06 Dec TA:16 How to sell your apartment in a tough market
Most property around Australia has enjoyed solid growth for about 20 years save for a few bumps along the way. We are now in a downturn and who knows for how long or how deep but most people are suggesting we are about 6 to 12 months into a 2 year slump.
To find out how to sell your apartment in a tough market we need to speak to someone who has experience and worked in property cycles since the mid 1980’s. Ray Wood (yes related.. my brother) worked as a real estate agent in Melbourne from 1982 and now coaches and supports agents across Australia and Canada. He has a unique expertise and can talk about selling in a tough market with a lot of authority. I hope you get great value from our chat.
He is a blog pulled from our discussion…
You want to sell your apartment but are worried it is perhaps not the right time given the market is weaker.
Firstly if you are selling and buying in the same market conditions, then it is a net sum game as you may sell for less than you hoped, but you will also buy cheaper. In weaker markets there are generally fewer properties for sale making it harder to find the property you want so consider buying first and then selling second if you can arrange it.
The big question in weaker markets is how to market and sell your property for the very best price. To answer this let’s understand why the market is weaker and how to circumvent the issues.
There are a few factors at play but the single biggest issue across all categories of property is finance. By this I mean the difficulty in buyers being able to borrow money. The banks and second tier lenders have all tightened up there lending practices by lending a lower percentage of the price, fewer interest only loans, scrutinising loan application more, and limiting exposer to particular types of property or locations. This is driven from APRA (Australian Prudential Regulatory Authority) and findings from the recent Royal Commission into Financial Services.
Now we know obtaining finance is the problem, how do we adjust the marketing to help buyers through this and pay you the highest possible price.
Hire the best agent
Now more than ever, you need a great agent and especially one that has seen and worked through difficult markets before. This means they will have 10 -15 years experience, be well equipped to advise you, work hard and be able to dig deep into their kit bag of experience to negotiate a sale at a good price. They will also give you the right advice on every step set our here.
Method of Sale
When someone bids at auction, that is an offer on an unconditional basis. ie. They can not bid subject to finance or building inspections or anything else. If they are concerned about how much finance, they will be able to get they will either not bid at all or only bid to a lower price. Private sale allows negotiations on a subject to finance basis giving a buyer more confidence of offering a higher price knowing it is subject to their finance being approved. Some property still suit Auction but just not as many as in a boom market.
Length of Marketing
The normal 4 weeks marketing may not be long enough. Especially if one or two buyers are knocked back on their finance application and your agent needs to go back and agree another sale. This could mean the sale process takes 5 or even 6 weeks.
Be ready from day 1
Internet ads and staging (furniture) hire costs last 4-6 weeks and because the negotiations may take a bit longer than usual you need to make every day of your marketing count. From the day your property hits the market your agent must have contracts of sale available, presentation perfect, all maintenance items completed, inspections arranged, brochures printed, sign board in place, letter box drop done, etc
Estimated Selling Price
It is time to be realistic about price. Trying to set a high price and negotiate down will burn up valuable marketing time and lose qualified buyers. Comparable sales that are more than about 9 months old can’t be used to set your reserve as the market has changed and you must adjust your expectations.
Presentation is always important, but it is now more critical than ever. Buyers can afford to be fussy so your property needs to stand out. If you do sell your property subject to finance the valuer who inspects your property for the potential purchaser will need to be impressed as well.
Remove all other areas of objection
Do everything you can to remove any buyer objection that may give them cause to pause. Make sure all maintenance items are completed, finishes are good, and even consider getting an independent building report done for buyers to review. Other things like a depreciation schedules for investment buyers all help to remove any barriers or unknown risks allowing a buyer to negotiate to a higher price with confidence.
In normal markets buyers figure out price themselves by looking at comparable sales or property for sale. Your agent must do this leg work for them to avoid them comparing your property to one that sold at a lower price. Work with your agent to compile a list of sales that support a higher price and provide reasons why one sold for a lower price and how your property is better. An agent needs to provide comparable sales in the statement of information and this is a good place to detail them.
Review and adjust quickly
Now you have done everything to sell at the very best price in a weaker market hopefully it will go well. It is more important than ever to react quickly to any signals from the market and tweak the marketing message or price. Also track the marketing of other properties for sale and use those result so to support your marketing.