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SteveandLisa Stone

Best First Home Buy?

Q: We are first home buyers and are wondering what your advice would be re buying an apartment versus a small home or home unit? Our concern is really around which will be the best investment for us when we (hopefully) move up to a family home in another 5 or so years.

Jerry D.

 

A: We are often asked about this, and it’s quite a complex subject, so we will be answering this in two parts – Part Two next week.

In the past, we have always said “buy land, because they’re not making any more of it” which would suggest that a unit or house with a bit of land would be a better investment than an apartment.

But let’s look at the facts: House values in Auckland have risen by 60.63% since 2012, while apartment values have risen 57.21% (Source homes.co.nz); not a huge difference really. So in terms of future sale price you are probably ok either way.

What may be of more importance to you is how the two differ in terms of initial cost, and on-going maintenance.

Here’s a real-life example: We recently bought an apartment in Remuera, rather than a house/unit. It suits our real estate lifestyle of course, being secure and low-maintenance. But what surprised us was what we saw at the auction. The apartment came up for auction immediately after the auction for a 75m2 brick and tile unit in Royal Oak with about 60m2 of garden/grounds. Now you should know that our apartment is 115m2 and is located in double Grammar zone. It also has great harbour views from a good-sized terrace, and the complex sports a swimming pool and tennis court, all built in the 1970’s.

Now, back to the auction: The home unit was fiercely bid for and ended up at just over $1.1m! Ours was up next and we paid well under $1m, and were left wondering why we hadn’t had to pay more.I can hear people saying: Yes, but you will have a body corporate to pay every year. Yes, we do, and next week we will go into the ins-and-outs of body corp fees and general home maintenance costs. We will also talk about other apartment options.

The Dilemma: New house or Existing Home?

The Dilemma: New house or Existing Home?

Q: We are debating whether to buy a new house in a new subdivision or an existing home nearby. Any suggestions on which is the better long-term idea? Raymond L

A:  Well Raymond, the first thing to consider with real estate is of course: Location. As you are looking at new or old in the same area, then the other things to consider are affordability, securing finance, and what works best for you.

When you build a new property, you have the opportunity to start with a blank slate and can create what you want from the outset. You have the freedom to pick everything from the location, the home’s design, and the other details like wall colours, landscaping, and customised fittings. Unfortunately, most existing homes will require costly changes, renovations, and remodelling to turn them into your perfect home.

The older a property, the more maintenance it requires to keep in top condition. Small issues need to be fixed regularly before they become difficult and costly to repair. Everything in a newly built property is brand new, which means it should require very little, or no, repairs and maintenance. Another benefit is that a new property will be under warranty, and if anything is faulty early on, the repairs or replacement should be fully covered.

When you build new, you are less likely to face issues such as mold, damp, lead paint, asbestos, or even allergens, which can affect your health and wellbeing. With new, energy saving standards being implemented throughout and modern appliances, your new property should also have better heating, cooling, and ventilation, which is good for your family, as well as the environment. 

The latest building trends are all moving towards smart technology, and ultimately changing homes into smart homes. Not only is new technology convenient and exciting, but it can also make a huge difference to the efficiency of a property and drastically reduce utility bills. Your builder should be able to give you options to choose modernly advanced, building materials (which are usually more durable, safer and easier to maintain), as well as a choice of technology for your new appliances, and heating, cooling, and safety products.

A brand-new home should already have a higher value than an older, but similar home from the start, but when you build you also have the power to choose every detail of the home with future value in mind. This means that you can choose design features like a stylish elevation, open floor plans, ensuite bathrooms, high ceilings and outdoor living areas, which will be highly desirable to future buyers.

Psychology of Auction: Social Proof!

Psychology of Auction: Social Proof!

We are often asked about how auctions work, and what makes a good auction so thought we would share the following article that we wrote for another publication:

Have you ever wondered about the psychology of auctions? Have you heard of “social proof? If you understand it you can use it to your advantage.

If you attend any auction across Auckland there’s a good chance you’ll see the following scenario play out –

Auctioneer: “Who wants to open the bidding?”

Crowd: silence

Auctioneer: “Who wants to start it off!”

Crowd: silence

Auctioneer: “Surely you haven’t all come just to see me!”

Finally someone calls out a bid, or the auctioneer makes a vendor bid, and all of a sudden there’s a flurry of hands in the air.

Auctions are a great example of ‘social proof’ – a psychological phenomenon where other people’s actions reinforce one’s own decisions. Imagine you’re heading out for breakfast and there’s two café’s side by side – one is empty, and the one next door is full. You are more likely to choose the busy one, because the assumption is made that something must be wrong with the empty cafe. It’s the same at an auction – if nobody is bidding, it can sometimes (often subconsciously) make people question their own judgement. As soon as someone else has put their hand up, it provides validation that no: there’s nothing wrong with the property, and yes: other people do see value at that price thereby triggering the other potential buyers in the crowd to join in.

Social proof can go both ways. If there’s active bidding it can signal to others that the property must be desirable and it’s worth fighting for, often encouraging people to stretch beyond their original budget. But if there’s no bidding, it can sometimes result in a property being passed in, even though there are people in the crowd who have every intention of buying it. Without the social proof of competition they freeze up, second guess themselves and begin to have doubts. We’ve seen many properties pass in on a vendors bid, only to have multiple parties then go inside to negotiate against each other.

The moral of the story is don’t let other people’s lack of interest in a property put you off. If you like the property, you can afford it and you’ve done your due diligence, then go ahead and buy it!

Questions? We have lots of information on our website at www.thestones.co.nz/property-tips

Building Inspection: Standard Clause or Additional Clause?

Building Inspection: Standard Clause or Additional Clause?

Q: What is the difference between using the Building Inspection clause on the front of the standard sale and purchase agreement, and inserting a building clause in the “additional clauses” section? Which would you recommend to a purchaser? 

Raewyn T.

Good question Raewyn. Firstly, there is no obligation to use the standard clause rather than your own ‘custom’ clause (which you can insert under Further Terms of Sale). Formerly your agent or solicitor would draft a clause to go in the further terms of the agreement and the terms of the clause could vary. The new standard clause (clause 9.3 in the agreement) is designed to protect both vendor and purchaser from possible misuse of a custom written clause. The main points are:

    • Written report required: The report must be in writing and must be provided to the vendor immediately should the purchaser decide to void the contract on the basis of the inspection. Note, however, that the new clause does not give the vendor the option of rectifying any defects.
    • Suitably qualified builder: The clause states that the inspector must be suitably qualified, so no getting your mate to have a look over the property if they are not a qualified builder or building inspector.
    • Ability to cancel (objective test): The clause also states that the purchaser must decide whether the report is unsatisfactory on an objective assessment – that is, would any reasonable purchaser, on reading that report, have found it unsatisfactory? The answer must be yes to cancel validly.

So those are the main elements of the clause. Of course, as a purchaser, you may want to have any minor defects found to be rectified by the vendor, or even negotiate a price reduction, and you will still have that right. However, as a seller, you need to be aware that this clause does not give YOU the right to rectify unless the purchaser agrees.

If the above points don’t suit, you are still at liberty to have clause 9.3 deleted and have your lawyer insert your own building inspection clause under Further Terms of Sale. You may want to do this because you have a friend who you feel is qualified to look over the property, rather than paying for a full building inspection. Or if you are a seller and you want the option to rectify any defects identified rather than having the purchaser being able to cancel the agreement automatically.

Whether you are buying or selling, as with all contracts, it is best to get your lawyer to check and explain the agreement to you to ensure you understand what you are signing and that your interests are protected.

Who’s Looking after Whom?

Who’s Looking after Whom?

Q: We have recently sold our house and bought another. Dealing with different sides of these two real estate transactions has been a little confusing. When we sold we dealt exclusively with the agent we were selling with, but when we bought we used a buyer’s agent and yet we still had dealings with the seller’s agent? I’m interested in whose best interest’s agents are meant to represent.

Danny Y.

A: Great question Danny. Real estate salespeople tend to operate in three ways:

  • Representing only you.
  • Representing another party (a prospective buyer) involved in your sale.
  • Representing both sides – the buyer and seller.

Also called a listing agent, the seller’s agent works for the person selling the home. The agent will list the home, hence the name, and will work to find buyers and eventually sell the home. The owner of the home typically pays the seller’s agent a commission in the form of a portion of the sales price.

In this case, the agent owes the seller undivided loyalty, reasonable care, obedience to lawful instruction, disclosure, confidentiality, and accountability. A seller’s agent must put the seller’s interest first. They must attempt to negotiate the best price and terms acceptable to the seller. While doing this they must treat all potential buyers fairly: They cannot be dishonest or misleading in their dealings with prospective buyers.

Kiwis tend not to use true buyers agents: A buyer’s agent works exclusively for the buyer, not for the seller, and most importantly, is paid a commission or fee by the buyer. Buyer’s agents can be quite helpful for buyers who are out of town, or not resident in NZ.

What often happens in NZ is that a buyer will see a house they like and will ask a real estate salesperson who they know and trust if they can show them the property. The salesperson will then contact the listing agent to see if they can do a conjunctional (i.e. split the listing agent’s commission). This is usually at the discretion of the listing agent, but in the interests of getting their client’s home sold most will agree. If successful the agent representing the buyer will then be paid a portion of the listing agent’s fee. They have a responsibility to both buyer and seller but will obviously be focused on making your purchase of the property as simple as possible.

I hope that helps – the main thing is that all agents have a responsibility to treat everyone in a real estate transaction fairly and honestly, whatever their role in the transaction.

Where Should my Property be Advertised?

Where Should my Property be Advertised?

Q: I’m about to list my property for sale and I’m concerned about getting it marketed properly so that my home sells for the best price.  What should I be looking out for? Bruce F.

A: It is really refreshing to hear someone asking about how best to market their property. In our opinion, a comprehensive marketing campaign is the first, and possibly the most important, step in getting a premium price. There are three main areas to cover: Online (realestate.co.nz,TradeMe, etc.), print Property Press, NZ Herald, Epoch Times, etc.) and social media (FaceBook).

Advertising online will certainly get you in front of buyers, but these buyers are actively searching for a property and you need to have ‘passive’ buyers too. And passive buyers come from print advertising (like Herald Homes). By the way, make sure your agent uses a professional photographer to take the photographs of your property and make sure he has someone complete a floor plan. This is all about making sure you get as many people to view your home as possible – amateur photos will not do the job.

Check the copy for print advertising. Your agent should run this by you prior to having it submitted to the magazine or newspaper. People make mistakes, so check spelling and grammar carefully. Do the same with advertisements as soon as they appear online.

Facebook: Your property needs to be marketed on Facebook. Not many agents know how to market on social media, so make sure your agent has a plan, and check them out on Facebook to see how many followers and interactions they get. Again, you do not need to be on Facebook to get your home sold, but if you want to maximize your exposure to produce more bids on your home, you cannot afford to miss out on this great exposure. If your home is not actively featured on a highly trafficked Facebook Page, tell your agent to make it happen right away.

Don’t be fooled by a low-price marketing budget – make sure all your bases are covered so that you reach as many potential buyers as possible.

We wish you a Merry Christmas and a very Happy New Year.

Don’t just use the cheapest agent to sell your property!

Don’t just use the cheapest agent to sell your property!

 Q: Hi, we are looking to sell soon and are interested in your thoughts on how to choose an agent. Commission rates vary quite a bit, but we are wary of choosing the cheapest.

 Ronald and Jane L.

 A: Selling a property is usually a stressful time, and knowing who to sell it with can make all the difference.

The process of deciding on an agent begins with doing some research. Many people feel they need a local agent: Today it’s far less about which agent knows more about the area and recent sales because all of this information is available online. What is far more important is that the agent has the key skills (sales, negotiation, marketing, and technology) and a good success rate (i.e. lots of successful sales) backed up by client testimonials.

For your part, it’s also a good idea to research homes for sale in your neighborhood – and how much they are selling for. It’s even better to attend a few open homes, and auctions, as this will allow you to see how well the different agents conduct themselves.

Then you should get up to three different agents to appraise your property.

Agents appraising your home will use comparable sales to provide you with an estimated selling price for your home in the current market. Don’t allow yourself to be swayed by a flattering price. This is a common tactic to get the listing, followed by plenty of communication re how the market is not seeing the price at that level.

An appraisal also provides an opportunity for you to ask agents what services they provide, the strategy behind their marketing and advertising campaign and what their commission fees are.

When looking into commission fees don’t let commission make up the bulk of your decision making, as while you may want to find an agent who asks for the cheapest rate, the cheapest agent may not necessarily be the best agent.

As mentioned above: Focus on the agent’s skills and on their success rate.

A skilled agent can negotiate the final sale with one or more interested buyers, achieving the best possible outcome for what is possibly your most valuable asset.

Trying to sell your house ‘on the cheap’ is very likely to cost you significantly in the long run.

Choosing your agent: 4 things to watch out for?

Choosing your agent: 4 things to watch out for?

Buying and selling homes is one of the most stressful and complicated things that a person can go through; which means that choosing the right real estate agent is essential. The right real estate agent can move your house more quickly and even more importantly, get you a better price. Here are some red flags and signs that you may need to ditch the current agent you have and find one cut from a better cloth.

  1. Lack of Confidence

When looking to hire an agent, you should have a predetermined list of interview questions in hand. You will want to know for certain that the individual you hire is a top performer with a proven track record that can guarantee you will get what you want from the selling process. If they start looking nervous or uncertain of how to answer any of the questions you have, you should be suspicious of their credibility.

  1. Negotiation Skills

A good way to test an agent’s ability to negotiate is to demand a lower commission rate from them right off the bat. If they give in without too much of a fight, there is a pretty solid chance that they will do the same when negotiating prices with potential buyers. You want someone fiercely committed to getting you the best price, after all, it is you who is paying them.

  1. Poor Communication Skills

Don’t forget that, your real estate agent is working for you. It means that they have an obligation to keep you in the loop throughout the selling process. Does that mean that they have to tell you about each tedious and monotonous step? No, but it does mean that you should be kept in frequent contact as to any progress made. A clear lack of communication between you and your agent is indicative of inexperience, incompetence, or even worse, a lack of care. Should you be alerted to the feedback provided from attendees of your most recent open house? Absolutely! Any agent worth their salt will know what you need to know during the process.

  1. Failure to Utilise Technology

The technological era offers several resources that can be utilised to your benefit. If an agent lacks social media presence, consider it a glaring red flag. An experienced agent will not only have a strong social media presence but will know how to use it to your advantage.

Are the Christmas Holidays a Good Time to Buy or Sell?

Are the Christmas Holidays a Good Time to Buy or Sell?

Traditionally, sales activity in the housing market slows during the holiday period as people become distracted with Christmas shopping and planning their holiday vacation. However, this can be a good time to buy or sell, depending on the market you are in.

Buying:

One of the advantages of buying a home in December can be the eagerness of sellers to finalise a deal before the end of the year so that they can be done and dusted before their holiday. And they might be more open to a lower offer provided the buyer can move quickly and settle early.

Vendors who have properties scheduled for February auctions may also be willing to sell early if a buyer presents a compelling offer.

Selling:

Property sellers can meet different types of buyers during the holiday season—from the frustrated ones who have been looking for a property since the beginning of spring to the motivated ones who are keen to buy before Christmas or the beginning of the new school year.

People looking to transfer to a new city often use the holiday period to do their research by visiting their new city to look for their new home.

The end of the year is also a common time for rental leases to end, which will have a lot of people working out their next move – and some of these will be looking to buy.

As there are fewer properties in the market by the end of the year, sellers can easily make their property stand out from the crowd, enticing motivated buyers without having to deal with as much competition.

Remember though, that solicitors, mortgage brokers, and other service providers may close their offices from around mid-December to mid-January which may also significantly delay the settlement process.

While there may be fewer buyers in the market, there are also fewer sellers during this time and at the end of the day, supply and demand will vary depending on the market you are trying to buy or sell in, so consult with your real estate professional before making a decision.

Sell First or Buy First?

Sell First or Buy First?

Q: Now that our children have all grown up and left home we want to downsize from our current property in Parnell to a smaller property. We are worried though that if we sell we won’t be able to find anything we like. What options do we have? Margaret B.

A: This is a very common question these days Margaret, especially with the shortage of houses on the market in Auckland right now.

Obviously, you have two choices: Sell first then buy, or buy first then sell. If you buy before you sell you won’t really know what your budget is (you can’t be sure how much your home will sell for) and you may very well need bridging finance to get you through the period between when you have to pay for your new home and when you settle on (and get paid for) your current home. (The length of settlement is the time between unconditional date, often the auction date, and the day the new owner pays and takes possession). You can minimise this by asking for a long settlement on your new home, and then be ready to go straight to auction on your current home as soon as you have an unconditional agreement on your new home. This may enable you to get sold and settled before you settle on the new home, but what if your purchaser wants a long settlement too? Either way, you do run the risk of being forced to get bridging finance. In the very worst scenario, you may have trouble selling your home and end up owning TWO properties – not always ideal!

Alternatively, you can do what most people seem to be doing these days: Sell first and then buy. Of course, as you’ve said, the risk here is that you can’t find anything to buy once you’ve sold. However, what we have found is that people who have sold get very focussed very quickly on finding their new home, and they become a lot less fussy! And if it takes longer than you expect there is always the option of renting while you search.

Clarification: Last week we quoted auction clearance rates: These figures were for Ray White only, and not clearance rates for other agencies.

Are auctions still working?

Q: Are auctions still working?

A: With the ‘softening’ of the market we are often asked if auctions are still working. Or actually, people are often saying to us “auctions aren’t working now so we want to sell by negotiation, or with a price.”

This is absolutely not true. In our current market, an auction is still THE BEST WAY to sell your property.

There are several reasons for this, but let’s start with the facts: In Ray White NZ 82% of properties taken to auction sell, while only 34% of properties sold by private treaty (priced, by negotiation, tender etc.). In other words, you have twice the chance of selling when you go to auction as you do if you sell any other way.

Why is this? When a property is listed with a price or by negotiation, and a potential buyer sees it and quite likes it, there is no reason for them to take any action. With the slower market right now they know there is unlikely to be a queue of people lining up to make an offer. So they say to the agent “let me know if anyone is going to make an offer” and off they go to the next open home.

An auction, on the other hand, forces all interested parties to take action because there is a deadline.

At the end of the day, an auction still provides the vendor with all the benefits: you stay in control, there is a strong call to action/deadline, all bids are unconditional and the sale is final on the drop of the hammer and payment of the deposit.

If buyers are conditional (e.g. have to sell their home before buying) they will be at the auction hoping it won’t sell and ready to put in a conditional offer if the property doesn’t sell under the hammer.

Interestingly when the market turns from a seller’s market to a buyer’s market there are plenty of agents who just find auctions too much work, and too scary. After all, if it doesn’t sell under the hammer the agent is the one who gets the blame. It’s so much easier to hide behind a By Negotiation sale, hold endless open homes and blame the lack of activity on ‘the market’.

So, there you have it: Auctions are still working and working better than any other method of sale, regardless of the market.

Can you trust online valuations?

Q: We are looking at buying, but find it really hard to get a price indication on auction or ‘by neg’ properties. How accurate is it to use the CV of an online estimate of the sale price? 

Julie and Bruce

A: Didn’t your mother ever tell you “Don’t believe everything you read online”! There are some real problems with online valuations. No-one has actually looked at the property. Basically, the estimate is the result of a computer algorithm and doesn’t take into account interior condition, renovations, aspect, charm or just the general feel of the home. The Auckland property market moves rapidly, and online estimates are based on historic data of settled sales – sales that settled in the past month may have actually sold at auction several months earlier so the sale price is way out of date.

Remember too that there is more than one price for a home: It will be a different value for a buyer who wants to make it their home versus an investor. It may be worth more to you if it’s close to family, or in a school zone that you particularly want. These are the kind of factors that can lead to one buyer paying much more than another.

We have written before that we bought our apartment for just under $1m. Would we care if we had paid just over a million? Not at all. It just doesn’t matter in the scheme of things as long as you get the home you want and you are going to live in for the medium to long-term.

We see online valuations that are both too low and too high. Don’t let an online valuation pressure you into paying more than you think it’s worth to you. It is your opinion of value that counts, not computers!

When you find a home that you really think will work for you, our very strong recommendation is to do your own in-depth research on sales in the area. Take the time to visit other open homes nearby and ask the agents what they think. By all means look up the values online, after all, the more information you have the better, but don’t let a computer-generated valuation stop you from trusting your instinct and getting the home of your dreams.

Are You Worried About Your Auction?

Q: I’m thinking of selling my property and have been told to take it to auction. What worries me is that I’ve been to some auctions where hardly anyone turns up. How do I know I’m going to get a result?

Jerry B.

A: Property is an incredibly dynamic market. At any point in time there are a finite amount of properties and buyers in a market, but an infinite number of outcomes. Each property and auction campaign is unique, as is each property. So with all these variables anything can happen!

Generally speaking, an auction that has a big crowd on the day will also have a good number of bidders. You may think that an auction with ten bidders would get a higher price than one with just one buyer, but that is not always the case. Sometimes the only bidder in the room is “the buyer” and with good negotiating skills from the auctioneer we can get a price that our seller is delighted with.

One reason an auction might only have one bidder or limited bidding is that the agent has lost their main buyer/s in the lead up to auction day. It could be that the buyers have purchased something else, or they’ve simply had a change of heart. External factors like job losses, family illness and relationship upsets can also affect who turns up to bid. Either way, a campaign can go from having several strong interested parties to nobody at all, regardless of how fantastic the property is. Timing plays a huge part of any auction campaign, and if there are a number of comparable properties on the market at one time there’s a higher chance an agent will lose buyers during the campaign.

Something else that can happen is that you turn up to your auction and there are only 3 people there – your heart (and the agent’s!) will sink, but we’ve had auctions with just 2-3 people where they have all bid and the property has sold well above reserve, so don’t be too put off by numbers.

Finally, just remember that in real estate, a lot can happen in one day. We have had several auctions where the successful buyer viewed the property for the first time in the 30 minutes before the auction, and another, believe it or not, where the winning bidder was painting the roof of the neighbouring property and hadn’t seen the inside of the property until after he had won the auction!

Good luck with your sale.

Should we have a Property Inspection?

Q: Our agent has suggested that we get a building inspection before we list our home for sale. It seems like a waste of money to me – if a buyer wants one then can’t they just get it themselves? What’s your advice?

James L.

 

A: Personally, we think it is a sensible idea. It costs money but it could save you plenty, in fact it can be the difference between selling and not selling – especially at auction.

Why? We recommend that all buyers, whatever property they are looking at, get a building inspection before buying or bidding at auction. If we have a vendor’s inspection available for them to view then it can give them the confidence to do their own inspection – this is particularly important for monolithic- (plaster) clad properties. When an agent allows a potential buyer to view the vendor’s inspection report they must be very clear that the inspection was undertaken at the vendor’s cost and that the buyer should do their own due diligence, but it can certainly give the buyer the confidence to move forward in his or her decision making.

 

Getting your home inspected before you list it for sale can also help you avoid any unexpected surprises. Almost every home, even new builds, are likely to have issues raised in an inspection, so having one done before listing for sale gives you the opportunity to fix anything that may scare a potential buyer off. What most sellers don’t realize is the building inspection is the place where many sales fall apart. A pre-listing building inspection will allow you to get a clear picture about the state of your house – including any problems that may derail your sale. By getting most or all of the problems taken care of you increase the chances of having a smooth and pleasant transaction.

It pays to do this well before you go to market – there are few things as stressful as selling your home, and you certainly don’t want to add to the stress by having to do last minute ‘repairs’, so get an inspection well before you want to go to market and give yourself time to get your house ready for sale. Good luck.

Should I buy an Apartment off Plan?

Q: We are about to put our home of twenty years on the market and are considering buying an apartment in the city off the plans. The block we are looking at will be finished in another 18 months so then we can decide whether to move in for a while or rent it out. What are your thoughts in buying off the plans and what are the risks?

Julie & Bryan K.

A: Interestingly our partner company Loan Market has just published an article on this, so I have summarised this in my answer. Signing a contract for an apartment that is yet to be built can be a little daunting. After all, you’re handing over money for a property that hasn’t been built yet. Buying off the plan can be tricky but doing your homework can help prevent disappointment down the track. Here are some tips to help guide you through the process.

Firstly, researching the developer and their reputation is probably the most important step to determine whether to invest in a particular project. Reputation is everything, so research the work ethics and level of integrity of the property developing company. Definitely take a look around some of their previous projects and speak with owners (if you can) about how they feel about the company.

Next thing to research is the location. This is hugely important. If you are buying in the city then you will be fine for services such as transport and restaurants but just be sure to check that there are no new developments planned that might block your view or sun in the future.

The NZ Building Code should ensure that the building is properly built and weather-proof and that you will have all the required safety and security features (fire alarms, etc.) but be sure to check that sound-proofing, the standard of finish, measurements, car parking etc. are all consistent with what is in the contract.

During the course of building, the developer may still have the right to modify the building plans so it’s paramount to go over the contract with a fine tooth comb and ensure the contract mitigates the risks involved in purchasing off the plan.

As always, seek the opinion of your solicitor before committing to paper, and always talk to a mortgage advisor re your finance.

4 Questions You Must Ask at an Open Home

Q: We’ve been doing the rounds of open  homes recently. While some agents are really  helpful, many are not. What are the most  important questions we should ask when we  find a property we are interested in?

John & Becky L.

A: The open home is the best time to qualify  a property in or out of your search. Take the

opportunity to ask the agent questions face-to-  face rather than via email or phone. If it’s busy  then either come back another time or stick  around so you can speak directly to the agent  after the open.

Remember, the agent is not allowed to lie, but  many are pretty good at avoiding giving you a  direct answer! Here are four initial questions  (we’re assuming sales by auction here), to make  sure you are as informed as possible.

Why are the owners selling? It’s great to know  the seller’s motivation. If the owners have already  bought, or are moving into a retirement village for  example, then you know they are serious and the  property will very likely be sold.

How long has it been on the market? If a property has been on the market for a long period of time it is most likely due to an unrealistic price expectation,  so a good guide to owners price expectation. But don’t let that stop you making an offer!

What is the seller’s price expectation? You can certainly ask this but most agents will not give you a straight answer. We do our best to be honest and we often have the same list of sold properties that we have supplied to the seller at appraisal time, available at the open homes. No one knows what a property will sell for at auction, but the agent should be able to provide you with some realistic and relevant information.

Has there been much interest in the home? This gives you an idea of the level of competition you are likely to encounter on auction day. Don’t be pu off if the open home is really busy. A busy open home does not necessarily mean a busy auction,  so make sure you ask the agent how much interest there is, and base your decision on that.

We don’t have the space here to go into all the detail, but feel free to contact us at  steve.stone@raywhite.com with any questions.

What’s an Agency Agreement?

Last week we answered Diana’s question on why her home had not sold, and because we mentioned that it might be because she is using the wrong agent we thought we should tell you what is involved in a Sole Listing Agreement, and when and how you can cancel it. The real estate agent you choose to sell your house will ask you to sign an agency agreement.

This is a legally binding contract so make sure you read and understand it before signing. Your agent should also recommend that you take legal advice before signing.

Your agent must also give you a copy of the REAA  Agency Agreement Guide which explains your rights under the agreement.

If you use any of the major Auckland real estate brands you will most likely be signing an agreement that contains just the approved standard clauses – if your agent modifies the agreement in any way then definitely seek legal advice before signing.

Your agent must explain to you when the agency agreement will end.  Make sure you check the cancellation terms. These can vary from agency to agency.

A sole agency agreement gives one agent or agency the exclusive right to market and arrange the sale of your property. If you sign a sole agency agreement you should not sign another agency agreement with any

other agent until you have cancelled the first agreement.  If you do, you may have to pay all agents a commission,  regardless of which one arranged the sale.

If the sole agency agreement is for a residential property and for a term longer than 90 days, the client or the agent can cancel the agreement at any time after 90  days.

Make sure you check what happens when the sole agency agreement is cancelled. Some sole agency agreements become general agency agreements when cancelled – this means that you will also have to cancel the general agency agreement if you no longer want to work with the agency.

When a sole agency agreement is cancelled your agent must give you a list of people they have introduced.

If you sell to one of these people, the agent may be entitled to a commission.

If you change your mind after signing a sole agency agreement you can cancel it by 5.00pm on the first working day after you have been given a copy. This must be done in writing ie, letter, email or fax.

However, if an agent carries out any work before the agreement is cancelled and that work results in the sale of the property after the agreement is cancelled, the agency agreement will be legally binding and you will have to pay that agent commission.

Why isn’t my Home Selling?

Q: We put our home on the market 3 months ago (auction) and had no bids. Since then we have put a price on it, but we haven’t received even one written offer. Our agent is a lovely lady but we just don’t seem to be getting anywhere. Any suggestions? Diana C.

A: There is nothing as frustrating for a home seller as their home not selling, and I’m sure your agent feels the same way too!

There are a number of possible reasons, but the most obvious is the price. If you have been through an auction campaign and had feedback at say $1m and you are holding out for $1.2m then maybe that’s your problem, especially if the market is not on the rise. We are often confronted with a potential seller who has based their price on what the house owes them, or what a neighbour’s property sold for. The sale price is determined by the buyer, not the seller I’m afraid.

Another reason can be your choice of agent. There is no doubt that a good agent will get you a better price than an average agent, and in a tough market such as now, this is even truer. We have written before about choosing the right agent for you, and as we say, it’s even more important in the current market. Certainly, make sure they have a good rapport, but also check their listings to sales ratio: How many properties have they taken to market this year, and what percentage of them have sold? Over 80% or 90% is good.

There may be a whole raft of other reasons you are still on the market. People will tell you that presentation makes a big difference, and it does. But the price will always trump any other reason: If your home needs a $100,000 makeover then it will be reflected in the price. Drop the price by $100k and you will very likely sell. If you want to spend the $100k doing the makeover you may find it easier to sell, but not necessarily for an extra $100k!

We’re sorry you haven’t managed to find your buyer, but keep an open mind and think hard about what you are willing to accept in order to move on.

Next week we will talk about what your rights are in terms of a listing with a sole agency.

What is a Reverse Mortgage?

We read the following article online and thought it might be of interest to our readers. The Australian Securities and Investment Commission (ASIC) are reviewing reverse mortgages:

 What is a Reverse Mortgage?

Essentially, it is a loan that allows you to borrow money against your home by using the equity built up in your home as the security. This type of loan can be taken as a lump sum, a regular income stream, a line of credit, or a combination of these.

With this type of loan, although there aren’t repayments while you live in your home, there is interest charged like any other loan. The interest will compound over time and be added onto your loan balance.

These types of mortgages are usually taken out by retirees to complement their lifestyles and provide an additional income stream during retirement years.

However, there are many long-term financial risks when taking out these loans.

As these loans are mainly taken out by retirees, the loan must be repaid in full (including interest and fees) when you move into aged care, move out, or pass away. Until this time, you are able to stay and live in your own home, all the while accumulating interest and reducing the value of your estate.

Risks

The current ASIC review of reverse mortgage lending in Australia found that borrowers typically do not recognise or understand the long-term risk of taking out this type of loan.

There are large risks when taking out a reverse mortgage, the main risk being severe financial distress later in life.

Some of the risks associated with these loans:

  • The payments may impact your pension eligibility.
  • The banks will offer higher interest rates and charge higher ongoing fees than the average home loan.
  • As you are aging in life, your debt will increase as interest rises on your loan.
  • Debts will increase quickly as the interest compounds over time.
  • The value of your home is not guaranteed to always rise, and if the value of your home falls, you may have less money than expected for future medical treatment or aged care.
  • Maybe high break costs involved.
  • In some circumstances, if you have someone living with you, not on the mortgage, such as children, family or friends, that person may not be able to stay if you move out, or pass away as the bank will need to recoup their loan.

We strongly advise that if you are considering taking out a reverse mortgage you seek independent financial and legal advice as well as speak to your family as there may be other ways to obtain funds in your retirement years.

How to make the most of a Property Manager

Q: We have recently purchased an investment property and have been strongly advised not to manage it ourselves but to use a property manager. How do we make sure we get the most from our property manager? Cheryl P.

A: We passed your question on to Delanie Horrobin, of Super City Rental Management, who responded:

Every landlord is different, with different needs, different investment motivations and different expectations of a property manager. Communication between all parties is key. For this reason we like

to discuss some of the following questions to help us customise our service to your requirements as a landlord:

  • What is most important to you in respect to how your property is managed?
  • How often would you like to hear from your property manager?
  • How would you prefer us to contact you? Phone, email, text?
  • Are there any chattels at the property we need to be aware of or that you are considering adding?
  • Do you have any concerns around the management of your property now or in the future?
  • Have you ever used the services of a property manager before, and if so what did they do well and what could they do better?
  • Are you interested in ongoing advice on how to grow your portfolio?
  • Do you prefer a low or high level of communication from us around minor issues or updates?
  • Do you understand the importance of ongoing property maintenance and how this can affect your investment return?
  • Do you have an investment goal or strategy?
  • Are you interested in ongoing advice on how to grow your investment portfolio?
  • Do you have a landlord insurance policy?

This helps ensure that expectations are set and continue to be met throughout the working relationship.

 

Choosing to have your property professionally managed is a big commitment. Whether it’s the family home or part of a million dollar investment portfolio, you

need to ensure that your asset is being maintained to the highest standard.

Here at SuperCity Rental Management, we understand that; so give us a call to hear more about what we have to offer.