As an apartment owner, you want to get the highest price for the sale of your Auckland apartment. An important step is to list it above your expected price.
Andrew Murray, Apartment Specialists. Today I’m talking about how to figure out how much you should list your Auckland apartment for.
We will backtrack a bit. You are selling your Auckland apartment. The record price for an apartment which is exactly the same as yours or very similar is $300,000. And you want to get as much as you can. So you want to beat that $300,000. That’s your goal.
So how much should you list it for? Now this is where you put yourself in the buyer’s shoes. So I’ve got owners that go “oh we’ll list it at 305”. Now that’s too close to what your goal price is. You want it to be a bit further away. For example, think of a buyer. A buyer wants to get it for the lowest price possible. That’s what buyers do. So they are going to come in and they are not going to offer a listing price. They are going to come in lower. So you’ve got to leave a bit of fat in. And this is where negotiation comes into which is what I really enjoy.
So generally you will add on maybe 20 to 30 thousand dollars, because you know – lets say you list at 300 and the owner is going to come in at, maybe sort of, 290. I’ll try to negotiate as close as I can to 330. Or sometimes you get lucky and a person will come at 310 already and then you can negotiate with them even higher.
So that is how you want to look at it from an owner’s point of view. You want to know that “okay, what are you listing the price for? Or the apartment for?”. It needs to be a little bit above what your goal price is because you need to have that bit of room for negotiation.
What I’m going to talk about next is traders. Now what a trader is, that’s somebody who buys a property off a real estate agent or off an owner privately and then resells it for profit. Now as a rule – we have a company rule where we don’t sell to traders. But I have lots of traders who bring me properties to sell for them. This is where it gets really interesting because this cuts – what this will do is help you cut through all of the real estate hype, as in what is the most effective way to market your property and this is how we market our properties.
So what do the traders do to get the highest price? How do they get the highest price? How they’re getting higher prices than agents? What marketing are they doing and what marketing aren’t they doing? I’ll go through that next time.
How do you stage your apartment to look its absolute best online? Why is this necessary for owners who are selling their apartments? These are questions that we will answer in this series on questions asked by many apartment owners – “How Do I Sell My Apartment?”
Andrew Murray, Apartment Specialists. “How do I sell my apartment?” The question I get asked most often.
Now, it is all about having your apartment looking its absolute best online. So that is about using professional photography. And what I’m taking about today is not about you just paying for professional photography – it is having your Auckland apartment looking in its best light before the photographer gets there because otherwise it is a waste of time.
So, looking at the list of things that I’ve just come up in the last two days – rather than comparing my own and all that kind of thing – I wanted to look at two apartments that are very similar and can actually be really compared. So again here, you’ve got one in Harvard and one in Zest. They are investor apartments. They are the ones that a lot of people have difficulty with with tenants.
And now that is not an excuse. You can create a relationship with a tenant. And you will see that, as in regards to the results of professional photography. So both have used professional photography here.
Freehold, two bedrooms, the apartment in Harvard. Eleven photos. Two bedrooms, one bathroom. Two bedrooms, one bathroom. Both exactly the same size. Very similar. Both listed at exactly the same time. So you’ve got here, Freehold, two bedroom apartment, and the photography- it’s professional photography. I mean, the appearance could look better but it doesn’t look bad. It’s showing the apartment in good light. And how many views has it got? 396.
Now, we then look at Zest which is very similar. Professional photography as you can see by the wide angle lens. But the presentation is shocking to be honest. I mean, if you were an owner, would you want your apartment to look like that? If you are a buyer, what are you thinking? And this is an example where it just doesn’t create the same amount of enquiries.
So, it is about creating relationships with the tenants. It is coming in and lightly staging with them – and actually talking with them – and that’s a whole conversation in another process. But it is the result that counts. So professional photography is a must. But you are wasting your money if you are taking professional photography of something that does not look good.
So, I guess that is the point that I want to get through today. And you had probably see in the views 286. So from 286 to – how many were there before? Very quickly, my apologies. So, probably about 30% more views. So that’s 30% more buyers looking at your apartment.
Thank you for that, I will be now commenting on the third part of this question, Is it a feature or not a feature?
We will be talking about the Auckland apartment market and how can you determine if your apartment is being undersold to a trader. I will also tackle some of the common myths associated with a trader – All these in this podcast.
Apartment Specialists Podcast No: 25
Andrew Murray, Apartment Specialists. You know, when your Auckland apartment is being undersold to a trader to be resold. That’s a myth. You don’t know. Most of the time, you don’t know.
One tenth – so one out of every ten Auckland apartment sales or apartment transactions on the Auckland apartment market is dealing with the trader. So that means over a hundred owners each year are selling to traders in one suburb in the city centre without even knowing in most cases.
Occasionally, clauses have been used. But these clauses are very misleading and give a completely different picture. So how can you be sure this isn’t happening to you? Everybody thinks, “Oh, I wouldn’t be that stupid to undersell my apartment”. Well, the thing is, you don’t actually know. Because me – being an apartment agent – it took me probably a year, or six months to a year, to actually figure out the values. So you as a vendor, how are you supposed to know when I’m doing this day in and day out? And the reason why – a huge reason – is sales don’t always represent values.
Every apartment is different, every condition is different. It’s a real minefield. So if you even suspect that your apartment’s being sold to a trader, put in the agreement on the vendor side, “Subject to evaluation”. Then you actually know – and just for the sake of that $500 you spend on evaluation – you’ve got peace of mind knowing that you’re not throwing away money.
Probably the best way to ensure that this doesn’t happen from the very start is when you choose the agent to represent you. Create a separate form saying that the agent will ask every prospective buyer – he puts in a contract – the purpose of the purchase. Is it an owner-occupier? Is it an investment for “x” amount of years, or it’s to resell? And through doing that, you can actually ask the agent have they asked the purchaser a question and what is the reason for the purchase. Now, if they say it’s to resale, they have to say it because you’ve actually given them a document or put a clause in for the sole agency saying they have to do so. You’re not flying blind. Because it happens time and time again. And some of the top agents in the Auckland apartment market sell so many apartments to traders and no one has any idea.
I hope that helps and make sure you do put that clause in. If you’re unsure and you feel like you’re in an area where you can’t make an educated decision – because you feel like you’re just relying on the information in front of you – put it subject to evaluation for the vendor and that’s not normally done – but in the Auckland apartment market that needs to be done. Or as I see it – if you can – ask to have that clause in the agreement. You can even say, “I don’t want to receive offers from traders”. And every offer, I would like to know what the purpose of the purchase is. I hope that it’s been helpful.
The next myth I’m going to talk about will help educate you guys is the auction market. An auction is the best method of sale when it’s unique, when it’s going to bring in emotional buyers. I very rarely use this because I can get higher prices through listing with a price. But there are times when auction is the best method. In this market, the sad thing is that’s not the case. And I’ll go through that in my next podcast and how you can ensure that you’re not falling into that category.
In this podcast, I discussed about the myth of the sole agency and the reason why you need to get out of it.
Andrew Murray, Apartment Specialist, the Auckland apartment market. Today, I’m going to be talking about the myth of the sole agency. The fact that, you can’t get out of it. The thing is, you can.
I often get called by this guy, “Andrew, I’d like you to represent me. You’ve been recommended by Joe Blogg because the agent that I’m with at the moment is just not working for me”. For number of reasons, it could be promises they haven’t kept. Or it could be that they’re just not getting along.
Now, real estate is an interesting industry. And the Auckland apartment market’s where you can’t try before you buy. The agent promises the world – and if they don’t deliver – you’re stuck with them for 90 days. The same thing is this: if you’ve got a vendor that has to sell on a certain time frame for various reasons – generally because of financial commitments – and it means they have to go through an agent they don’t want to go through or they don’t feel are doing the best job for them. And often, this leads to accepting offers that they didn’t want to accept.
The key thing here is to remember as the vendor, you are in control. Make sure you are always in control because the problem with the real estate industry – especially in apartment market from my opinion is – the vendor loses control when they sign that sole agency and they need to get that control back. They need to better dictate the terms. They need to be able to hold the agent accountable.
So when you find the agent who you want to represent you, ask to have a clause added in the agreement saying you can terminate that agreement if you feel they’re not representing you or they’re not delivering what they promised. So it’s their business loss, because what other industry can you actually lock someone in? So remember that. And that should really, really help you because it’s also going to make them work harder. Because they know that if they don’t, they’ll lose the job or they’ll lose you as a customer. And that’s how it should be as it is in every other industry.
I hope that helps. That’s a really, really an important one that I feel very passionate about. And so remember that.
Next week what I’m going to do is, I’m going to talk about another myth – that you know your apartment is getting sold or undersold to a trader to be resold because you don’t. And I’ll give you a few tips on how you can tell.
In this podcast, we will talk about the common methods used by agents when selling Auckland properties and the policies they follow.
Andrew Murray, Apartment Specialists. Myth: All agents are able to sell your apartment.
Now in the Auckland apartment market, there are over a hundred apartment specialists. Now, unlike the housing market, these specialists represent all different demographics – different cultures, buyers that don’t go to newspapers, don’t go through Trade Me and only buy through particular agents because of relationships – and that I mentioned earlier.
When selling your apartment, an agent will nearly always say, “Yes, I do sales with other agents.” But the simple fact of the matter is, they don’t. You’ve got one of the major agencies – it’s their policy to not let other agents from other agencies actually bring an offer. I have actually called them and sent emails saying, “I will give you a listing price. I’ve got a buyer from overseas who’s going to pay really good money and give you a listing price for your apartment.”
And I get a response back saying, “Sorry. It’s not our policy to sell to other agents or give you a referral fee.” At the end of the day, every agent is out there doing a living. It’s a job for a reason. This is not doing what’s best for the vendor – now that’s an extreme.
Then you have the majority of the agencies in the Auckland apartment market which do conjunctional sales. So they will let another agent from another agency through the apartment. But the thing that they don’t tell you is – they will restrict the commission and that ranges from 20% or 30% or 40%.
So for example – if I have a buyer who’s going to pay top dollar for an apartment that’s been listed by another agency, I’ll ring them up and I’ll go, “Can I take a buyer through and will you do a conjunctional sale? They’ll say yes – they may only give me 30% of the commission.
Now if you ask yourself, if an agent has a really good buyer who’s going to pay top dollar – and that agent is trying to make a living, are they going to direct their buyer to a property where they’re going to get paid less or where they’re going to get paid freely?
So the key question is, when you’re choosing an agent to represent you, ask them not only do they do conjunctional sales – which is very important – but do they share the commission fairly and evenly?
Actually put a clause in that agency agreement saying, “That you, the agent, will share the commission after expenses, 50-50, with another agent from an other agency”. And you actually put that in your ad. What that does is – it means that you’ve got a whole market looking for you – which ensures that you get the highest price for your Auckland apartment.
Now I hope that’s been helpful – quite an insight. It’s hard to know what’s going on in the real estate industry unless you’re in it. Hopefully that’s given you a little bit more.
Next week, I’m going to talk about something that very few people are aware of. All apartment agents get paid differently, even if they’re in the same agency. And there are reasons for that. And that also has implications for you being a vendor.
Anyway, I’ll talk about that next week and talk soon.
We will tackle why owners of agencies incentivise auctions and why they do this sort of thing. Get the facts straight from this podcast.
Andrew Murray, Apartment Specialists. Myth number two. Agencies incentivise auctions because it is in the best interest of the owners.
In my own opinion, that is a complete myth and from my experience it has been a complete myth. Owners of agencies incentivise auctions because it’s in the best interest of the agency.
They do that for three reasons.
Because an agency is like any company, it needs to predict next month’s income. And the best way of doing that is through auction – because auctions are more likely to sell. The reason is because of the pressure of an auction – the amount of money spent on the advertising. The owners go all in. They’re not going to that point and go “Oh, we’re going to spend that $4-5,000 again”. So for an owner, they can predict and look okay we’ve got 10 options next month, that means on average we sell 90% of all our options. So that means there’s nine sales right there.
Now at the moment, in the housing market, they’re in line. In my opinion, in the housing market, if I had a house, I’ll sell it by auction because that is the best way to sell at the moment. Currently, because there is a lack of supply of listings and there are more buyers. They’re emotional buyers so there are more. But if you looked at it three years ago, it would be the worst way to sell your house because we all know what was happening. There was nobody around to buy. It was a crash – it was a financial crisis.
Now if you look at apartments, where there is a huge amount of supply – over 611 apartments currently. Well, why are auctions being used if they aren’t having the same result in the housing market? Why are they being used to sell lease-hold property when there aren’t any buyers? It’s because the owners incentivise them. They’re giving their agents more commission or more commission goes to a listing agent. Then the agent finds a buyer because it’s selling by auction. The other reason why agencies want auctions is because all the advertising of the publicity, that’s half ego and it’s half because it kind of works. The more publicity you have, the more market share it appears you have. And so other owners are more likely to go to that agent or agency because of the advertising.
So I hope that’s really given you a different point of view of how auctions are being used. In my opinion, why there are so many auctions in the apartment market, where especially in buildings where they are lease-hold buildings. You don’t have owner-occupiers purchasing them. It’s all about the numbers – there isn’t the emotion and continually- again and again -I’m not getting the best prices, listening to the prices, yet auction is chosen again and again.
Okay, next week we are going to talk about something completely different – rental companies. Being that 70% of the Auckland apartment market is rented, it’s a pretty big topic. The myth is that all rental companies are equal.
In this podcast, I’ll be talking about myths that you will commonly encounter in the Auckland apartment market and the whole real estate market in New Zealand.
Andrew Murray, Apartment Specialists. Today we’re going to be talking about myths. What you do not know about what happens in the Auckland apartment market, as well as the real estate market through the whole of New Zealand.
Now myth number one’s quite an interesting one. I would be very surprised if many people are aware of this. But the myth is, real estate agents get paid the same amount whether they sell Auckland apartments via auction or by price or by tender. Now that’s a myth. That’s not the case.
Agents get paid more to auction your property. What happens is an agency gives them 70% of the commission on offer to the listing agent. And then they only offer 30% to the agent who finds the buyer. That’s because an agency wants as many auctions. And I’ll be talking about that in the next podcast, the reasons why an agency wants more auctions.
Now specifically what does that mean? A listing agent gets paid more if they list a property by auction than with a price? Now, that’s actually a bit of conflict of interest because it means there’s an incentive to sell an open apartment or house by auction. Now to me it doesn’t swing. You’ve got to ask yourself – three years ago in the housing market, why there was still auctions when we all know that was the worst way to sale? There was no demand. And in the apartment market, why are there so many auctions? Auctions for leasehold properties when there are no buyers? And then it is just passed in again and again. And if there was a good buyer, they’ll only have to pay just above the other buyer who was most likely a trader or somebody who was just speculating.
Why does it have this effect? So what happens is, the listing agent gets paid more when they list it and they’re going to get 30% when they find a buyer. So what happens is, other agents who have a really good buyer – it’s all about paying the bills. That’s what agents do. You’ve got to think about it as your own job.
If you’re going to have a good buyer that’s going to buy property, are you going to direct it towards a property that you’re going to get 30% of the commission? Or are you going to direct it towards a property where you’re going to get more commission, or paid more? I mean that answers the question itself. And because of this, the IRA just come up with a new legislation to make sure that every agent – when they auction – actually declare that to the owner. Now whether that’s happening or not, I don’t know. That’s myth number one. A bit of a biggy and something you need to be aware of. And actually ask your agent who’s representing you, if they haven’t already told you that. Because they’re supposed to. Thank you.
Next week, we’re going to be talking about myth number two, and that is why do agencies want auctions?
This is the second part of my podcast and we will discuss more why auction in the Auckland apartment market is not achieving the same results as it is in the housing market.
Andrew Murray, Apartment Specialists. Today, we’re talking about why auction in the Auckland apartment market is not achieving the same results as it is in the housing market. And it’s quite simple. It’s supply and demand.
If you go to any suburb around Auckland and see how many listings are available, there will be 20, 30, 40, sometimes 10. Yet if you go to the apartment market, it’s always over 600. I think there was 611 this morning. We all know for auction to work, there has to be less supply than there is demand i.e., there has to be more buyers than there are sellers. That is the reason why auction is creating such frenzy around the Open City. I’ve got a good friend of mine. They’re a couple and they want to start their family. They’re panicking because there’s just so much competition. There’s so many emotional buyers wanting to purchase. That’s just a family home and there just aren’t enough listings out there.
Yet in the apartment market, it’s very different. Buyers aren’t as emotionally involved. Now, I’m not saying that auction doesn’t work. I’m saying that auction has its place. I’m saying it’s when there’s scarcity. So auction I think is a really good measure when you’ve got an apartment that’s very unique and obviously favourable. So you have a lot of people wanting it and they know that in a months’ time or two months’ time, there won’t be another one just popping up. That will create that emotional connection to the property, which will drive the prices up and that competition factor, which makes it work.
Now, I did have a few people from the last podcast that did go, Well, I did get a good price for mine, and that’s what I mean. It’s because your property was unique – and don’t get me wrong – sometimes you do achieve it – but I’m just saying, more likely than not, it’s not achieved through auction.
Look at the traders. These are people who buy apartments – most likely through real estate agents – and then sell them at a profit. Now, do they sell by auction? Nine times out of ten they don’t. That’s their business to get the highest price and they choose not to auction. I think that’s a pretty good indication of what’s working in the CBD because a trader in the housing market does sell by auction.
Anyway, What I want to leave you there is with – okay, let’s look at two scenarios. You’ve got a buyer who wants to buy your apartment. That is willing to pay 480,000. And you’ve got a buyer who’s willing to pay 420,000 for your apartment. Now, how much does the buyer have to pay – who would’ve paid up to 480,000. Only 421,000? 425,000? And that’s why in this market, I feel if you’re listing with a price and creating a multi-offer situation, it is far more effective. There is a lot of technique and skill that goes into how you list it with a price and how to achieve that maximum price. We can talk about that another time.
Anyway, next week we will talk about another reason why – giving you more education regarding why, auction isn’t as successful in the Auckland apartment market as it is in the housing market and hope you found this helpful.
Have you ever thought of a reason why an auction in the Auckland CBD is not achieving the price you’ve always wanted? I’ll discuss my points in this podcast.
Andrew Murray, Apartment Specialists. Why is an auction in the Auckland CBD in most cases, not achieving the highest price? Now, this is quite a big topic. So I’ll take it down to a couple of points and do a podcast for each one.
Now, the first one is: a bid at auction is unconditional. So that means there’s no conditions. You know that you bought it. Once that hammer goes down, you’ve bought it. So in this market buyers are very scared because of bad publicity because of the leaky building issues. And the amount of due diligence they want to do to make sure that they are making a safe purchase. This deters a lot of purchasers.
Also, the finance is very different. Unlike with a house, where you may get a pre-approval to a certain amount. A pre-approval with a bank will still require a valuation, every time, in most cases. And the big one is this, okay they may have given you a pre-approval but then when you find an apartment in a particular building, they may not give you finance because they’ve got too many – they’re linked to too many apartments in that building. So, they’re exposed to too much risk or they might just have problems with that building or just reasons that they won’t even tell you.
So, it’s a lot harder for someone to go and purchase at auction. You’ve got to be very, very confident. And if you look at it, I’ve heard of purchasers who wanted to do a building inspection, as well as a valuation.
So when you’re dealing with apartments that are not worth as much as houses and they’ve got to do all this due diligence, it’s very difficult for them to spend a thousand dollars on each one, looking into them. So that’s one of the reasons why auction is not achieving the same results as with houses.
Next week, I’m going to be talking about the supply issue and the difference between the apartment market and the housing market.
In this podcast, I’ll be talking about the best selling methods and common schemes of real estate agents, especially when auctioning your apartment and how they get more when they do.
Andrew Murray, Apartment Specialist, methods of sales.
Did you know real estate agents get paid more to auction your apartment than they do to list it with a price? Now, what I mean by that is, when the agent gets paid the commission, the listing agent will get a higher percentage of that commission if they auction the property. And the person who found the buyer will get a smaller amount of commission. And that has all kinds of implications. That often means that, if someone’s got a really good buyer that’s not on their listings, they would rather push their buyer towards a listing that’s listed with a price, because they get paid more money. It also means that – in a lot of occasions – well, if you ask yourself if you’re going to get paid 70% just to sell a property and not find a buyer, are you going to do as much work to find that buyer? Well, you can make that conclusion yourself. So, it’s quite interesting.
Now, about the other point… Okay, if you ask me right now. How I’d sell my house in Auckland, I’d say I’d auction it. So, what am I saying here? I’m not saying auction is not a very good way of selling. I’m saying that it has its time and its place. If you ask me how I would have sold my house three years ago – no way by auction. Because we weren’t in a burning market. We weren’t in a time where – basically there was more demand than supply. Now, I have apartments and my parents have apartments. If you ask me how I would have sold my apartment three years ago, I would definitely list it with a price. If you ask me what I advice I give my parents – list it with a price. If you ask me right now in a burning market how would I sell my apartment, I’d list it with a price.
Now, what’s the difference between an apartment and a house? There is a huge difference. And that’s the reason why statistically, when you look at all that, how the highest prices are achieved – and most buildings I know are through listing with a price. It’s because of due diligence. It’s because people are scared of buying apartments. They need to do their due diligence.
When you come into an auction, you’re making an unconditional offer. And a lot of people they want to have conditions. Before they purchase, they want to have a building inspection. They want to be able to go through the minutes with a fine tooth comb. They want to be able to get an evaluation and a conditional price. There’s a lot more conditions, people are a lot more scared when they’re purchasing apartments. Going to an auction, doesn’t suit them. Also, values.
Also, if you’re looking at apartments now, we’ve got so many of them. If you look in a suburb, there’s probably maybe 20 at the moment – 20 listings in a suburb, maybe 30, maybe 40. Well, in an open CBD, there’s about 700. And if you look at say 3 bedroom, there’s probably about 300. So there’s so much choice. You look at the traders, how do they sell their apartments? Now, these are people who buy apartments either directly from the owners or off real estate agents and then – they buy them undervalue and then sell them at the maximum price. And that’s their job. That’s their business. Do they auction their apartments? Nine times out of ten they do not. I see a lot in the housing market, but not in the apartment market. So, ask yourself, that’s their business to get the highest price “Why aren’t they auctioning their properties when selling their apartments?” Let’s look on Trade Me. Look at Icon City. That’s the biggest trading in Auckland apartments or apartments in New Zealand. And they’re not auctioning, they’re listing their price. So, that should give you a good idea.
If your agent does tell you that the best way to sell your property is by auction. Ask to see the values or the highest sales achieved in your building and find out what methods of sale were used to achieve those sales. And you can get that information from the REINZ. So even a real estate agent can get that information. So it is available and that will help you choose what method of sale is best for you. And if they are pushing auction and it’s not the best method so sale – you’ve got to ask where their motivation is. Is it for them? Or is it for you? So I hope this helped. I think it will have given you a very good insight – especially into the apartment market which is very different.
And next week I will be talking about knowing your building. How important it is that you choose an agent that knows your building and the questions to ask and to find out if they do.
Cool. So, if you haven’t downloaded it already, as I mention on each podcast. I had a lot of great feedback. This is just one of ten points on mistakes owners make that I see them making which costs them thousands of dollars in selling their apartments. Download it from www.apartmentspecialists.co.nz