notpom

Food for thought

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    First things first.

     

    Yesterday I had a drive through the Southern Adelaide having usual fun of counting For Sale signs. Interesting observations:

     

    1. Out of 173 signs 160 had "Sold" or "Under Contract" sticker on them. And this is not the hottest market time of the year. Panic purchasing usually starts 6-7 weeks before Christmas. I do not understand this phenomena. Why people do not buy in winter when it is less competition? The only explanation I have - most of the people can not think rationally.

     

     

    2. I have seen 5 "For sale by owner" signs. Four of them I have seen 6 months before. Again - the same phenomena. People can not think rationally. What is the difference between owners and RE agents? Both have two arms and two legs (and other body parts). Difference is that agents are equipped with the knowledge to pressure you into the sale you do not want. On the money side, buying from the owner has the advantage of less competition from others. Needless to mention that you can always have a discount equalling to at least a half (if not all) agents' commission.

    Speaking about myself at the boom times I never even wait for the owner to declare their intention to sell. I always carry a bunch of pre-printed offer forms, and when I see suitable property I simply write in my offer and drop the form into their letter box.

     

    Second thing.

     

    "State of the States" report from Commsec has found that SA has the lowest rate of new housing starts. I would not mention that SA is the only state where migrants can get state sponsorship living in the capital city. Steady increase of demand with dwindling supply. Means that every day you rent, you doing yourself a damage.

     

    The last, but not least.

     

    http://www.smh.com.au/world/why-chinese-investors-come-to-australia-its-luxury-compared-to-home-20151026-gkiq9g.html

     

    Please read carefully and pay attention to the following:

    1. Adelaide has the highest rental return in country

    2. Adelaide is the cheapest mainland capital (lowest investment entry point for the masses of mum and dad investors who are looking to preserve their money when China enters the crisis)

    3. Substandard property in Chinese cities costs 22 average annual salaries. Chinese Real estate is the most expensive in the world. This is in case you believe the nonsense that Australian price/income ratio of between 7 and 8 will cause "property crash". This "ratio" is largely meaningless for the property markets. In the most Asian countries and Eastern Europe this ratio is between 30 and 40.

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    If you did use an agent to sell a property...what's a reasonable % commission that you should pay?

     

    I wish I knew straightforward answer to this question.

     

    Depends on the agent's performance. And commission is only the part of the story about money you pay to the agent.

     

    First you need to sit for a couple of days and think very hard of the target market for your property.

     

    Example 1: Average size 3 bedder on an absolutely level block of land, close to shops, medical centres and hospital - appeals to everyboidy, but most of all to elderly downsizers. Old people look for property without steps and the need for renovation. In this case and this case only you have to pay for newspaper advertising. Younger people do not waste time going through newspaper, and if you sell anything which is not suitable for older guys you pay to advertise your agent.

     

    Example 2: You are trying to sell something which would appeal to developers or renovators. Like big block, at a corner, recently rezoned, with structurally sound but rundown house on it. In this case I highly recommend you to get full steel trousers, machine gun and dig the bunker. This is due to the fact that 90% of agents are developers themselves. 90% of the rest "enjoy good relationship" (nice replacement for the term "mafia") with developers. In other words, you have 99% chance that you will have "identical twins" selling agents. They share not only the looks, but houses, spouses and driver's license. One of the identical twins will be sweet talking you into signing long selling contracts with them, and yapping about their client base, and present you with the marvellous ways to market your property. This person disappears straight after you sign. Another person comes in - the one who turns genuine buyers away ("I can't show you the house because......" Insert what you like. "Owner changed the locks" "Your time is not suitable to us" "My dog has maidens knee"....). You will be told that there is no interest to your property and conditioned to sell it for a song. Agent gets "commission" from a developer and commission from you and advertises themselves at your expense. I fail to understand why it is not legal just to skin this type of agents alive and sell their skins to cover your losses.

     

    I never sold anything, but for some reason every man, woman and their dogs (and cats) ask me for advice. My advice usually is:

    1. Look at the "sold" section of realestate.com.au or other site. Avoid agents who do not disclose sale prices (means they have nothing to be proud of). Be very afraid of the agents who have very different sale prices for very similar properties (they work hard to sell their own but drive down price for the houses they want for themselves or their friends)

     

    2. Insist on a "sliding schedule" of commissions. Say depending on achieved sale price

    $300K - 0%

    $350 - -1%

    $400 - 2%

    and so on.

    For a marketing - never pay anything upfront. No sale - no fee.

    3. Never sign selling contract longer than 4 weeks. If agent does not get enough buyers through the door - you do not stuck with them for months. Good indicator - genuine agents agree for 2 weeks contract. Deal shall be simple - "If I happy with your performance, I will have no hesitation to resign contract after two weeks. I understand that it is almost impossible to sell in that short time, but I do not want to get stuck if things go wrong".

    4. With all the above, for the Love of God, stay away from the agents from "Jenman system". They are very good on paper, but reality is very different.

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    Amnesia is extremely good disease. Does not hurt, and provides an opportunity to recycle the same news indefinitely.

     

    In other words, number five:

     

    Do not ring agents. Put together an ad for your property, put it for free on a gumtree.com.au.

     

    For the first two weeks you will be bombarded by calls from agents offering to sell your property.

     

    This way at least you might get a proactive agent.

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    Perhaps the BBQ chicken I have bought yesterday in a supermarket was mentally ill.

     

    Forgot the main thing.

     

    Number six. Do you actually need to sell? Or you simply WANT to sell?

     

    "Need to sell" encompasses very few scenarios For example the last night you lost couple of millions in the underground casino and you see the mafia truck with the industrial mincer mounted on it that is parked at front of your door. Or Council decided to approve a rubbish dump next to your backyard.

     

    Most of the other "personal circumstances" fall in the "want" category. Sit tight and think hard that in 5-7 years your property will be worth twice as much it is worth now. Perhaps healthy greed will take over the irrational urges.

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