Property Sales - It's Not a Boom Anymore, But Why the Doom & Gloom? By Susan Salkeld
Most of the western world, if not the entire first world, seems to be reporting that property market price inflation is decreasing or stalled. In the worst-hit areas we even hear tales of a lowering of house prices and negative equity for some unfortunate new homeowners who jumped on to the property bandwagon at the peak of the recent property boom. High Street inflation never lets up, so it's natural for property investors large and small to feel that the end of the world is nigh.
This state of mind is undoubtedly an over-reaction. The human psyche drives modern man to ensure he has a place he can call home in the shortest possible time after leaving his childhood days behind in the former family house. Fair enough - but does this man of our times actually have to own his home outright, in theory at best? And more tellingly, does this man have a god-given right to expect that with home ownership comes enough lifetime's wealth to be able to retire from working for an income at his chosen time? The latter scenario is a common desire, and it is based upon the premise that property values will always rise faster than other commodities.
We are now finding that we have come to the end of a period where property value inflation was outstripping general living cost rises. But we should not be surprised because we have had these ups and downs before. The general trend though is that property prices commonly rise again fairly rapidly after periods of stagnation. It's all about supply and demand.
The demand for new homes or at least of people looking to move house will never cease. Why? Because many old homes become dilapidated for a start. Then we have the new young families who need their own space and cannot expand into the limited space of parental homes. On top of that, the modern world economy relies upon many workers who must be mobile throughout most of their working lives, thereby prompting housing development and property transactions countrywide and often internationally. And don't forget those that choose to upgrade or downsize by choice due to family or personal needs.
What about the supply side? The builders can't build fast enough in boom times because handsome returns on their property investments are almost guaranteed. If land banks are purchased just prior to a stalling of property prices, then naturally there is no rush to build and sell at reduced profit margins. So any oversupply rate reduces until it balances demand. This is the period being experienced in many parts of the US and Europe at present.
As soon as a local property market detects increased demand, sellers start hiking up prices and builders and developers start building. So the conclusion is "don't panic" and take some time to reflect on why existing homeowners feel uneasy every time this cycle reaches its low point.
Property is a reasonably sound investment, and it gives the buyer the obvious immediate attraction of having somewhere to live (or work in the case of commercial premises). However there are other ways to exist comfortably which don't involve organizing your life around the demands of meeting hefty monthly mortgage repayments and fretting about why the value of your property doesn't always rise at a consistent rate.
Many young people are opting to rent property. The so-called home-owning critics immediately shout that house rent is "dead money". To a degree, yes, but if renting frees up income to invest in markets which don't fluctuate in boom & bust cycles, then isn't the oft-struggling homeowner something of a hypocrite? And who actually owns the majority of private domestic homes anyway? If a homeowner misses a mortgage payment you soon find out that the big financial institutions cold-heartedly treat lenders as no better than tenants of real estate upon which their businesses are founded. And furthermore, as tenants with much less rights than conventional renters of property who have fair and equitable rental agreements to rely upon in times of hardship.
It's interesting to note that in previous generations the majority of house dwellers were tenants, particularly in towns and cities. Most homeowners can probably quote that their parents or grandparents lived in rented accommodation, and that is a reason why they strive to ensure that they and their dependents have the security of home ownership. What security, if you worry about why your investment and lifestyle is not always as good as you dreamed? Our ancestors survived, without the disposable income levels of today, so perhaps the property rental option should not be dismissed so readily.
Maybe the biggest lesson to be learned by property investors when global economy growth recedes is that only a few property types are guaranteed to grow in value (in the longer term) at a rate generally in excess of other inflationary factors. These are the well-maintained properties in desirable locations whether they be urban or rural. Funnily enough, my experience tells me that these properties are likely to fall into the cheaper price category or the other extreme, the high-end luxury home. The middle range property, by its very nature, forms the bulk of property sale listings, so the seller struggles to promote his property above the multitudes of similar priced homes or sites.
I suppose it can be summed up as follows:
• First-time buyers, transient workers, students and 2nd home buyers will always provide a ready market for low-end "affordable" property, particularly in urban settings. • High earners will always want to upgrade to luxury properties in secure and private surroundings, particularly in established districts of like-minded people. • The rest of us, by far the majority, continue to buy or rent in the mid-price range through necessity of location or finance limitations and a natural desire to match or slightly better our neighbors' lifestyles.
The exclusive luxury homes and the lower-end smaller properties are instantly brought to the fore from hundreds of listings by easy-to-use search functions which detect price range and/or location. The more attractive middle range properties also benefit in that household features and property type listings enable the website browser to easily compare the best value for money of numerous properties in a chosen location.
In Ireland, I can report that Property Agents say that Property Portals have contributed greatly to stability in the mid-price range domestic property market. Sale closures in this category, for sensibly priced houses, are regular and commonplace, thereby propping up the market in general. This contradicts the doom & gloom reported in the media, no doubt created by "worried" homeowners who aren't even active in the buying and selling of property. The lazy expectation that easy money can be made simply by buying and living in a home for life smacks of greed, not reality. These merchants of doom should be ignored. We also read in the press about the owners of expensive houses for sale having to dramatically slash prices to arouse interest. Probably, not maybe, the asking price was unrealistic and based upon outdated market value. The eventual selling price of a luxury home will still have made the purchase a sound investment if it was bought at any time except the very peak of the recent boom. Again, I can report in Ireland that Agents say that there is still a waiting list for desirable upmarket properties. The best of these homes are sold via website mailing lists or by the uploading of the property brochure to Propertysteps.ie and similar internet property portals.
For a fraction of the cost of press advertising, our best value for money website gets quick results. Often you never even see a For Sale sign being erected for property in the more exclusive address category, yet new occupiers appear and everyone involved in the transaction is delighted. You don't read about these everyday success stories in the media; it appears to me that only boom, doom or gloom stories sell newspapers when the local economy is discussed.
Be Aware of the Different Agreements With Agents When Selling Property
It is perfectly possible to appoint more than one agent when selling your pride and joy, but this does depend on what type of contract you have with your agency. It is imperative that you proceed with caution before instructing a second agent. As with all contracts in all things you should read the small print carefully.
It is there for a reason, and many an unwary customer has tripped over the tiny print. You wouldn't be the first. If there is anything you do not understand or are confused by, then seek out appropriate professional advice. Don't sign anything until you are 100% satisfied and don't accept the agency's advice as gospel here because at this point they are not looking out for your interests, they are looking out for their own.
In short there are five different contracts you could sign with a real estate agency. Make sure that you know the differences and make sure that you know which one it is that is presented to you.
SOLE SELLING:
With a sole selling agreement the real estate agency always retains the right to charge you commission on the sale of your home even if you find the eventual buyer quite independently of the agent. You can't avoid the fee by doing the work yourself. If you try to do so you could end up being sued.
SOLE AGENCY:
With a Sole Agency agreement the agent is still the only agency granted rights to sell your property, but there is now no commission due to the agency if you find the eventual buyer yourself. Check the small print that this is indeed the case before you sign the agreement. If in doubt ask the agency to confirm the point in writing.
MULTIPLE AGENCY:
You have the right to appoint more than one agent to try and sell your home if you choose to, but you only have to pay a selling commission to the successful agent that sells the property. Multiple agency agreements often stipulate a higher than normal percentage commission rate. Check that fact and the point that you will only be liable for one fee in any event.
JOINT SOLE AGENCY:
In the case where you appoint two or more agents to work together to sell your home they will split the fee equally between themselves when the property is sold irrespective of who is responsible for the sale. Make sure the small print says what you think it says. Don't be confused by legalese and gobbledegook. Insist terms are written in plain English.
READY WILLING & ABLE:
This a quite rare and crazy type of agreement that should be avoided at all costs. In effect it states that if the agent finds you a buyer and you pull out of the sale for any reason, you will still be required to pay the agent their fee, even if you never sell your property and never move out. Why anyone would knowingly agree to such an agreement is a mystery and probably comes back to the point of the seller not reading and not understanding the small print in the first place.
The vast majority of agents are honest and hardworking but there is always the occasional bad apple in every barrel. You can help to protect yourself by reading and understanding the small print on all documents presented to you. The most important thing of all is that if you do not understand anything do not be afraid to seek out independent professional advice. That will give you all the reassurance you need.
Alternative Income Sources For Real Estate Agents By Ellen Mikesell
Tough times in the real estate market have made many agents look beyond the traditional residential home sales market to bolster their incomes in a declining market. It has been said that for every problem there is an opportunity and this is as true in the real estate field as any other. Below are some alternative markets worth taking a look at if you want to add income streams to your bottom line in this difficult market.
Performing Broker Price Opinion valuations for banks and mortgage companies. Similar to the traditional Comparable Market Analysis, or CMA, agents are familiar with providing for potential listing clients, they are very much in demand as foreclosures rise. Pay ranges from $40-150 per report and many agents perform multiple reports daily.
Short Sales. As property values decline in many areas of the country, more and more sellers are finding themselves in the position of being "upside down" in their homes. It is well worth the time and effort to learn the ins and outs of handling such sales successfully and those who specialize in this field are seeing their incomes soar in spite of the slow market.
REO/Foreclosures. Only a few years ago, this was an almost non-existent niche in most markets. A handful of agents who specialized in this field dominated the market and it remains difficult to break into. REO offers its own special challenges but mastering and establishing yourself in REO can bring very substantial rewards. All three niches above offer increasing opportunity in the present market and promise to do so for some time to come. The wave of foreclosures is by no means over and market corrections are expected to continue for quite some time. Before making a decision to enter any new niche, it is recommended that you research the pros and cons as well as prerequisites for success in each.
Preparing a home to sell can be much harder than people think. Does this sound intimidating? Well, it's really not. Just do a few things to make sure that your home feels warm, clean, and inviting.
Clean the home. It may seem obvious - the need to clean up your house before inviting in a Realtor or even buyers. However, many people leave their houses dirty. Here's a hint: those considering buying your house do not want to see how it normally looks - which might be in a messy state. They want to see the house clean, so that they can visualize themselves living there. The buyer wants to see what the house can become, and they can only see this if the house is clean.
Shampoo or professionally clean your carpets. If you have hardwood floors, you should polish them. However, if you have carpets or rugs, then these should be cleaned by a professional. Steam cleaners, such as those available for rent at your local grocery store, do a decent job of upkeep on your carpets. But if you want potential buyers to be interested in your house, you will need a deep cleaning system with a heavy duty stain removal solution. Your carpets and rugs should look new so that the new owners will not say that they need new carpets before closing on the purchase.
Walls should be painted. This step may not be required if you have just painted your house. But if you painted in bright colors or with unique patterns, you are going to have to paint again. The house paint should be a neutral color throughout most of the house. Kitchens should be a brighter color. Any work space, such as the office, should be a more neutral but professional color. If there are walls in your home that are painted with an accent color then you should think about painting over them. You may think they look great, but your buyers may not appreciate them. For example, if your home has a strong Asian motif, the dark red accent on the walls may turn off potential buyers. They see only the designs they do not like and decide they do not like the house. Thus they do not see the potential of the whole room or the rest of the house. You should try to make your house as "buyer friendly" as you are able.
Clutter should be gone. To make your home buyer friendly, make it easy and convenient for them to see the home that they would want to live in. This is done by putting your things away and having as open a feel as possible. Then it is a simple matter for visitors to imagine how they could live in that house. So get out the boxes and start putting things away. Put away and box up all toys, family photos, and heir looms. Remove or even throw away knick knacks. Shelves and book cases need to be clean and nearly empty, so that potential buyers see the potential home they want to buy. You should also remove a lot of books from bookcases. This will allow them to imagine the house filled with their things.
Set up the home. You should leave a few candles and some nice hand towels on the bathroom counter, a few collector's editions or nice looking books in the bookshelves, fresh flowers that match the kitchen decor on the dining room table, and few magazines in a fan pattern on the coffee table. Get rid of any furniture that takes away from the proposed value of the home or doesn't match the home. For example, an older trunk that has been passed down for generations doesn't always have to be in the family room. What you are trying to do is to make each room in the house look appealing and comfortable.
Baking cookies is a good way to do this. If you don't do much baking, simply buy some cookie dough and put it in to bake about 20 minutes before a showing. The cookies should have time to bake and cool, and you will have time to leave before the showing. What's the reason for baking cookies? To make your house feel like a welcoming and happy home, the smell of fresh baked cookies, along with the other things, will be perfect.
As a Durango real estate investor, Rocky Spurrell truly appreciates sellers who take the time to stage their homes properly. When looking for real estate in Durango Colorado with his Realtor Durango Colorado - Rocky looks mostly at welcoming Durango mountain homes that have a family-friendly feel. Accordingly, these are the only homes he purchases.
Selling Property in a Buyers Market - 3 Secrets to Success By James Dylan
Over the past 20 years global property, stocks and shares have enjoyed a secular bull market. The easy monetary policy of Greenspan's Fed, off-shoring of the western world's inflation to emerging nations, the advent of the internet and online trading, mandatory 401k contributions, and the often-mentioned baby boomer generation has fuelled one of the largest boom cycles in recorded history.
But what goes up comes down- history has proved this to us time and again since the days of Adam Smith, but our collective memories are short. With the typical cycle lasting 30 to 40 years it is no wonder we forget past lessons. I certainly do not remember the hard-learned lessons of the years following 1929.
Most leading economists now agree that we are entering, or have entered, the bear market phase of the economic cycle. Whether this started in 2001 with the internet bubble, the turn in property prices in 2005, or through the continuing effects of the credit credit crunch will only be determined with the clarity of hindsight. Any estimates to how long the decline side will take to turn up again are really just best guesses.
So, prognostications and economic theory aside, what does this mean for your average homeowner or property investor?
The answer is "it depends".
For those who are conservatively leveraged, able to comfortably meet their mortgage payments or with positively geared investments, they simply do nothing. Their net paper worth may change, but in 2, 5 or 10 years they will be wondering what the fuss was about as prices rebound through today's depressed levels.
Unfortunately, many of us do not have this luxury. We may have increasing mortgage payments, increasing interest rates on credit card debt and car loans, while at the same time our disposable income is being reduced by the skyrocketing price of everything from fuel to beer.
Inevitably, this forces many of us to sell property into a declining market. Selling in a declining market is far different than selling in a boom market and it is important we are aware of, and prepared for, the fundamental differences in sales approach.
Firstly, in a declining property market it is imperative that we price accurately. Mis-pricing in a rising market may lose us a quick sale but at some stage the market should catch up with our asking price. This is not the case in a declining market. An overpriced property will likely sit in the market bypassed by the few buyers looking for property. The longer a mis-priced property remains unsold, the more over priced it becomes. In a declining market price accurately, sell quickly.
Secondly, fear marketing and the use of phrases such as "better be quick" and "don't miss out" are more likely to have the opposite effect in a declining market. Is a buyer going to "miss out" today when they might pay less tomorrow? No, in fact the buyer's fear has changed to one of buying too high, rather than missing out. When marketing talk up the features and benefits of a property and avoid hard-sell tactics.
And thirdly, in a depressed market we need to find buyers. They are out there, but there are many properties for sale to distract them from finding yours. Word of mouth is a great tool- don't be ashamed to spread the word. Post signs, flyers, and place ads in newspapers. Employ good real estate agents who will actively market your property with you- remember they also have mortgages and mouths to feed. The more people know your property is for sale, the more likely you will find a buyer.
And the internet, use the internet. Not only can you access your local market, but with the internet you can market your property to the world. There are many great websites out there offering a range of services, and many even offer free basic listings. In this case you have nothing to lose but more exposure and more chance to sell your property.
At ExpatFlats Limited we do offer free basic listings but we also offer something no other website does... direct exposure to foreign investors. Hong Kong's Expatriates come from all 4 corners of the world and are very active property investors in their home countries. For the first time ever, real estate agents and private owners can reach these people directly by a listing in our new Investment Property section. http://www.ExpatFlats.com invites you to be one of the first to take advantage of this brand new marketing tool. James Dylan is the managing director of ExpatFlats Limited, the leading independent Hong Kong property portal.
