02 Mar TA:02 Ray Wood tells us the best way to sell an apartment
From many years working in Real Estate Ray Wood has discovered the key issues when it comes to selling real estate. He has written about them in his best selling book “How to sell your home for more”
We discuss this very topic with Ray and from our chat I have written up the 5 rules of selling an apartment.
So here they are…
The 5 rules when selling an apartment
The very first decision to make is … “Are you committed to sell the apartment?” This may seem like an odd thing to ask but throughout a sale process there are some critical moments where you will need to revisit your commitment to sell the apartment to help guide you through. Assuming you are committed to selling you need to do whatever you can to maximise the sale price and then sell the apartment at that maximised price.
That is not to say you will sell at any price, but if you are only half-hearted in your decision to sell or have a relatively high target price then you may be wasting your time and money and should perhaps not sell at all.
Selling an apartment can be expensive, time consuming, and stressful so please don’t go through the process if you are not 100% committed to selling. You can also damage the image of the apartment if it is casually for sale for a long time. Once you are clear on your decision to sell, it’s now important to do everything you can to get the very best result.
There are many “experts” who have watched one too many reality TV shows and learned all there is to know about presenting and selling an apartment. The rate of change in markets, technology, regulation, buyer tastes, economic conditions and demographics is rapid and so is the best way to sell real estate. Every apartment has its own attributes and challenges, which coupled with the owner’s personal situation, requires a tailored approach
1 selecting the best agent
The most important decision when selling is hiring the very best agent as they will work with you through the entire process and make the rest of the decisions a whole lot easier.
The two things many sellers ask a real estate agent is “how much? …and how much?
- “How much is my apartment worth?”, and
- “How much is your fee?”
They are two very important issues, but there are the two worst criteria when selecting the best agent to sell your apartment. Some agents are hard wired to suggest a high value to attract your interest in hiring them.
Of course, it’s about the money, but the best agent will get you the very best price regardless of what they think it is worth. The sale price is determined by buyers. Don’t believe the myth that if the agent doesn’t think the apartment is worth $750,000, they aren’t going to achieve that price. How many times have you seen a property sell for way above what everyone thought the property was worth including the agent. Only time judges who is right and who is wrong about value.
Selecting the agent who tells you the highest price is a big mistake and sets up the entire selling process on the wrong foot. You want the agent with the best plan and experience to get the highest price.
The second “how much” question relates to agent’s fees. This is also a bad criteria to select an agent and is something to discuss with the agent, once you are satisfied they are the best agent for you. Agency fees are negotiable and any small difference in fees between the best agent’s fee and the other agent’s fee will be repaid to you many times in the price achieved, the advice provided and the service delivered.
The net cost of the best agent will always be the cheapest. In other words, the best agent will get you the best net price (sale price less the fee) making them the cheapest as a lesser agent may cost you much more in a lower sale price.
The agent you hire needs to be an experienced professional that can present your apartment in the best way and with a strategy that has regard for your situation. There are lots of real estate agents all happy to take on your business so make sure you hire one that will give you the very best advice. Here are a few ways to do that or questions to ask them.
- Don’t pick the agent because they are nice or friendly or take great interest in your kids or stamp collection. This is business and it’s not about making friends. They must however understand your needs and have strong commitment to do an outstanding job for you.
- Ask about their experience in real estate. Hire someone who has been in real estate for 5 or 10 years. They need to have seen what works and what doesn’t, and seen many situations arise and know how to handle them.
- Stress test their recommendations. i.e. what are the pros and cons of each option. This will demonstrate how they understand your situation and how much consideration they have given to different options and not just rolled out the standard package.
- What are the specific roles of each individual sales person? Make sure you are getting senior people actually working on the sale of your apartment. You want to know who is preparing the marketing, holding the inspections, calling prospective buyers, reporting to you, following up people who inspected, and doing the auction (if relevant)
- What is their database of buyers and advisers like and what is their office system for communicating with buyers from other sales campaigns?
Once you have selected the best agent it is time to talk about fees and pricing strategy. Let’s discuss fees first.
2 agents fee
There are several ways an agent’s fee can be structured. Here are the most common ones:
- Percentage of the sale price
- A sliding scale percentage of the sale price
- Fixed dollar price
You can negotiate and choose the structure that suits you best, but here are a couple of things to keep in mind. Whilst the agent wants to see a high sale price they are really working for the sale. A sale at a lower price (lower fee) is better than no sale at all (no fee). So, if you choose a sliding incentive scale with the intention of motivating the agent to get a really high price make sure you are confident the agent can make that difference. The fee scale should also reduce the fee for a lower price. Otherwise you may incur a higher fee than you need to.
Assuming you select the best agent, they will also be selling other properties for other clients so don’t make your apartment the one that pays them the least fee as it may get the least attention as well.
Ask the agent to justify their fee and discuss it with them and don’t pick the agent with the lowest fee or you may get the worst agent providing the lowest service and the lowest outcome.
3 auction vs private sale
It’s a key question and the answer will depend on how you and your apartment rate on the following issues in this order.
- Uniqueness or attractiveness of your apartment to buyers
- Strength of the market for this apartment and the likely buyer depth
- Your commitment to present and market the apartment really well.
- How committed you are to finalise a sale at the market value.
The higher you score in each question the greater the case for an auction. Your agent will advise you on this but it’s worth a good discussion as it is an important issue.
An auction works best when two or three people compete and bid the price up to meet or exceed your reserve price. For this to happen you must have an apartment that is highly desirable, and a buoyant market (or the marketing power of a reality TV show).
The natural process of an auction pushes the price up but this assumes there are competing buyers who bid. A good agent will be able to create similar competitive tension in a private sale process by skilfully negotiating with qualified buyers. Not all auctions are a guaranteed success and there are auctions where no one bids. Unfortunately, it does happen.
The marketing cost for private sale vs auction are similar. An auction can provide a focus point to reveal all potential buyer’s interest, but it can also disclose a lack of interest if only a few people turn up at the auction. Discuss this in detail with your agent and agree the best option for your apartment.
4 selling an apartment while it is leased
This can be a bit tricky mainly because it is difficult to control the quality of the presentation but also because it may preclude owner occupier buyers. If the apartment is leased for 6 months or more, home buyers are less likely to buy it limiting your market to investors only.
Conversely a vacant apartment is losing money in lost rental. If the purchaser is an investor they too will suffer a rental void immediately following settlement and then incur new leasing fees, and “for lease” marketing costs.
Your agent will advise you on the best strategy however generally speaking if the apartment has equal appeal to both owner occupiers and investors then a vacant offering with a superior presentation is best. If the apartment is mostly an investment purchase and the tenant is cooperative and tidy then a leased offering can work. In reality almost all apartments have a 50% or better appeal to owner occupiers.
The other thing to remember is a tenant values peace, privacy and stability. Once their home is being offered for sale their life has been disrupted. Apart from the inconvenience during the sale process they will assume the new owner will want to live there, so they will usually decide to move out anyway. Keeping a tenant during or after a sale is difficult and therefore if they are going to move anyway it is perhaps best to have it vacant during the sale to enhance the presentation and maximise the buyer pool.
Organising access times with a tenant can also be challenging and occasionally they do not allow inspections at short notice or at the times of the day that present the apartment at its best or suits buyers the most.
5 presentation and marketing
Now you have selected your agent and agreed the selling strategy it is time to work with them on how to present the apartment in the very best light and attract the best buyers.
The detail of the presentation and marketing is specific to the apartment and your agent will guide you to the best plan. It is often considered expensive to promote an apartment for sale especially as it is money spent that (unlike the agent’s fee) is not conditional upon the apartment selling. This is the time to remember your commitment to sell the apartment and do everything you can to achieve the very best price. If you are not prepared to present the apartment at its very best then you should review your decision to sell the apartment.
If a prospective purchaser notices some small maintenance item that has not been attended to like a broken towel rail or cupboard, they we will assume that other items they cannot see like air-conditioning or hot water units have also not been maintained properly. Do a very careful review of the apartment to make sure all maintenance items are attended to.
The more significant area of works are things like paint, carpet, tiles, kitchens, bathrooms and window furnishings. Your agent is best positioned to advise you about this but if you are unsure if they need to be replaced or updated then they most likely do. A fresh coat of paint makes a huge difference to the presentation especially if you update the colour to something more current.
The last and very important part of presentation is styling the apartment with furniture and effects so that it exudes a homely and welcoming feeling. Your agent will work with you on this and recommend an appropriate stylist. This can be done with your own furniture if you are living there or hired pieces if it is vacant.
If the apartment is leased you may need to work with the tenant to have it professionally cleaned, especially windows, kitchen and bathrooms. You can also have flowers delivered for each inspection and request the tenant’s cooperation to present the apartment in a neat and tidy manner for each inspection. You will appreciate however this may be difficult to execute.
b) marketing budget
It is often difficult to know how much to spend on marketing other than to take you agent’s advice. 1% of the apartment value was a general rule of thumb for many years but recently with less reliance on newspaper advertising the cost is perhaps closer to 0.8% to 0.9%. For a $700,000 apartment, the marketing budget should be about $5,500 – $6,500 (excluding furniture hire for staging / styling). However even a $400,000 apartment will cost about $4,000 as some costs are fixed regardless of the apartment’s value.
c) marketing mediums
Your appointed agent will advise you on marketing mediums and the effectiveness of each as they relate to your apartment.
Here is a summary of the usual components;
Great photography is essential and is used across the major mediums of internet, press and the brochure. It sets the enduring impression in a buyer’s mind and surrounding “mood” photography is often used to highlight the local attractions and enhance the emotional pull of the apartment.
ii. 3D virtual tour
This is an interactive 360-degree tour that allows a buyer to take a virtual tour of your apartment from their computer or mobile device. It is really effective for a buyer to get an initial feel for the apartment if they can’t physically inspect the apartment initially. Buyers can share the 3D virtual tour with family, friends or advisers.
iii. floor plan
A dimensioned floor plan allows a buyer to get a true understanding of an apartment layout and its actual size and configuration. This improves a buyer’s confidence in what they are buying. Buyers are more educated now about apartment and bedroom size and will want to know the dimensions.
iv. active buyer database
Your selected agent will have an active and well maintained buyer database to whom they will email details of your apartment to.
v. internet marketing
This is the go to marketing medium and will comprise about 50% – 70% of your advertising budget. Australia’s most prominent real estate websites are realestate.com.au and domain.com.au. Advertising on both these sites is a must. Most other web sites have comparatively less market coverage and are usually free to advertise on.
vi. newspaper / magazines
The effectiveness of newspaper and magazine advertising has diminished in recent years, but for many parts of the market it remains an important advertising medium. Increasingly however it is less relevant for apartment sales and mostly used for houses or luxury/penthouse style apartments.
A brochure is an important part of a marketing campaign as it provides buyers with an attractively presented hard copy of the photos, attributes of your apartment, and a floor plan.
Regular open for inspections are an important component of the marketing and can transition a buyer with moderate interest to serious interest. Private inspections are also important to personally sell the apartment attributes and negotiate price. If your apartment is tenanted the agent will need to work with your property manager and tenant to comply with all access legislation.