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.
We’ll be talking about the various methods and strategies real estate agent use to earn the highest commission in selling properties. But I will enumerate the facts that a lot of real estate agents don’t realise. Achieve a worry-free Auckland apartment sale. Get the facts on this podcast.
Andrew Murray, Apartment Specialists.
Now the average real estate agent only earns $35,000 a year. When you think that commission opportunities in selling property whether it’s 10, 15 or 20 thousand dollars, do you think it affects how they think? Of course it does.
Now, put yourself in their shoes. If the average real estate agent is earning around $35,000 and you’ve got an opportunity in front of you that represents a good chunk of that, do you think they are going to be thinking “let’s get the deal done or let’s get the deal done the best way possible?” Now you be the judge in regards to that, but I think that’s pretty obvious. And that’s a problem.
What a lot of real estate agents don’t realise is that this is not about the deal right now. It’s about the deal – a thousand deals down the track. That one thousands apartments that I sell – that’s what I think about every single time I sell a property. And the reason why? It’s because the deal I’m doing now communicates to other owners, to referrals, through proving to other owners that gets the highest prices. The deal I do now brings me the next deal, and the next deal, and the next deal.
So what I am talking about? I’m talking about today’s point number six, regarding 10 reasons why Auckland apartment owners lose thousands of dollars in selling their apartment. And this one is about the sales process. The reason why I’m going to cover the sales process is so that you know what are you paying an agent to do. Have they actually invested in their own business? Not only that they’re the franchise because that’s just bums on seats. Do they have their own personal assistant? That would be the number one thing. Why? Because 80% of the average agent’s time has to be spent looking for more business. They’re not doing the job that they are actually getting being paid for.
So for example, question one, what are you paying them to do? They should be investing in their own business as a single business and having an assistant doing the $5, $10, $15 jobs, the paperwork, the flyers all that. You and your agents, look into the buyers, bringing them back, dealing with them, doing open homes, doing extra viewings. Getting back to that extra time to get that extra $5,000 $10,000, $15,000 for you.
So when choosing an agent, you want to get inside their business. Do they have their own personal assistant? How do they do their business? How do they get record sales prices in your building? How do they do it? What is the method of sale they use? That’s a big one and I’ll talk about it in a couple of days.
So what I want you to take onboard today is regarding – looking at an agent to represent you. It makes a huge difference. And point number 6 of 10 points is about – are you paying them to actually work for you or are you paying for them to look for more business? And one of the easiest ways to tell that is to have a personal assistant that takes care of all that other stuff for them. Because at the end of the day, you’re employing them to be using their mouth and their brains to sell your apartment.
Okay. So next week, I’m going to be talking about what’s the best way to sell your Auckland CBD apartment. Looking at statistics, the proof, what are the charts? How the best price is being achieved, and in an upward market and a downward market.
When it’s booming, when there is a bubble, it is actually just steps that actually show you what is the best way to sell and what ways are being used to sell despite this. Now it’s very different to the housing market and I think you’re going to be very surprised. I look forward to talking to you about it in a couple of days. Anyway, if you haven’t already downloaded the report, I was talking about point 6 today. Go to www.apartmentspecialists.co.nz, that’s www.apartmentspecialists.co.nz and you will clearly see the 10 mistakes report to the right and download it today and look forward to next week. Cheers.
In this podcast, we will talk about property agents and their common method in selling a property. I will also discuss the difference between an apartment market and the housing market.
Apartment Specialists Podcast No: 7
TRANSCRIPTION Andrew Murray, Apartment Specialists, agents protecting their listings. That’s when agents want to sell the property themselves so they will do this by limiting other agents from selling the property. They will either not let them do it or offer them spilt percentages that’s pretty much not worth the other agent’s time, 10, 20, 30% or make it very difficult. Or you know that when you put in an offer, they’ll knock you around. The average real estate agent only makes 35, 40 grand around that figure a year. So they really care about that one deal.
Well it shouldn’t be that, it’s about you. You’re employing an agent to do a job for you. Now, there’s a huge difference between the apartment market and the housing market. With the housing market, everyone is pretty much looking at the same places, they’re looking at Trade Me and they’re looking in the paper and that’s pretty much it. Now, in the apartment market, there is a huge international pool of buyers. You’ve got 70% of buyers and purchasers who are not planning on living in the apartment. They are all over New Zealand and don’t see the ads in the local paper.
They speak different languages, so they don’t even understand Trade Me. I’ve got buyers agents from New Caledonia, from Australia, from Russia, from Korea, China, all walks of life and that’s what’s in properties. And the buyers only go through them, because they trust them. I’ve got buyers myself that will only go through me because of relationships formed. They’ll pay top dollar but they only go through me. Other agents have got buyers who will only go through them. But I don’t have all the buyers, they don’t have all the buyers, nobody has all the buyers.
So how can you as an apartment owner make sure that your apartment is open to all the buyers? Well, it’s actually quite simple but unfortunately it doesn’t happen. Now you’ve got agencies in this market, their policy is to not let other agents from other competing agencies sell your apartment. They’ll only do a referral fee. You’ve got ones who will only do 30%. You got clauses in the agreements that say, at any point in time they can refuse access to the apartment. Or, I mean I can just go on and on. So what’s that doing?
That’s actually stopping a possible buyer from purchasing your property because of their own interests or the franchise’s. It may not be the agent’s fault but they are all doing it, so it’s okay, well it’s not okay. So, how can you ensure that your apartment is getting the maximum buyers, maximum of offers? This is where you ask your agent, “Will you do a conjunctional sale? What a conjunctional sale means is will they do another sale with another agent from a competing agency? ” And most, when you ask that question, they will say “Yes.” The next question that is crucial is, “What commission percentage do you offer the other agent from your competing agency?”
Some will say 20%, some will say 30%, some will say 40%. The thing is, it’s almost become – I’m not looking at the chart. Its become good advice by correct price. I’ll bring it up an agency. Or bring up an agent. This happens frequently, I’ve been using those. And on that other side, I’ll bring out an offer. Or, we don’t, we kind of leak you through. One sided, this is not the case. They simply will not do that. So how can you absolutely ensure, it’s a difficult one. So what I am saying is, ask them will they do a conjunctional sale.
Ask them what is the percentage, ask them to change that percentage ’cause it means that you dictate the terms, you are the client, the client is always right, why does that apply to every other industry but real estate? So I would like to – if I bring my business to you as an agent, if you to sell me your property. I would like the commissions for other agents and that to be advertised in the ad to be after expenses and your normal licensing phase and that kind of thing to be at 50%. Because if you think about it, if you’re an agent from another agency and you only get 20% of the commission or 30% of the commission.
Well, you’re going to make it an extremely difficult for another agent to come through. You’re not going to do it. You’re going to take your buyer by elsewhere. Because during the day, a real estate agent is just like you, doing a job. They do need to get paid. They need to put food on the table, so the saying goes. So if they’re going to get paid less , what’s going to make it extremely difficult for them, why are they going to bother? So you’re going to make sure your agent makes it as easy as possible and advertises in the ad, “all agents welcome equal commission”.
In that regard that’s how it should be. And, there’s another way to maximize or make sure that your apartment is getting all the publicity, all the action, all of the–it’s getting the highest price I can in the market because this is the worst, I’ll tell you what and it’s so frustrating when I have a buyer who will pay more but I was not able to sell it.
Now, I’ll give you a bit of an insight into the apartment market and the real estate market out and how–you’re probably getting a little bit of trend here as you listened to this. As you are the client, you can actually dictate terms but you got to-I’m trying to educate you so you have the– Because, this is where I live and breathe. And I’m sure, in your industry if I came in and try to figure out what you do. I wouldn’t have a clue, I would be lost.
And so I am trying to give you insight on what to question and how to put a stand to the person you want to represent you to make sure you’re getting looked after.
Hope it’s been helpful and I will be talking about next time is about presentation of your apartment. Now, this is a big one. I kind of touched on it before when we went through photography. That this is a huge one because it’s not done on running the industry and it needs to be. It’s something that you and I need to be aware of. Especially if you’re going to do the ad campaign, ask to see the photos, ask to see the campaign, that kind of thing. Anyway, have a good one. Talk to you soon. Bye!