Brian Edwards Media
Posted by BE on October 22nd, 2014
In the 32 years that Judy and I have been together we have bought and sold quite a few houses. Six years is the longest we lived in any one of those houses. Our friends regard us as gypsies. The best explanation for this is that we like houses and looking at houses. Sometimes looking means falling in love and falling in love can lead to buying, preceded of course by casting off the old love. This was the case with the house we recently sold. We had a perfectly good house, walked in to an open home at a house across the road, fell in love and bingo – divorce followed by another marriage. This one has lasted a little over 5 years and the house will soon have far more faithful owners, a delightful young family who expect their children, and maybe even some of their grandchildren, to grow up there.
In the process of all this pillar-to-posting we’ve learnt quite a lot about buying and selling houses which could be summarised as ‘win some, lose some’. And we thought we might pass on some of that accumulated experience to you, dear reader. What follows is amateur stuff really and may not be 100% correct. But it’s our experience of the fascinating world of real estate. I say ‘our’ because my editor, JC, as she always does, has read the text and given it her tick of approval. So here goes:
How to Sell a House
1) Put a price on it:
Decide (jointly with your partner, if you have one) how much you WANT for the house. Roughly calculate this amount by taking into account:
What you paid for the property;
The cost of improvements you have made to the property;
General inflation in the period since you bought the property;
Specific rises or falls in the housing market since you bought the property;
The buyer appeal of the house;
The buyer appeal of the street or district;
Any capital gain you hope to make from the sale;
What you’re going to have to pay to buy another property;
How much you NEED to get for the house to feel CONTENT. This will also determine the lowest figure you will accept for the property. Have a clear agreement with your partner on this figure. If you don’t and have to accept anything less, you’re both going to be unhappy and recriminations may be the result. In our opinion this is the best way to sell a house because potential buyers know exactly where you (and more importantly they) stand. Your asking price is the highest figure they will have to pay to own the property, but not necessarily the lowest. It is the starting point for future negotiations. There may also be a sense that you’re someone who’s laid their cards on the table – an honest broker.. Putting a price on it is the most transparent way of selling a house. We have always ended up putting a price on a property we were selling or by advertising it as ‘price by negotiation’.
2) Advertise the sale as ‘Price By Negotiation’
Make all the calculations as in 1). Decide how much you NEED to get for the house to feel CONTENT. This is your theoretical minimum sale price; Decide on the figure you’d REALLY, REALLY like to get. This is your theoretical IDEAL sale price. Convey only this second figure to your real estate agent. Knowing your bottom figure compromises the agent when answering potential buyers’ questions. She can tell buyers what ‘they’re really looking for’, but not ‘what they’ll take’. Best if the agent doesn’t know that.
The upside of ‘Price by Negotiation’ is that it allows for greater competition between buyers and the possibility that you may get even more than the figure you came up with when you ‘put a price’ on the property. From the prospective buyer’s point of view, there is less certainty as to what will buy the house and more competition with other buyers, but greater opportunity for negotiation. The prospective buyer feels that he or she is more in the driving seat. The pros and cons of ‘Price by Negotiation’ probably make it ‘equal best’ with putting a fixed price on the property. As a vendor you may do better or worse but you’re not stuck with a price that prevents people even looking.
3) For Sale by Auction
We’ve done this four times and deeply regretted it. In every case the agent overestimated the price we could expect to get for the property. None of the four properties came within cooee of that price and none sold at auction or in negotiation after the auction. The process was dispiriting and demoralising. We subsequently sold each of the properties by putting a price on them or advertising them as Price by Negotiation. In all four cases, that price was higher than the highest price reached at auction.
Agents like auctions. If you doubt it, check out the windows of almost any real estate agency in the country. The vast majority of properties are being sold at auction. The reasons why agents like auctions should be fairly clear:
The sales campaign has a fixed duration which is generally shorter than the open-ended options of putting a fixed price on the property or advertising the price as being ‘by negotiation’.
The auction brings potential buyers together at the same time and in the same place with the prospect of competitive or ‘frenzied’ bidding leading to big bucks. Not our experience, as I’ve said, but maybe our experience was atypical.
[By the way, auctions may not be great for buyers either. What an auction doesn’t do is let you get close up with the vendor. Direct negotiation, even through your agent, really isn’t on the cards. And, until auction day, you’ve really no clear idea of how many people you’re competing against, how determined they are or what they can afford or are willing to pay. Your agent may not know either. And, as a recent TV documentary showed, the strategy of the people bidding against you may be to automatically up every bid you make by the minimum permissible amount. Hugely frustrating and not always good for race relations.
But the news may not be all bad: Every auction ad contains the encouraging little phrase ‘unless sold prior’. I’m told that’s a legal requirement. So all you have to do to is make the vendor a great offer and the house is yours. Well no! The agent will thank you for your offer, tell you she’s going to present it to the vendor and… ‘… and the auction will be brought forward and your offer presented as a bid, acceptable to the vendor.’ In other words, the property is now officially ‘on the market’. There’s no law that says this has to happen; it’s just what they do. So now you’re still buying at auction, just a different auction, in which your ‘acceptable offer’ has now been transformed into what is effectively a starting bid. That probably wasn’t what you intended when, in an attempt to by-pass the auction process, you made that great offer. Now your great offer is at the bottom of the pile. You can understand why this appeals to the vendor. They already have your offer and can use it as a launching pad to find out whether they can do even better. If you’re presented with this scenario, I suggest you inform your agent firmly but politely that you have no intention of going to auction and he should inform the vendor that that’s your offer, take it or leave it. The vendor may of course decide to leave it. ]
So our experience of auctions, both as buyers and vendors has been thoroughly negative. So ask yourself this question: How come the auction is now the preferred selling option of a significant majority of vendors? I suspect that’s because it’s the preferred selling option of their real estate agent agency. Now why would that be?
4) Advertise the property as For Sale By Tender
A tender is sometimes known as a ‘blind auction’. It’s the buyer who’s blind or at least completely in the dark. She has no idea what you want or will accept for the property; no idea how many other offers you have received, no idea how much those other offers are for, and no idea whether she’s tendered higher or lower than everyone else or somewhere in between. Even more significantly, she doesn’t know whether there are any other tenders at all. Our personal view is that, unless a buyer is completely happy to conduct one of the most significant transactions in their life totally in the dark , they should avoid tenders like the plague. We always have.
By the same token, selling your house by tender doesn’t seem to make a great deal of sense either. If a significant proportion of buyers share our view of the tender process, that’s a significant proportion who are going to be turned off by your ‘Tender’ sign.
5) Private Sale
This is where you dispense with the services of a Real Estate Agency and do the lot yourself: preparing the property for sale, advertising the property, running the open homes, negotiating with interested parties, entering into contractual agreements for Sale and Purchase etc. You’re probably going to need the services of a lawyer to finalise things, but everything else you can in theory do yourself. Personally we think you’re nuts. But it’s your funeral. And it probably will be.
6) Other Methods
There are other methods of selling property, but we have had no experience of them. Putting a price on the property, advertising the sale price as ‘by negotiation’, selling at auction and selling by tender are the most common methods in New Zealand.
7) Some other things we’ve learnt:
*It simply isn’t true that one agent is as good as another. Some are brilliant; some are useless. Ask around. Really successful agents sell lots of properties and get a good rap. We’ve had the same agent for both our last two house sales. Both properties sold in 10 days. A good agent can really make a difference.
*Try not go get too emotionally involved in the negotiation. Hating the people who aren’t prepared to meet your price is bad for your digestion and doesn’t achieve anything. Let your agent get the ulcer.
*For much the same reason, don’t be upset by negative feedback about your house. And don’t pressure your agent to tell you what people at the open homes said. Your decor and furniture may not suit every taste.
*A dirty or untidy house will be harder to sell than a clean and tidy house.
*An untidy courtyard or neglected garden won’t help either.
*Not much you can do about it really, but swimming pools can be a turn-off as well as a turn-on for many buyers. We won’t look at houses with swimming pools. Too much bloody trouble!
*If you can afford it, and even if you can’t, have the house professionally ‘dressed’ or partially dressed for open homes. Yes, all those cushions on the beds look bloody stupid, but in our experience ‘dressing’ the house really improves your chances of a sale.
*Don’t have coffee brewing or the lingering smell of fried bacon. People don’t buy houses because they like coffee or bacon.
*Don’t have music playing during open homes. The chances that your musical tastes are the same as those of all of the people looking at your house are infinitesimal. People are there to look not to listen.
*If you value your privacy take down your personal photographs for open homes. They’re just food for gossip about you.
*Don’t hang around your house during an open home. It’s sneaky. Prospective buyers are entitled to their privacy too. And you’re likely to hear things said that aren’t very pleasant.
*And finally: Don’t be greedy. Chances are your greed will lose you the sale. Not to mention contributing to driving house prices up, which you’ll regret when you’re in the market yourself.
That’s it folks. Going, Going, Gone to lunch!
25 Comments:
So do you regret not paying a capital gains tax on all these transactions, Brian?
I would guess he does because a property gains tax would have lowered the cost of all the houses – he would probably have ended up paying out less overall.
The first tax ever to lower costs? You believe in miracles obviously.
Family home? I don’t think it would be eligible for CGT.
That’s a good Chardonnay Socialist policy then isn’t it?
Either, for reasons best known to himself, he’s continuing the misinformation campaign which helped National win the election or he’s come to believe his own propaganda.
Just helping you with the review of the policies which lost Labour the election, John. After all a CGT policy that penalises the poor who rent while exempting the wealthy who can afford to ratchet themselves up the property ladder is pretty hard to defend, isn’t it?
Reminds me of Captain Mainwaring when he got something wrong – “Just testing.”
Lsbour reminds me much more of Corporal Jones: “Don’t Panic” as they run around like headless chooks. And they never know when they get stuff wrong. In their fantasy world they are always right so everyone else must be always wrong. Just like you here, pretending I was wrong without being able to raise the slightest counter factual or logic.
An interesting article about buying and selling a family home.
The comment about capital gains tax has no relevance to the article. Nowhere in the article is there mention about capital gains tax. The Labour policy on capital gains tax exempted the family home. As the author(s) were writing on selling a family home, the sarcastically worded presumably rhetorical question is meaningless.
Hardly. See above.
The rabid right never lose a chance, however slim, to have a go at Labour. What are they afraid of?
Only boredom, John.
Having an unexpressed opinion? God forbid that they miss the chance to bore the rest of us with them…
Interesting article, Brian. I’m fascinated by your ability to be seduced by property so easily; it’s always seemed like too much damned work to me.
Bell, I am well aware of the Left’s reluctance to think. So boring. Feeling is all that is necessary isn’t it?
Your snide comments often pass unchecked, but I’m baffled how you reach this conclusion since you know little or nothing of me, or indeed of others whose political persuasions don’t match your own. Your views, however, are widely disseminated. The ability to post doesn’t equate to the ability to think, of course.
So, back to reflections on how to sell and buy a house?
i’ve seen some of your posts, Nell. But even just considering this thread I think my point is on target. Analysis of CGT bores you. Property is too much work.
You’ve once again projected yourself onto others and onto this forum.
I own a house – just one. It’s enough for me. I understand, from their post, that Brian and Judy enjoy the process of buying and selling more.
I also understand the ramifications of CGT in its various manifestations. That was not what this original post was about; rather, it is what you want to talk about. Go ahead, fill your boots…
As with most people wishing to move house, it’s necessary to put your current house on the market in order to pay or part-pay for the new house. This isn’t generally regarded as speculation. Selling and buying in the same market is unlikely to make you rich. As it happens, I’m a supporter of capital gains taxes, including on the family home, and have expressed that support to Consecutive Labour Party finance spokesmen. You really have a talent for thinking the worst of people, Alan.
I congratulate you, Brian. Your advocacy for a universal CGT is the only principled position in favour of it. Unfortunately that was not what Labour chose to promote which as I observed left them favouring the upwardly mobile middle class at the expense of the poor.
My question was actually genuine to provoke discussion of the issue. The point you raise is also relevant. A CGT applied consistently and universally penalises asset transactions by perennially clipping the ticket each time. So an individual who has to move house loses money each time compared with one who doesn’t. And charging CGT on unrealized gains is disastrous for those with little income.
In short most of those advocating a CGT do so from a position of sublime ignorance of the consequences.
I agree that buying via tender is like buying at a blind auction. It may work well for vendors – a very keen buyer who has ‘fallen in love’ with the house has no idea what others in the marketplace are prepared to pay so the various tenders can be thousands apart. But it may work against vendors with many buyers not wanting to submit a tender, only to wait anxiously and miss out, or to have the tender accepted and left to wonder if they have paid too much.
Trying to buy at auction means you outlay hundreds or even four figures on reports (e.g. legal, LIM, builder’s report etc) and then risk that it is money down the drain if you miss out.
Everyone has their favourite way of buying or selling I guess. I like the current system of going to open homes over the old system where an agent would drive you to look at houses.
Auction, Tender, PBN, Fixed Price, Set Sale Date; they all have their good-and-bad points.
As Captain says in Cool Hand Luke, “It’s allll up to you”.
A friend bought his house through tender and paid a ridiculously low price.Housing NZ Who also wanted the site missed the closing date for the tender process.He paid 40% less than market value.The vendors who were overseas just wanted to be rid of the property.All types of sales processes can be advantageous to either party.
Auctions and Tenders are used to beat the Vendor’s expectations down quickly and if a sale does happen, Woohoo the agent can move on.
Regarding private sales, you need lawyers involved anyway and you can be a little more flexible on price [or take more gain depending on the market] as you’re not paying for an agent. You do have to make sure you can take the emotion out of the process and be professional.
I have bought and sold several houses over the years, privately. Worked well, and not much angst involved. I guess, starting off with a VERY clear value in mind and sticking to it, enabled the satisfactory sales/purchases.
Perhaps its not widely known but you can buy blank “Sale of House’ forms from Take Note, or similar.Or you could when I last did it 10 years ago.
Search Site
Categories
Blogroll
Copyright Brian Edwards Media 2018 Site: McGovern
