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Oct 3, 2017
TO AUCTION OR NOT?
Market conditions have been tough and whilst recent improvements are encouraging, the average time on market for a home in and around Fremantle is at 68 days. Those who need to sell and sell quickly, often opt for an auction given reported statistics for days on market for such campaigns is 28 days. I’m an advocate for the auction process as a method of sale for a number of reasons. Certainly, it’s a transparent process with all buyers able to see their competing buyer and the auctioneer bound by a strict REIWA code of conduct that brings fairness to the process. Buyers also usually have time (unless the seller accepts an offer prior to auction) to view the property several times, undertake all necessary diligence and arrange finance prior to auction day with only a slim chance of not having an opportunity to buy on auction day. The benefits to sellers include a cash, unconditional contract, a settlement period that suits their needs, a healthy deposit and the delivery of what is the very definition of fair market value. The “no price” marketing strategy in the lead up to the auction day is beneficial as it captures all possible buyers, including those deterred by an unrealistically high asking price for property offered for sale by private treaty. And if the property is being sold under an executorship arrangement, then auction is really the best option. However, offering a property to market via the auction process each and every time for each and every property is not necessarily the right approach. Sellers are often under significant pressure from their agents to “meet the market” on the day of auction even if the best live bid is below their original reserve price. The lead up to the auction day can be stressful too with multiple home opens and inspections during the weeks prior. Some buyers remain deterred by the auction process too; either too nervous to bid or unprepared to buy property without certain conditions such as finance approval for example. In the event the property is passed in, the sellers’ disappointment is palpable despite the auction day being only one part of the marketing and selling process with potential buyers unprepared to bid naturally translating the lack of bidding into a lack of interest and therefore an opportunity to buy at a lower price. When selling be sure to ask your agent about all the options when coming to market as there’s benefits with all methods of sale. It’s a matter of choosing one that suits your needs and circumstances and agents should be offering you that choice. By Hayden Groves – REIWA President
Sep 20, 2017
ENGAGE EVERY BUYER
Disclaimer: These comments are the writer’s own and do not necessarily reflect the current opinions and policies of the Real Estate Institute of Western Australia. I received an agent’s flyer in my letterbox on the weekend boasting about an “off market” sale. I’m sure the seller is pleased with the result the agent achieved for them and they didn’t need to endure countless home opens and potentially weeks of uncertainty. However, they may also have that nagging feeling that they undersold. It’s impossible to know if they would have got a better result if they’d exposed their property to the entire market via a comprehensive, well considered marketing campaign. It’s my view that the best way to achieve the highest price is to have the buyers competing to purchase. This is not about greed, it’s about agents discharging their fiduciary responsibility to their client. My own decision to sell a property some years ago by going to market despite receiving a strong off-market offer revealed three additional buyers and an outcome 11 per cent above my initial expectation. Very few buyers limit themselves to reliance on a single agent to find them a property and either “go it alone” or register their buying needs with several agents. These buyer data bases are an excellent source of would-be buyers for agents when pitching for business and are a genuine source of buyers when first bringing property to market. Enticing these buyers to act before the property “comes to market” can sometime deliver a great result because these buyers want to avoid competition. Although, I think sellers ought to not overly rely on an agent’s ability to deliver fist fulls of active “known” buyers to secure a sale. By far the largest of the buyer groups is the active “unknown” buyer; those that scan reiwa.com and search through newspapers to seek out property within their price range and in their preferred locality. Most agents target these buyers by simply advertising their properties in places they know these buyers are looking. To uncover the best price, sellers really ought to tap into this buyer group as that is where most of the buyers are hiding. Folk that sell to active “known” buyers before they can be seen by the “unknown” types will never really know if they got the best possible result. By Hayden Groves – REIWA President
Aug 10, 2017
SELLING SUBJECT TO SALE
Buyers are often, of course, sellers too. Most people who decide to sell their home also look for an alternate property at the same time and often find something appealing before they have secured a buyer for their own. Buying a property “subject to the sale of another property” is common and REIWA agents are well equipped to ensure the sale agreement is procedurally correct. Normally such agreements enable the seller to continue to promote their property for sale and in the event of receiving an alternate offer to purchase (normally not subject to the sale of that buyer’s property), give notice to the first buyer of their intention to proceed with the second offer after two business days. This colloquially termed “48 hour clause” provides the subject sale buyer two business days to obtain an offer on their property or waive the benefit of the subject sale condition. Certainly, these arrangements can get tricky. Agents need to be especially careful not to prejudice the second offerer by giving the first buyer a hint that a second offer might be on the way. Notices served between the parties must also be technically compliant and strictly adhered to so as to not unfairly advantage either buyer. Sellers ought to be mindful that sometimes in accepting a “subject to sale” offer at say $600,000 binds them to that sale price despite a second offer being unconditional and at $625,000 should the first buyer waive the subject sale condition within the two business day period allowable. Some agents refuse to entertain presenting subject to sale offers to their vendors. Such an approach is, in my opinion, not in the best interests of the vendor. Contracts for sale that include the “subject sale” condition often succeed and proceed smoothly to settlement and is normally worth the effort. The “subject sale” buyer normally expects to pay a premium for the privilege of being allowed to buy with the protection of only having to settle after the sale of their own property. And sellers are justified in asking for a little extra over an offer that is unconditional. There are many instances where buyers not able to submit a “subject to sale” offer at a premium price return to the same property after they’ve sold and end up paying a lower price! Sellers ought to consider all offers including those subject to sale of the buyer’s property. In this market, it might be the only offer you get! By Hayden Groves – REIWA President
Jun 12, 2017
Pass the Joint
Several decades ago, when the original representatives of the Law Society and the Real Estate Institute sat around discussing contractual arrangements for the sale of property, “pass the joint” meant something entirely different to an after-party at a Doors concert. In Western Australia, the development of the Joint Form of General Conditions for the Sale of Land was a significant achievement enabling buyers and sellers to rely on a single standardised document to manage each party’s contractual obligations. The Joint Form is aptly named from the “joint” ownership of the form by The Law Society of WA and REIWA as well as a reference to it being used “jointly” with the Offer and Acceptance document as provided by REIWA. The General Conditions have undergone many revisions over the years, adapting to the evolving legal landscape, changes to common law and the introduction of new legislation. The current revision is from 2011 although the most significant changes were drafted by Mr John Symington in 2002 after the somewhat problematic 2000 revision enabled broad Requisitions on Title that caused significant problems for vendors in particular. The 2000 Joint Form allowed purchasers to inquire about the property after contract prior to settlement and ask as many questions as they wished with the vendor compelled to reply. This often led to buyer representatives inquiring at the local council if all improvements on the land were formally approved which - for older dwellings - was not always the case. Contractual carnage ensued with buyers refusing to settle, local governments not able to retrospectively approve buildings, Ministerial involvement and penalty interest payable by the Vendor for months of delayed settlement. John Symington and the Joint Form Review Committee are heroes (in nerdy, legal-eagle kind of way) by making the necessary changes that enabled fairer application of these Requisitions. The current revision is undergoing a forensic review right now with substantive changes expected in September this year. The introduction of new laws around foreign ownership will need to be included as will some modifications around changes to the Strata Titles Act for example. The humble Joint Form has stood the test of time and is largely unaltered since 2002. It modestly affects the settlement of tens-of-thousands of properties every year. It’s a document that we take for granted but in its absence, buyers and sellers (like they do in NSW) would be spending thousands of dollars on lawyers to draft individual contracts for each and every sale. The passing of this Joint leaves everyone with clear obligations and a clear head. By Hayden Groves – REIWA President
Jun 6, 2017
Selling Methods
“What’s this new Open Negotiation all about and is it as “transparent” as the agent claims?” asked a friend of mine considering a property offered for sale using this method of sale. Conceived by some local Perth agents, this relatively new approach to offering a property to the market aims to combine the three common methods of sale typically used in WA; private treaty (for sale and accounting for about 95% of all transactions), auction and tender. It works by inviting buyers to participate at any price and once an initial offer is made, that “base” price becomes the listing price. Buyers submit offers with conditions of their choosing in the lead up to a predetermined date of purchase (a little like a tender) whereby registered buyers then bid for the property either manually via the agent or using a smart bit of tech on their smart phone or device. Buyers are able to make a “take-out” bid (a “happy” price determined by the Seller) at any stage during the proceedings which secures them the property and ends the bidding process. Otherwise, registered buyers simply bid up the price until there’s one buyer left. “Sounds like an auction” I hear you say. The method does require a licensed auctioneer to oversee the process so it is a form of auction, although it does (unlike an auction) allow for each buyer to have pre-agreed different conditions of purchase. Under public auction conditions, the terms of purchase, such as deposit amount and settlement terms, should be the same for all buyers participating. It also differs from the common private treaty “for sale” method of sale by revealing the details of each buyer’s offer to all other participating buyers. Normally, when buyers compete for a property under private treaty, the details of each offer remain confidential, hence the phrase “Transparent or Open Negotiation” used by the proponent of this selling method. There are some advantages of using Open Negotiation including the usually low starting price and the ability for buyers to submit offers with conditions of their choosing. Purists espousing the virtues of the auction method argue that it fails to deliver certainty to the Seller and they do have a point. It could be the winning buyer’s offer that’s subject to finance approval fails to proceed, for example. And it is possible offers are falsified in order to encourage other buyers to participate, but I think that’s unlikely. Auction remains the most pure, transparent method of sale but not all buyers can participate in the process and Open Negotiation neatly fills the gap between a private treaty and auction sale. By Hayden Groves – REIWA President These comments are the writer’s own and do not necessarily reflect the current opinions and policies of the Real Estate Institute of Western Australia
May 15, 2017
Getting Back Your Bond
When taking on a residential tenancy, typically the owner requires the tenant to pay a security bond an amount normally equivalent to four weeks’ rent. The bond must be paid to the government Bond Administrator, a specific government managed trust account. There are severe penalties for those that fail to comply with this provision. An owner who self-managed his properties was recently fined $24,000 for misuse of bond monies. Obviously, the purpose of the bond is to provide the property owner an opportunity to mitigate any losses endured at the hand of the tenant during the tenancy such as damage to the premises or non payment of rent. At the end of the tenancy, either the owner or their agent inspects the property to ensure the property has been left in the same state and condition it was at the commencement of the lease whilst taking into account reasonable fair wear and tear. Often, an outgoing tenant’s view of what constitutes fair depreciation and that of the owner’s differs and disagreement over how the bond is disbursed between them arises. Importantly, if after a bond inspection it is revealed that, for example, the tenant has failed to clean the oven or mow the grass the tenant ought to be given the opportunity to make good. Sometimes, the tenant leaves such items to the owner and is happy to have the costs of making good deducted from their bond. Occasionally however, agreement cannot be reached and the manner in which the bond is disbursed remains in dispute. In such situations the Property Condition Report (PCR) - a mandatory document requisite for each new tenancy - its content agreed to by both landlord and tenant at the start of the lease, is relied upon to determine whether, for example, the carpet was stained during the term of the tenancy. It may have been stained prior but if not noted in the PCR, it is difficult for the tenant to disprove responsibility. Ultimately, the courts decide allocation of bond monies in the event of an unresolved dispute. However, tenants must ensure the PCR is accurate at the commencement of their lease and make every effort to return the property to the owner in the best possible manner at the end of the tenancy in order to guarantee a full refund of the bond. By Hayden Groves – REIWA President These comments are the writer’s own and do not necessarily reflect the current opinions and policies of the Real Estate Institute of Western Australia
Mar 13, 2017
The Importance of Presentation
Not unlike a first date, first impressions count. Just as you would dress to impress, smell lovely and chew with your mouth closed, presenting your home for sale ought to be preened with the same level of care. It is a good idea to get around to completing those jobs around the house that they you had been intending to do for years. Build that garden bed, paint the front fence, fixing the side gate, remove the old couch, etc are all typical examples of small jobs that fit into the “I must get to that one day” category. When preparing your home for sale, these “little” jobs are important in achieving an expedient sale at the highest possible selling price. This is because buyers typically notice the little jobs too; a rusty downpipe is easily and cheaply replaced yet can loom large in the buyer’s mind as a more major problem and hints that other areas of the property may be neglected. Of course, you need to be cautious about “over-capitalising” when preparing to sell. Replacing a bathroom and renovating a kitchen are expensive and depending on the property and its location may prove to be counterproductive in the effort to achieve the best price. A quality home on a generous lot in Hilton worth say $650,000 is probably more difficult to sell at $720,000 even with a new kitchen and bathroom that cost $70,000. This is partly because the property is already well above the median house price for the suburb. Conversely, an original cottage in Fremantle’s Solomon Street is more likely to benefit from renovations when preparing to sell due to the higher demand for “all finished” properties in one of our most popular streets. Obviously, each property and circumstance engenders a variety of options for sellers when preparing to sell and opinions from real estate agents on the matter are, as always, subjective. In general terms however, presenting a neat, clean and tidy home is always going to help your cause in selling at the best price, “Present it like you don’t live in it,” a client suggested recently and is probably a fair description. Paint out bright colours on internal walls, de-clutter by storing away trinkets and excess family photos, clear the fridge of magnets and kids’ school art and place items neatly in storage cupboards. For vacant properties, the hire of some stylish furniture makes a huge difference and almost always speeds up the sale. Small things do make a difference with paint and gardens another two areas of focus that can make a disproportionate difference to the selling price relative to their cost and the effort involved. It is also worth considering seeking advice from a qualified home stylist who, whilst relatively expensive, can mean the difference between expedited, possibly a higher than expected selling price and no sale at all. By Hayden Groves – REIWA President These comments are the writer’s own and do not necessarily reflect the current opinions and policies of the Real Estate Institute of Western Australia.
Mar 2, 2017
Property Taxes and Pollies
In recent state and federal elections, many of the policies of the two main opposing parties have not been that different. Not so this time around as West Australians prepare to cast their votes on 11th March. Property related taxes have long been the “revenue play-thing” of successive state governments with (once GST revenue is excluded) these taxes contributing about a third of all state income. It is therefore an important income stream for governments responsible in the delivery of essential services. The problem with property taxes is they rise and fall in line with the free market; less sales transactions equals less transfer duty, less investment equals less land tax. With sales transactions less than half that of a decade ago transfer duty income has also halved given property prices have barely changed over the same period. Property investment is also very soft and aggregation rules around land tax coupled with a 35% rise in this tax over the past three years hardly encourages more investment. Property taxes need to be arranged in a manner that encourages mobility in the property market. The Barnett government’s announcement this week to give seniors (those aged over 65) a transfer duty exemption of up to $15,000 for those “right-sizing” their homes is intelligent policy. A substantial blockage in the current arrangement is the high cost of transfer duty for those seniors who are “asset rich and income poor”. Few feel encouraged to move to more appropriate accommodation when the transfer duty burden represents a full years’ pension at a purchase price of $750,000. The policy will bring to market family homes on larger lots more suited to family groups at higher values bringing the government more transfer duty than that lost to the exemption: a win-win policy. Disappointingly, Labor’s plan around property taxes in to introduce an extra tax of 4% to foreign property buyers. The justification for this is that “the east coast does it.” This is lazy, ill-conceived policy that ignores the current state of the Perth property market. The foreign buyer surcharges in the east is in response to red-hot speculative markets in those states and therefore a necessary move to slow those markets. In Perth, this will stifle already weak growth and affect jobs in the construction sector partly reliant on pre-sale commitments from foreign buyers. REIWA is committed to an apolitical approach to property matters and will back the side that develop policies that support home ownership, addresses affordability and encourages housing diversity. If property matters to you, picking a side this election should be easy. By Hayden Groves –REIWA President