all three submit and present their proposals. Blair impressed us in his professional approach to the proposal to market the house, as well as his insight into the local market. However core to our decision was his recent experience with prospective buyers who are looking for a house like ours.

It is worth highlighting that the commission fees were discussed with all three selected agents. We wanted to be fair and objective and recognise that a market base fee was appropriate. This did require us to negotiate the fees where necessary with those who were charging higher fees so as to ensure that the fee commission was not a influencing factor in the final decision, in doing so we created a level playing field where price was not the deciding factor.

With the decision to appoint Blair came the decision as to the marketing strategy of the property which I will detail in the next article. 


Previous Chapters:

1. Method of Sale

 

Future Chapters:

3. The Marketing Process

4. The Sale!


Real Estate, the generational challenge

by Alistair Helm in ,


Image courtesy of Flickr

Image courtesy of Flickr

I read this short but interesting article from Inman News over the weekend titled "Appealing to millennial homebuyers often requires out of the box thinking"

It got me thinking about the way real estate is and has (or has not) adapted to the changes in the demographics and attitudes of the new generations and the cultural changes of the past 20 years.

Here are my thoughts:

Not exclusively the domain of millennials but for most of us these days buying any product or service involves at some stage an online search. Whether for price comparison, product details, customer feedback or just simply opening hours. For real estate this is a telling fact. Real estate is a business providing a service to homeowners wishing to sell property. These home sellers don't want to be prospected by real estate agents. They want to do their own prospecting to find an agent that suits their needs. As the article says (and here again I don't think this is the exclusive domain of millennials) people tend to be resistant to strong sales technique. We have been empowered through the resources and capability of the internet and more than ever shun hard selling technique. Hard as it may be to hear this, real estate agents need to change their approach to securing new business and stop prospecting using hard sell techniques - they need to nurture relationships - not sales leads.

Be part of the community really resonates with me. However I think most real estate companies and agents think this means a flash new office on the high street. I have noticed over the past 5 years the look and feel of real estate offices have changed markedly. Gone are the windows plastered with pictures of properties for sale, replaced by inviting open spaces with comfy chairs and coffee machines that look very inviting. However when was the last time you saw anyone sitting in one of these goldfish bowls?

To be a part of the community means so much more. Banks have learnt so much more about this in their local business centres - places where people can use offices and Wi-Fi to sit down between meetings or host meetings. How about real estate offices taking this idea from banks for business people and doing the same for non-business people? I am not exclusively thinking of young mothers, but imagine a place to have a sit down - the role libraries used to provide (and still do) where you could grab a coffee or a water, use Wi-Fi have a chat with a friend, hold a community meeting or whatever. A place in the community - a part of the community.

Giving back to the community. Real estate is well respected as a large donor to charitable organisations - think Ray White and Ronald McDonald House, Bayleys Guide Dogs and Barfoot & Thompson Starship. Very laudable and public spirited. However real estate is essentially a hyper local business. People engage local agents and the colour of their jacket, tie or the brand logo on their business card is largely a supportive component of the decision. 

Real estate agents do foster and hold deep relationships into the community and they do sponsor local school events and rotary clubs. However the Inman article about supporting local artists somehow struck me as more mutually beneficial than simply giving money to a cause. How could real estate agents work more with local businesses to see more mutual benefit? I don't have the solution, I just wanted to trigger some thinking - any ideas?


The fact is we are not the same people we were in the 80's or 90's - the home buyers and sellers in the next 10 years have no idea what a cassette is. To them the stock market crash happened in 2008, not 1987; they cannot imagine interest rates of 10% let alone 20% and can't conceive of a house not connected to ultra high speed broadband. However the large majority of real estate agents were in school or had started work when man took its first tentative steps on the moon and most probably know the words to or can hum along to American Pie!


A radical change for real estate websites?

by Alistair Helm in ,


Last week was the bi-annual conference of Inman Connect.  Held in San Francisco in July and New York in January, the event is billed as the place where real estate meets technology. I have attended many of these conferences over the past 8 years, however this year I attended virtually by following the goings-on on Twitter and through the Inman site.

For me the most interesting component of this conference was the tech challenge undertaken by 1000Watt Consultancy to revamp a website in 24hrs! In the hands of the team at 1000Watt this was always going to be worth watching as they are the leaders in their field, always at the cutting edge of the innovation capabilities of technology as it applies to the real estate industry at franchise, broker or agent level.

The team took a San Diego real estate company website of Willis Allen and revamped it in the allotted time and created a radical change - contemporary, engaging and very different. When you examine the current site against the new design and explore the new design - you will see the difference.

The current Willis Allen website

The current Willis Allen website

The revamped site as designed by 1000Watt Consulting

The revamped site as designed by 1000Watt Consulting

The Inman News team covered the session and for me what I found most interesting and I really wish I could have been there to witness the moment when the new site was unveiled to Bud Clark the Managing Broker of Willis Allen who had at the outset said that he was looking for "a modern fresh site but wasn’t sure what direction to go". 

Apparently Clark seemed a little shocked at the extensiveness of the changes. “It’s different,” he said. Clark said "the firm will look at the design and consider what it wants to implement as it works to figure out how it wants to evolve its website".

He will "look at the design and consider" - this design was created by the smartest minds in the digital space in the real estate industry, profiled at the leading event in the industry and communicated through the media and all the manager can say - we'll consider it!

To me it says so much about the real estate industry's approach to digital marketing and this applies here in NZ as much as it does internationally. The heart of the problem as I see it is that every real estate company wants to have a website that first and foremost is about trying to be a property portal - placing searching for property front and centre. Why?

Home buyers don't use real estate company websites to search for property - that is the reason that portal aggregate the total pool of listings so one site offers the access to all the listings - or in the case of NZ, both Realestate.co.nz and Trade Me Property having pretty much all the listings, with private sale listings the added richness on the later's site.

Sure real estate companies want to showcase the listings they have and there is good reason to have the individual property listings on their sites - just not blasting out of the home page - see what I mean!

My advice to real estate companies would be, have current listings within the content of your real estate company website, not just current but also have old listings - all of the listings as components of the site. In that way any Google search for a property address will be more likely to bring up the real estate company site that listed the property.

But don't have a search function on your home page and clutter the home page with current listings to mimic your office window! 

The purpose of a real estate company website is as a marketing platform for the real estate company. Just as it is for any business looking to attract new customers and provide a profile platform for prospective clients to make value judgements as to the services and uniqueness of what the company offers.

For real estate that uniqueness is not to be found in the current listings. It is in the expertise, experience, knowledge, professionalism and performance of the company and its agents. It's all about local knowledge and insight. Real estate companies should look to engage visitors to their site quickly and share with them the reason why "you should choose this real estate company over all the other options when it comes to selling your home"

For Willis Allen the distilled essence of the company as exposed by the 1000Watt team was:

 

Independent, family-owned business with a leadership position earned through integrity - Willis Allen, 100 years of Real Estate

 

Too many real estate websites uses generalities "Results through Excellence", "You'll be glad you chose..", "People and Property",  "your place for everything real estate".

I have over recent years talked to many real estate companies and owners on this subject - about focussing their websites to address the needs of their future clients and prospects rather than their current clients - few, if any have taken the radical step of embracing this change. Too many seem to echo the comments of Bud Clark at Willis Allen - "we'll consider it" - but they never do!

 


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.


Trade Me vs. Real Estate Agents : 5 months on, could the boycott be growing?

by Alistair Helm in , ,


Back in November last year when the news of an agent boycott over proposed fee increase by Trade Me hit the mainstream media, I was pretty sure that sanity would prevail and more importantly vendors would not be used as 'Pawns' in this issue of internal costs of marketing.

It's now 5 months later and the issue is still not resolved and as each week passes I would judge that the balance of power is tipping significantly in favour of the agents.

Back in February I reported that the then two highlighted areas of the country where the initial boycott had begun - the Hawkes Bay and Hamilton still had a situation where Trade Me listings were significantly reduced and in some cases dominated by private sale listings. Revisiting the situation today shows a continuing gulf of listing stock stock between Realestate.co.nz and Trade Me Property in these areas.

Taking the Hawkes Bay region - as at this week Trade Me Property is displaying less than half of the property listings for sale than Realestate.co.nz (based on all house types as well as lifestyle property).

The data analysis of the Hawkes Bay I have undertaken this time has broken down the listings by real estate company.

Screenshot_28_04_14_9_13_pm 2.png

As reported at the time, the regional players of Property Brokers and Tremains who between them represent close to 40% of all listings in the region continue to boycott Trade Me Property; they currently feature less than 1 in 20 of their active listings on Trade Me Property (most of which are listings added by the vendor with the agent details). This means that from amongst the 1,594 active property listings on the market at this time in Hawkes Bay, Tremains and Property Brokers between them are not displaying 583 of them on Trade Me - that is significant over 500 properties for sale from the two big players in the market not being displayed on Trade Me Property!

Given the extent of this boycott it is clear that these companies are not facing any adverse reaction from sellers - properties are being listed and sold in the Hawkes Bay without the exposure on Trade Me Property.

Widening boycott?

What is also significant from the Hawkes Bay data is the extent to which Harcourts are boycotting Trade Me Property, with less than half of their listings in the region displayed on Trade Me, that amounts to another 181, adding to the 583 from Property Brokers and Tremains not featured on Trade Me.

The extent of this boycott by Harcourts is dramatically seen when doing a search on Trade Me Property for Harcourts listings by listed date - there have only been 3 new listings across the whole of the Hawkes Bay region in April from Harcourts whereas in fact from data on Realestate.co.nz shows the total number of new properties listed by Harcourts in the region in the month was 227.

The National Picture

Applying this analysis to the national picture, Trade Me Property is displaying 8% less listings of property than Realestate.co.nz (this total includes private sale listings).

The analysis below details the extent of the support or boycott by real estate company. Clearly Barfoot & Thompson and Ray White are at this time supporting the use of Trade Me (or as an alternative conclusion these companies agreements with Trade Me have yet to reflect the new charging rate).

Whereas Harcourts are only featuring 7 out of 10 of their active listings on Trade Me Property. Harcourts are the largest real estate company in the country with over 190 offices and currently 8,315 listings of properties for sale.

Equally as significant is the analysis of listings from Bayleys and LJ Hooker who also appear to be boycotting Trade Me Property which in the case of LJ Hooker with 2,664 active listings on the market results in only 1,755 of them displayed on Trade Me Property.

 

Boycotts in Other Regions

Further investigation of the listings data shows that in addition to the Hawkes Bay, the Manawatu / Wanganui region is also witnessing a boycott of some significance.

From amongst the 3,223 active listings of properties for sale across the Manawatu / Wanganui region (using the boundary definition of Trade Me) as showcased on Realestate.co.nz, just 2,567 of them are shown on Trade Me Property (actually somewhat less as this number includes private sale listings). The breakdown by company, shows that it is only Ray White that has almost full support for Trade Me Property whilst Harcourts display less than a third of their listings on Trade Me Property. Equally other key players in the market such as Professionals and LJ Hooker display less than 70%. 

The anomaly though is Property Brokers. This region is their heartland where they hold close to a 30% share of all listings on the market, yet they are displaying over 60% of their listings on Trade Me Property - a very different situation than that in the Hawkes Bay.

So in conclusion it looks like the boycott of Trade Me remains and if anything is growing, given the extent of the Harcourts representation (or rather lack of it!) on Trade Me Property. In my view as each week passes without some action or decision or negotiation (which clearly will be going on behind closed doors) the market position of Trade Me Property weakens and the muscle flexing by agents appears to be working.

 


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!





Can real estate really be disrupted?

by Alistair Helm in ,


A couple of weeks ago I posed the question as to "Why has real estate sidestepped the technical transformation of the digital age?" and in so doing provided a couple of key reasons why it is hard to disrupt this industry as so many other industries have been disrupted through technology. The fact is, at its heart, real estate is a deeply emotional service-based business which due to it infrequency is tough to challenge.

Over the years there have been noble challengers to this billion dollar industry, most notable was The Joneses back in 2008. Their demise in my opinion was not their core business model of a flat fee service and salaried agents. Their downfall was simply bad financial management which meant that they simply ran out of money just before they reached critical mass, which they were certainly approaching at pace. They were certainly also not assisted by a property market that went into a nose dive at that time and a fair amount adverse undermining from the established industry players. In my view the model if rekindled today with adequate funding could make a serious dent in the market. After all who cannot relate to the strap line of "Flat Fee - Not Fat Fee" - their flat fee at the time was just $7,999! - any house anywhere.

In the UK only this week we have seen a new challenger announce a new service of real estate (yet to be launched) which could be a serious disrupter in the market - welcome easyProperty. Leveraging the ubiquitous brand of easy as in easyJet / easyCar / easyHotel / easyBus / easyPizza - you get the idea! this new company is seeking to shake up the real estate industry starting with property management and then addressing sales. From sketchy information so far the principle seems to be that easyProperty will charge 0% commission on sale of property, looking to earn income from referral and ancillary services wrapped around the processes of real estate. That is certainly a possible method for the UK where agents do not undertake such an extensive service as in NZ but then they only charge on average 1.8% commission as compared to NZ commissions of 3%.

As well as the marketing strength of the easy brand which claims a 99% brand awareness in the UK, the new company has secured as Chairman Harry Hill who was the former boss of the largest real estate firm in the UK Countrywide. as well as one of the founders of the leading real estate portal Rightmove. 

I would judge this is a serious venture and has the funding to get this new venture off the ground, as to the full details of how the service will work we will just have to see in the coming months.

What relevance could this type of move have for NZ?

Well I would have to say that there are two NZ brands that in someways mirror the easy brand. The first has already entered the real estate market a couple of years ago - Mike Pero Real Estate. The Mike Pero brand is extremely well known however their business model in real estate is not radical and could hardly be called disruptive. It professes to be a champion of low fees but in reality the differential is modest at best and in all other aspects, their services are a cut and paste of every other real estate brand.

The other brand is Trade Me. They currently dominate the advertising service sector of the real estate industry gradually eating away at the c. $100 million a year industry still so tightly held by newspapers and magazines, but imagine for a minute the appeal of a full service real estate company provided by Trade Me - tapping into the $1,300 million a year commission industry - even if they were to discount this by offering a Flat Fee - not a Fat Fee. Food for thought!

 

 


Why has real estate side-stepped the technical transformation of the digital age?

by Alistair Helm in ,


Global digital data.jpg

We have long heard stories of the power of the internet and its ability to disrupt almost every business. How everyday we search online for everything we need and choose from multiple sources based on price and not on location supported by social recommendations and user reviews. How we no longer use travel agents or visit CD stores and how TV has been transformed from a linear experience to an ‘Al a carte’ experience.

Yet despite these radical changes we still experience real estate services in the same way we did 20 years ago. Sure we use smart mobile apps and the web to do the searching but this is merely  swapping one advertising medium for another. The fact is self-employed contractors with a real estate license still spend two thirds of their time hawking their service in the desire to list a property and thereby secure the opportunity (with no guarantee) to sell that property for a commission.

It is still a process based on almost the same systems and processes of 20 or 40 years ago. Still paper based agreements facilitated between vendors and buyers accompanied by hurried phone calls.

The most significant change of the past 20 years though is the cost. The average fee for the service then based on average house prices was $4,500 (in today's money $7,200). Today you will pay $17,000 for the same service.

So why have we not got an online solution that allows to evaluate different modes of selling and evaluate the capability of individual agents? Why do we not have the ability to create our own custom solution for the services we need from agents? Why does the negotiation process not happen in a secure confidential online environment with support parties like lawyers and buyers agents assisting the parties without undue pressure; thereby reaching an agreement that is digital signed and transacted? Why can we not schedule property viewings using synchronised calendars open to all parties to optimise the schedule of the sellers, the agent and the buyers?

The fact is that real estate has not changed for a number of key reasons:

  • First and foremost it has not changed because the industry does not want to change and the industry is dominated by 5 major companies that account for close on 80% of all transactions. I would go further by saying that the industry has avoided change and in many ways stifled innovation.
     
  • Property transactions are in the main a highly infrequent event for the majority of the people. For most property owners each such events leaves them with a sense of “having to start all over again” as all the people involve last time have moved on and the location has changed - real estate is a local business and does not represent itself the same in any two offices as agents play to the ‘personal brand’ service rather than a company brand model.
     
  • Property selling and buying is highly emotive and has a high perceived risk. For this reason there is a low tolerance to ‘try something new’ - the safest bet is to do what everyone else does and sell the same way everyone else sells.
     
  • Commission fees regardless of how big they are, never appear on your bank statement or have to be paid for in the form of a cheque or cash. They appear as a line item on a lawyers statement of transaction. A statement that often these days has 7 figure amounts on the debit and credit side (including a 5 figure agents commission) but at the bottom only requires you to pay a cheque for c.$1,500.
     
  • Irrespective of the market conditions the commission fee can be easily rationalised away. When the property market is on fire and property is selling like the proverbial ‘hot cakes’, the logical side of your brain says “I should try selling privately, an ad on Trade Me and I’ll have people queuing up at my door to buy”, but yet you fall back on the logic of  saying “I’m so excited that my house has risen by $100,00 $300,000 or $500,000 since I bought it I don’t mind paying $20,000 to sell it”.
    Conversely when the market is dead and property takes ages to sell the logical and emotional side of the brain conspire to say “This market is way too scary for me to take a risk of selling other than through a traditional agent - I need to sell and to get the place sold will be well worth the commission”.

New Zealand real estate is in many ways not that different to many other countries in the way the industry is structured and operates. There is some degree of innovation overseas along the lines identified earlier, however we have yet to see a radical restructuring of the industry and a reinventing of the processes and charging. 

In my view there has to be a better way. There has to be a means by which greater efficiency can be brought to the process and with it greater transparency and naturally a lower cost. We cannot though sacrifice the service component nor the security of legal and principle disclosures and sureties so as to safeguard buyers and sellers in this most critical transaction. 


Incentivising agents to list properties for Auction

by Alistair Helm in ,


Agent with cash in pocket iStock_000016530240XSmall.jpg

The real estate industry keeps telling us that auctions are the best way to sell a property in today’s market. They reiterate that Nationally 20% of properties are sold by auction and in Auckland that number is 40%.

Leaving aside whether those numbers are truly reflective of a successful sale at the fall of a hammer at an auction, there is another side to this Pied-Piper-like behaviour by agents to encourage sellers to choose auctions. It is simple and yet not as well reported as the “success rate”.

Real Estate agents are being financially incentivised to persuade vendors to go for an auction.

I have been provided with information that shows that a real estate agent listing a median priced house in Auckland today could earn an extra $2,000 by gaining the listing as an Auction than as a standard Sale by Negotiation. The extra $2,000 would be in addition to a standard earning of $5,300. That is, in effect a 40% bonus incentive to list a property as an Auction.

Here are the facts.

The sales commission payable by the vendors for a median priced Auckland property today would be $20,528 inc GST based on a $600,000 sale price.

It is likely that on average the real estate company will pocket 40% of this commission ($7,140) and then distribute the balance ($10,710) to the agent or agents involved in the successful sale.

If the agent who lists the property, also successfully sells the property with no other agents acting for or introducing a buyer then the sole agent will pocket the full $10,710.

However, if as does occur especially in larger companies and as a function of the heated property market, buyers are introduced to properties by eager agents, then these agents described as  "selling agents" are entitled to a split of the commission with the listing agent. 

This is where the real estate company leverages that incentive. If you list a property as as a standard 'for sale by negotiation' or as simply a priced property and the subsequent sale involves a separate 'selling agent', then you as the listing agent pick up just 50% of the commission – you take home $5,355, and the selling agent picks up $5,355.

If however you persuade the vendor when you list a property to take it to an Auction sale (or a Tender) then you as the listing agent will receive not 50% of the commission but 70% - allowing you to take home $7,497 with the selling agent getting just $3,213. Therefore as an agent listing a property as an Auction in a way secures you a higher guaranteed income than as a standard listing.

Now there is nothing wrong, illegal or unprofessional with companies providing sales people with incentives to encourage performance or direct outcomes that suit the company – that is human nature and how commerce works and has done for centuries. However when it comes to selling a home there is a deeper principle of conduct that should be paramount above and beyond the personal financial motivation of agents and their bosses. After all their clients as vendors of houses look to agents to advise them on how to sell as vendors are not that aware of the best approach.

That is why the Real Estate Agents Authority, the governing body that oversees, regulates and administers the industry in their latest update to their Code of Conduct specifically included the requirement for agents to disclose to their clients any financial benefit they may receive as a result of a choice in how to sell their house.

Clause 10.5 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012 states:

Before a prospective client signs an agency agreement, the licensee must explain to the prospective client how choices that the prospective client may make about how to sell or otherwise dispose of his or her land or business could impact on the individual benefits that the licensee may receive.

Are agents actively informing vendors when they recommend an Auction that they may be receiving a benefit in recommending this approach to selling? – who knows, it is a legal requirement of all agents to make sure they do.

 


Auctions – perfect for $million racehorses, so why not for property?

by Alistair Helm in ,


Image courtesy of the New Zealand Bloodstock Limited

Image courtesy of the New Zealand Bloodstock Limited

I was in the middle of a presentation the other day expounding forth on my favourite subject of the limitations of auctions as a process to sell a house when someone politely stopped me and said “How can auctions be so wrong when Sir Patrick Hogan has relies on auctions to buy and sell all of his horses – he can’t be dumb!”

I have to say that question stumped me for a minute, not being a horse race fanatic and having only the vaguest recall who Sir Patrick Hogan was. Rather than answer the question directly, I chose to politely state that I would need to consider the question as there was a valid point being made and it was worth the time to reflect on the comparison between auctions for horses and property.

So for the benefit of the questioner and the wider assembled group here is my response.

Auctions are a highly effective process to sell items for which there is competition, items that are rare and unique. Auctions suit Fine Art, Furniture, Racehorses, Classic Cars and in some cases Property. They also suit the clearance-sale approach where there is a need to complete sales quickly and where the buying audience can be brought together in person or virtually to focus on the sale.

Race Horse auctions are part of events held locally or nationally on an infrequent basis where buyers and sellers and their items for sale can be brought together so that you have the full universe of buyers to ensure the demand is strong and a good supply of items to sell to attract a wide audience of buyers. Imagine how inefficient it would be if instead of a quarterly Race Horse auction you had an individual auction at each stud every day – buyers would need to spend all their time driving around. So event based auctions suit horse sales in the same way as Sotheby’s and Christie’s auctions suit Fine Art.

So then why is it that I contend that auctions are not the perfect solution for selling property?

Well clearly you cannot aggregate all the properties in the market and sell them at events every couple of months – property marketing is time-bound, people want to sell today, or this week, they cannot wait until the end of next month for an auction. Despite this there have been some attempts by some of the real estate companies to create “Big Auctions” – I cannot for the life of me see the value in this. Auctions for houses need to be unique events where the potential buyers are placed in a position where they champion one another for the right to buy the house using price as the weapon.

This leads me to another aspect of real estate auctions which I think is not appropriate. The weekly auction room sale, where each week a collection of a dozen or more homes are auctioned in a sterile meeting room. Buyers are told the auction will start at 2pm but who know when they will get to lot 7?

Why is it in today’s world when real estate agents charge commissions of over $20,000 to sell an Auckland house can they not afford to hold an auction for a property at a set time and place (at the property) – why do such auctions have to be crammed into what is akin to a sale year – for whose benefit? clearly the real estate companies derived massive economies of scale - one auctioneer 20 properties in half a day's work!

So accepting that property auctions should be unique events held at the property at the very least thereby ensuring the buyers are not intimidated by random strangers jostling all around them, who are simply sitting round for a later auction, what is still so wrong with auctioning property?

The truth is there is nothing wrong with auctioning property. My primary concern is that it is seen as the nirvana of property sales process. It has its merits and its disadvantages. To provide some clarity here is my summation of the pro's and con's of auctions for property:

Auctions pros and cons.png

A lot of my antagonism about auctions is driven by the recent trend of real estate agents blindly and with what I regard as blatant disregard to the needs of vendors, pushing every sale as an auction and in the frenetic desire to sell more houses more quickly, and in the process reducing marketing lead times to days rather than weeks, thereby driving panic amongst buyers who fail to undertake satisfactory due diligence. 

Property is a significant purchase decision and should be allowed to be reflected upon as a serious purchase decision. Please let us bring some sanity and pragmatism into the process as otherwise those who may get burnt in today's market may hold a grudge against the real estate industry when the market quietens down - which is what will happen in the coming years. 

 


When is an auction not an auction?

by Alistair Helm in , ,


Auction iStock_000007491409Small.jpg.png

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:

 

Auctions Information Sheet July 1 2011 reformat-2.pdf (page 1 of 5).png

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”.

 


Should a real estate agent be paid $1.5m a year in earnings?

by Alistair Helm in ,


iStock_000004004971XSmall.jpg

This week Barfoot & Thompson in celebrating the achievements of their Top 25 salespeople detailed that their top 3 agents collectively sold a total of more than 300 homes in the past year. At an average sale price of $721,000 these sales generated a total transaction value of over $200 million from just the top 3 agents at the largest real estate company in Auckland.

Now to my mind it is not important to know who these people are. They are undoubtedly successful and certainly valuable to Barfoot & Thompson as they accounted for 3% of the total transaction value of the company last year. Three people from a total of over 2,000 who are self employed contractors operating under the licence of Barfoot & Thompson.

Doing a simple calculation based on the commission rates of the company and knowing a little of the commission split between the individual agent and the company leads me to believe that each of the 3 top agents earned around $1,500,000 each last year.

Three of the top agents working for the largest Auckland real estate firm earned an estimated $1,500,000 each last year from selling real estate.

Now I will accept that these agents do employ assistants to help with the work load; after all 100 property sales a year equates to two sales a week and that is far above the average for the industry at large, at just 8 sales in a year. So let’s allow $150,000 of costs for assistants – that still means that these agents are earning around $1,350,000 a year.

That earning power puts them well inside the top 20 pay of CEO’s in NZ as referenced from the 2011 NZ Herald CEO Pay Survey.

 

CEO Pay Survey_ Salaries stall for NZ_s top bosses - Business - NZ Herald News.png
  • Earnings of $1,350,000 a year is the same as that earned by Simon MacKenzie  the CEO of Vector, a leading infrastructure company managing electricity, gas and fibre optic networks with over 500,000 domestic and commercial customers, it manages over $5.5bn of assets delivering an operating cashflow of $390m.
  • Earnings of $1,350,000 a year is over $100,000 more than Don Braid the MD of Mainfreight a NZ based global logistics company with sales of over $1.8bn employing 5,000 people. In that financial year the company made $26m in profits.
  • Earnings of $1,350,000 a year is over $350,000 more than Russel Creedy the CEO of Restaurant Brands operating 177 stores with 3,700 employees across NZ with sales of over $300m. In that financial year the company made $26m in profits.

Running a complex multi-million / multi-billion dollar business across NZ and the globe is a challenging and demanding role with the responsibility for thousands of employees, customers and suppliers not to say the accountability to a board and shareholders. Top CEO’s are paid for performance and the demands of the job. They are in demand and have global value.

Selling houses is not, let us be honest that demanding. You have a handful of customers at any one time, you have virtually no suppliers or employees. You don’t have shareholders or a board of directors to report to. Bizarrely the people who monitor your performance share in your success and yet they do not directly contribute to that success, save only for the real estate license that a salesperson at Barfoot & Thompson operates under.

I do not blame these top agents for earning $1,500,000 a year, that is just the fact of the industry. Further I do not lay blame at the feet of Barfoot & Thompson, the same situation exists for a handful of top agents at Harcourts, Ray White, Bayleys and others, each earning well in excess of $1m a year. It is just the way the industry is structured, as self-employed individual agents are incentivised through commissions. The structure of the real estate industry creates this situation.

I think the real estate industry is inefficient, I think it is in need of change. Selling a house is not a unique skill, nor a highly demanding skill. I am convinced that all of the 100 odd houses sold individually by these agents in the past year could just as well have been sold by any other agent. It is just that these agents have created a "marketplace" that they control, not though any illegal means, simply the structure of the industry allows them to be so effective and dominant.

The core fact is that these top 3 agents do not have unique skills that allow them to earn in 7 days what the average agent earns in a year! There is something wrong with this industry when these disparities exist and the consumers of the services of this industry are being stung with this cost structure.

 


New iPad app from Barfoot & Thompson

by Alistair Helm in ,


Auckland's largest real estate group Barfoot & Thompson this week launched an iPad app that I think is a great piece of work.

It works on the principle of keep-it-simple and let the technology work for the user instead of getting in the way. I would judge that it is the best property iPad app developed in NZ and an equal of some of the best I have seen worldwide.

However having lauded it with such praise, I don't want to go much further before stating a major problem with it.

It is a property search tool that only shows listing from Barfoot & Thompson agents. Now that may well be 40% of the listings in Auckland, but for any property hunter, what value is there in only seeing a fraction of what is on offer to buy. Just as in the early days of the web, buyers had to trawl through each website of each agency to see what was on the market and boy did they get frustrated. Trade Me Property & Realestate.co.nz came along and provided the solution, all properties on one site.

So aside from this issue lets look at the beauty of this app built by Jandal software (who by the way also built the ASB Property app).

1. The focus is on location as the priority – very smart focusing on the inherent GPS capability of mobile devices (Trade Me Property iPad app does not prioritise this). You can easily zoom in and out and the speed of response is Ok, not lightening fast but Ok. There is a small issue that when you zoom out you get no clustering of listings and clicking on a pin at a resolution of the whole of Auckland shows individual properties. The Realestate.co.nz app does a much better job of clustering. Also I wonder why the blue location finder icon that tells you where you are disappears when you first move the map – may be a bug that needs fixing.

2. Open homes are great – find the ‘layer’ icon and you choose to show open homes within the next hour / day / all time – simple and beautiful with open homes shown with a great corporate B&T logo.

Barfoot for iPad on the iTunes App Store.png

3. School zones are one of the highlighted features of the app and the execution is great. On the ‘layer’ icon choose to show schools, choose a school and tap the ‘zone’ and you get a clear boundary demarcation of the zone for that school. This is one of those ‘must haves’ of an Auckland property search tool and congrats to Barfoot’s for delivering this.

4. The individual property listings are prioritised to show off full screen images which look great. Swiping through photos is entirely intuitive and a joy to do! Extra tabs deliver property info, videos and floor plans. Here is a question though, why do Barfoot not mandate the provision of floor plans? Floor plans are a real benefit to buyers and providing them would really deliver a point-of-difference for the company.

5. There is though a glaring hole with the app in regards to functionality, and it is the same functional shortfall that befalls the Realestate.co.nz app – you cannot save properties as favourites and sync those listings between the web and the app. There is also another very useful but missing toolset that I thought would have been included and that was social sharing – you can email a listing to a friend, but no such luck sharing it to Twitter of Facebook.

So overall a great piece of work from a user experience point of view – but I come back to my earlier question, will it be popular given you only ever see a portion of what’s for sale?

Now Barfoot & Thompson could fix this. They could access the Trade Me API and deliver all listings in an area straight into the app. The API is open access, equally Barfoot’s are a big customer of Trade Me which would easily garner support from Trade Me for such an initiative. In the US many branded real estate company apps do exactly this – show all listings.

I suspect many of the competing companies might not like this, but to be honest what’s the problem? – if their listings are seen then that is good for their vendors.

Maybe Barfoot’s would judge that sharing the app with competing listings is not in their best interest, but then again who is the client? I am sure vendors would be happier to have a smart app being used by tens, if not hundreds of thousands of Aucklanders rather than an app being used only by Barfoot agents and a few people who don’t know the app doesn’t show all the listings.

So there is the challenge to Barfoot’s – be bold, be a leader and make your app the definitive app for Auckland property finding and build your brand, your respect and your business.


Golden rule of advertising - never apologise?

by Alistair Helm in


I was quite literally taken aback when I saw this poster on a street along from where I live in Central Auckland.

A real estate company; the largest Auckland real estate company apologising (if I am reading it correctly) for increased popularity and thereby by insinuation for high property prices in the local area!

B&T poster.jpg

I would say that is a risky marketing strategy. For whilst in my interpretation, what they may well be trying to say is that as a function of their success in selling property locally the suburb has become incredibly popular.

I might suggest that what it conveys to observers of the poster is that the company is in someways smug about riding the property wave of demand (and profiting from it) rather than taking the opportunity of reinforcing the value of their services or possibly demonstrating the value in their sales success as judged by market share or customer satisfaction.

Now I know as a marketeer that part of good advertising is "standout" to create interruption and thereby become memorable and distinctive but I can't recall a campaign that has built credibility or memorability through apologising! 

Now maybe the concept of this campaign is to start a series of these ads around this company's core Auckland market. I can just see these future version:

Herne Bay sure has become pricey - sorry about that

Otara sure has become unpopular - sorry about that

Meremere sure is a long drive to the CBD - sorry about that

Albany sure has become congested - sorry about that

It's just my opinion, but I feel that apologising is not the best platform for a brand building campaign - maybe you disagree. Happy to hear your views. Please feel free to share a comment below.


How brave are real estate companies, when it comes to their website?

by Alistair Helm in


Real Estate For Sale, Land and Homes for Sale, Rentals and Commercial Leasing-1.jpg

I was recently asked by a real estate company I was advising, the question “What could we do differently in terms of our online presence?”

It was a good question. Not surprising though; as most companies in most industries are looking for a point of difference.

I think however, what they were really thinking was; how could we make a website that showcased our listings better than our competitor so as to drive more traffic to the site, to generate more enquiries; after all that is what they want – right? More enquiries, more buyers, happy sellers!?

What I told them though, was not what I think they wanted to hear. I said, to start with how about not having property listings on your website!?

Think about it for a minute. Almost every website you view from almost every real estate company has a home page focused on a search box to find their listings. This is not unique to this country; almost every country reflects this approach.

So given this universal approach why would I advocate having no property listings, unless I was just trying to be controversial or get attention?

The point I made to this client and the point that I think is worth sharing more generally is that the purpose of a website for a real estate company is to attract new business. New business for real estate companies is not comprised of buyers looking for houses. It needs to be focused towards sellers looking to choose a real estate agent. In this situation real estate is no different from any other service-based business. They want to attract customers and to do that they need to profile themselves in such a way that the prospect says – “this is the company I want to work with”.

Now property listings are the content of the real estate industry, but I would argue that real estate companies are not in the content business, they are in the service business, the satisfaction business; the satisfaction that comes from a completed sales. They are not (or at least less so these days) in the property marketing business. In this regard they should leave property marketing online to the property portals – in NZ Trade Me & Realestate.co.nz. These websites have the eyeballs and this is where the marketing more and more takes place.

Concept Oct 12.jpg

A smart real estate company should focus its website to the process of real estate transaction. Helping people understand what the process involves, providing advice and rich content and then highlighting the value they add to the process.

The site should focus heavily on the team. Real estate is about agents. The industry structure is still based on independent contractors who earn their commission-based-income by people in regular and deep contact with clients. So I would advocate deep content and profiling of all agents. Take the opportunity o really reveal the personality of the agent. Too many profile just republish the same tired clichés “Jane / John has a passion for real estate, they love working with people through the life changing process of moving house. Jane / John have lived in the area for years and love the community and the relationships they build with their clients over the years that have become friends”!

This is an example of a real estate portal website - Zillow in the US, not a real estate company website, but the section "What I love about my house" is great

This is an example of a real estate portal website - Zillow in the US, not a real estate company website, but the section "What I love about my house" is great

How about a bit more about the unique characteristics of the agent – what about what they love in a house, what style they love, what is their passion outside of real estate. After all it is more likely that a person that loves dogs is going to be keen to chat to an agent that equally loves dogs!

The site should also be clear about how much it should cost to sell your house. It is amazing how hard it is to find this out in most websites. I seem to recall a quote that if there was no price on an item in a catalogue then if you had to ask – you could not afford it. Is this the approach real estate takes? If they want your business then they should be up-front and tell you what it costs. If they are flexible to negotiate, let them say that. But give a guide as to the expected cost.

They should also outline what types and scale of marketing that should be recommended dependent upon circumstances.

A real benefit would be some great case studies that demonstrate the process of listing, marketing and selling some homes, within this, demonstrating the areas where the agent helps the process through to satisfactory conclusion – this would be far more valuable than endless bland testimonials that most sites seem to have that just keep reiterating how marvelous the agent was. Let’s be clear; these days consumers only trust reviews when they are open and balanced, a curated list that is not allowed to be commented on, is generally discredited as biased.

Another key service that real estate companies can offer that is complementary to their market knowledge of property is their community knowledge, so how about making the website more about the living experience and community feel for the areas served by the real estate company. This perfectly complements the agent profile section so each agent can share open and insightful local community profiles.

Now a point I should make is that by real estate website what I mean is the business website for the local real estate company as opposed to the corporate website for the brand or franchise. In the case of NZ read Harcourts, Ray White, LJ Hooker, Professionals, Barfoot & Thompson and Bayleys. These corporate sites are likely to continue to focus on property search and listings. This is mainly because these corporates are more interested in challenging the power of the portals of Trade Me & Realestate.co.nz and supporting their franchise offices for whom they want to drive brand exposure and traffic. What they should be doing though is focusing more on profiling their core brand values, the investment in training they provide as well as the professional standards they uphold and the company network of local offices they have as well as socially minded initiatives.

Having made all of these comments of criticism and advice for real estate companies, I should add that recently I was forwarded a link from a colleague in the USA who has shared my views on the changing face of real estate – he had come across a brave real estate company who had taken the leap of faith and re-developed their website to not show properties – congratulations to Real Living at Home – a radically different real estate company of Washington DC.