Apartment Specialists Podcast No: 5
In this podcast, we’ll be talking about traders and why selling your apartment to a trader has its disadvantages. Learn more from this podcast.
Good morning, Andrew Murray from Apartment Specialists. Today we are talking about traders. Why? Because if you are selling to a trader, that means you are selling your apartment below market’s worth. If you look at approximately 1600 apartments per year in the CBD that are being sold, and traders make up or are involved in 10% of those transactions. Now that’s a lot of apartments being undersold. Now, don’t get me wrong, traders do have their place. They’re great when you need an unconditional offer very quickly and in a situation where an owner needs to, say, sell in days because they have a financial issue or they can’t pay the body corporate fees, or something in that regard. Something happens in their lives, which means they need to sell very quickly.
But if that’s the case, a real estate agent shouldn’t be selling. What are you paying us for? What? To just call somebody on the phone and go, okay? So if anybody is in that situation, feel free, send me an email email@example.com, or, give me a ring on 021-424-892, and I’ll put you directly in touch with a trader and you can deal directly with them. Because it’s not my job. It’s not good for my reputation, and it’s not good for my statistics. Anyway, just talking about how many apartments do get undersold to traders, and it’s remarkably a lot more than you think.
And the thing is you ask, how do these traders get their deals? How are they finding out about your apartment? How are they consistently getting or buying apartments underneath market value, doing them up and making them a profit, to the point where they can actually be in the Deloitte’s Fast 50. Be one of the top companies in New Zealand.
It’s because they get approximately 70% of their deals through real estate agents. So that’s where your real estate agents are getting paid to undersell the property. Now, yes, in some cases there may be a situation, but in many cases I bet you there’s not, and in my opinion, there’s definitely not. I’ve seen clauses used which imply completely different reasons for these traders buying the properties. One, in fact, which is used regularly, I see, which is disclosed to the owner, this purchaser is suspected to be in trade, and is actually selling these apartments overseas in a similar-type fashion, or by any other means. It’s not that exact wording but that’s the gist of it and so the owner thinks, “Oh, okay, so the purchaser’s going to take this apartment and go and sell it to an overseas buyer in a seminar and rip someone off like was done with Blue Chip and done with all the other different institutions that sold like that.”
But that hasn’t been done since 2004, 2005, 2006, 2007. It’s not happening at the moment. Yet, it enables an owner to accept underselling their apartment, when really what’s happening is, it’s going straight to the trader, and within a couple of weeks, straight on trade, and dealing with the same retail buyers. Now, that just shouldn’t happen. And that’s why obviously if anybody needs to get in touch with a trader, just get the number off me and you can deal with them directly. I don’t get paid a cent, I don’t have anything to do with it. How can, as you and I know, can you stop, or know that you’re not dealing with a trader?
What I do is I go to point number two. Now, what I’m talking about today, traders, that’s actually point number two in a guide I put out which is ten reasons that I see which are causing owners to unknowingly lose thousands of dollars on their apartment. Now, you can download that from apartmentspecialists.co.nz, or email me at Andrew@apartmentspecialists.co.nz, and I will send it out to you. In that number two, we’re talking about traders, there’s a link within that to a form which you can get whoever is representing you to actually sign a form saying– first of all, ask the purchaser do they or are they intending to onsell this property for a profit, and secondly, under what name.
There are a lot of people who you can buy your apartment, you can put any name or nominee and they could nominate it to a trader. And then thirdly, so then that has to be declared, so they’ve actually asked the purchaser’s name, because an agent goes, “Okay, I think they’re a trader,” but if they don’t ask them the question, they think they don’t have to declare it. That form is forcing them to ask the question, so you know if you’re dealing with a trader, and the reason why it’s so important when you compare it to the housing industry compared to the apartment industry, is it’s so hard for you to know values.
I’ll give you an example. How I work, is I will go and look for a building that’s under value. What I mean by that is the sales, how they’re being sold, the methods of sales or a bit of history of the building or basically, the apartments and what they’ve been selling for or how the previous people in my industry have been selling them, have not been achieving the values that they should be achieving.
So I’ll go in there and sell them for what they are actually worth. And that’s what a trader does. They go and look for these buildings. “Okay, these are the sale prices they are selling for,” and go, “Okay, I know that I can put in an offer that to an owner looks very good because they’re going to compare it to the previous sales, when really I know it’s worth this in this market because this market’s moved so much.” So it’s very, very difficult, so that’s why a form like that is very important, and also who you chooses as an agent is very important, but that’s your own individual choice.
So obviously, that’s a normal part of what we do because my aim is to get the highest prices for the vendor, and the highest prices bring you business. It’s pretty simple. That’s like with any industry, you do a good job, you get more business. That’s why a lot of mine comes through referrals, through body corporates, through building managers, through all that kind of thing because that’s what I do, it’s good for the building. Anyway, so first of all, get a form signed, so they have to declare it, and not so the agent has to declare it, but the agent has to ask the question and then declare it because otherwise, they will just not ask the question. Two, get the most up to date sales prices you can get and the methods of sale but then again, that’s slightly flawed. Ask for some sales in the most similar building, a comparable building to yours.
Now if you do that, that means you’ll get a higher price because that’s what I do, I’ll go look at this building and go, “Okay, the sales numbers are here, but this one that’s virtually very similar, similar kind of area, same kind of buyer they’re looking for, same kind of demographic that would purchase it, yet the sales values are lower, so I’m going to go in there and raise it and that’s another way. I hope this has been helpful, and do download that report because there’s nine other reasons, one which I will be covering next week, which is about transparency when talking to an agent about how they are selling your property.
Are they letting other agents from other competing agencies try to sell your property? And if they are, are they offering them a fair commission because they may say, “Yes, I let every single agent through,” but if your agent is only going to offer them or share 10%, 20%, 30% of the commission, why is that other agent from a competing agency going to waste his time? Because at the end of the day, they’re doing what we’re all doing. It’s a job and they’re there to make money. Now, I hope this has been helpful and look forward to talking to you soon. Thank you, bye.