“No One Ever Said a Lower Price Was A Better Offer...
Or did they?”
In this article, the tough questions are going to be answered. You are going to learn all about the various pricing, and offers available to you when selling your property, so you can determine which option is going to be best for you.
Spoiler alert, it’s not always the offer with the highest price!
Some of the areas we will be touching on are:
Who you’ll be dealing with, and what are their motives to purchase your property
What is your property worth to different buyers, and how will they calculate your offer
What are the cost’s involved
Who are you dealing with - Or who do you plan to deal with?
You’ve lived in your property for years and your neighbours/Friends and Family have always been there. They feed your pets when you’re away, they bring your rubbish bins in, they even bring over leftover birthday cake! But will they be the best buyer for you?
And why would your neighbour want to buy your property?
Landbank so in the future, they can sell a sizeable lot to a developer, or develop themselves
For an investment property close to home
They would rather they knew who lived next door than run the risk of having an undesirable neighbour they can’t share left over birthday cake with.
Having lived in the area for a long time they know the true value of your property and are looking to snap up a bargain
Why would a Developer/builder want to buy your property?
Looking for an opportunity to gentrify a neighbourhood by means of renovations and unitary developments
A project to put their building team on
To make a profit
Why would a Non-commercial buyer/TradeMe want to buy your property?
Upgrade from their previous home
Get on the property ladder
Looking for an investment property
Move to a particular school zone
Why would a Private house buying company want to buy your property?
An alternative to purchasing on the market
For a renovation project
For a development project
As an investment property
To on-sell the property to another purchaser
To make a profit
First I want to get an idea of what my property is worth – How can I find out?
Valuation sites online: (homes.co.nz, qv.co.nz, Trademe.co.nz, Oneroof.co.nz) – These are the first port of call for your standard home buyer looking to purchase a property. These sites do come with pitfalls as they are only based on your Rateable Value and nearby sales in your area. They don’t take into consideration any upgrades or circumstances of recent sales. Certain sites can also be edited by real estate agents.
Real Estate Agent Comparable Market Analysis: This is an excellent way to get an overview of the area and the market through an industry professional comparing your property to recent sales in your area. The data you will be shown will be up to date and of comparable properties in terms of quality and size. The estimate you will be left with is at the real estate agents discretion so watch out for under and overpricing.
Ratable Value (Ballpark): Once upon a time in a market that wasn’t so hot, Rateable Value was a good indication of what a property may potentially sell for. If it was renovated it may achieve slightly over Ratable Value, and if it was in need of some love the price may fall below the Rateable Value. The issue with Ratable Value is that it is a value that is made to determine your rates. It is based on where your house is located, the floor area and the land area. This doesn’t take into consideration the current condition of the property and current market conditions.
Valuation (Unquestionable and at a cost): A property valuation is undertaken by a registered property valuer who will be certified by the Valuers Registration Board. It is an independent assessment of the value of your property based on a number of different factors and should be a non-biased opinion based on data. This comes at a cost anywhere from $600 - $1000 depending on what company you use.
But there are some issues with my property, so how can I know for sure?
There are several professionals in the industry who can supply you with relevant reports so both buyers and sellers can make informed decisions. Sometimes these reports are commissioned by the sellers and sometimes it is up to the purchasers to undertake their own investigations. Some examples:
Building Inspections Report: A Building inspection reports include visual inspections of a building, such as the interior, exterior, outdoor, roof and site areas. General inspections of a house's plumbing, moisture and electrical conditions are also reported. Usually, a 'Registered Building Surveyor” or a qualified building inspector with similar qualifications and training will undertake these inspections. These vary in cost depending on the size of your house. Generally ranging from $400 - $1000
Weathertightness report: If your home was built in a certain era, or constructed with a high-risk design and material you may wish to get a weather tightness report to eliminate any moisture ingress concerns. These can range from thermal imaging to invasive moisture testing. These can vary in price from $500 - $1500
Engineering Report: An engineering report is a subjective report undertaken by a qualified Structural Engineer. The report will go much deeper than a building report with a focus on the major structural components of the property such as the foundation. If required the report will draw conclusions and make recommendations based on the data found. Price usually begin from $1500 +
I’ve got some reports and they don’t look great. There are definitely some issues with my property. What happens now?
The scope of your issues will dictate the type of buyer and price they will pay for your property. Builders, Developers and Private buyers tend to gravitate towards properties with deferred maintenance and issues as this is their area of expertise so they could potentially be your buyers. Non-Commercial buyers like your neighbours, friends and family, and buyers from Trademe are generally more interested in properties without issues as this becomes a problem when it comes to getting finance and insurance.
Great, so what’s my offer?
Well…..it depends. Let's talk a look at some of your options and possible price outcomes that you may have available:
Option 1: I’m going to list my property on Trademe as a private sale
The price wouldn’t be far off what the purchasers have found online in regards to value, without an agent guiding
Price will be heavily dependent on if you have positioned your property in the market to attract the right type of buyers and how skilled of a negotiator you are
You are letting the open market decide based on what they have already seen in the market and other competing properties that are currently for sale on the market.
The first week of marketing is your golden opportunity. You will receive most of your offers and interest through the property during this time
Properties that sit for longer than 5+ weeks become stagnate and receive a stigma from the marketplace as they think something is wrong with the property.
Expect a minimum of 10% less than what you are asking from deal hunters
Kiwis don’t tend to enjoy dealing directly with the seller. They like a degree of separation, for example, a Real Estate agent.
Timeframe = Depending on how well you have presented your property and managed the open homes. 4 weeks for an offer to potentially confirm then allow for your settlement timeframe.
Option 2: Selling through a Real Estate Agent
Price: Exactly what the markets prepared to pay. A real estate agent will provide you with a Current Market Analysis (CMA) which will give you a rough indication of what your property may achieve on the market usually with a best case and worst case
There are no guarantees until your property is on the market and you have had buyers through your open homes
On occasion, your property could be purchased by a “unicorn buyer” someone who’s willing to pay an incredible amount to secure potentially their dream home.
Timeframe: To get a property prepared to go to market will take 1.5 – 2 weeks, following this a standard on market campaign takes approximately 3 weeks and then depending on the offers you receive they will have another 2 weeks of due diligence time before they confirm. The settlement date typically is 2 – 4 weeks following this date. All up the time frame from preparing to sale is approximately 10 weeks.
Option 3: Selling directly to a family member or friend
Price = Typically current market value less agents fees (15 - 25K)
Softer values, less negotiating between family members
Timeframe: 4 weeks
Option 4: A developer knocked on my door and wants to develop the site
Price = Land zoning dependent
Land value less costs to demolish the house
Typically you would expect a square meter rate on the land
Multiply the square meterage & multiply it by X (depending on the zoning of your land)
How do I find out X?
X = is the p/sqm $ rate that developers apply to certain areas depending on the zoning. Recent sales and experienced Real Estate agents will be able to provide you with up to the minute p/sqm rates that developers are paying
Timeframe: 2 weeks + (depending on their conditions)
Option 5: I would like to receive an offer from a private company without any agents or fees
Price = Dependent on end scenario of property. (See below)
An experienced private purchaser has the ability to offer you a cash offer on the spot to suit your situation
They are generally cash buyers who don’t require finance
They will most probably have a construction background or be experienced in renovations so they will not be worried about deferred maintenance or building issues.
Private buyers look at properties for various different reasons which results in a different pricing structure:
Flip: After repair value – renovations - margin = offer
Hold: Annual rental income / expected rent return (5-8%, dependent on area) = offer
Trade: Current value – 10-20% of current value - margin = offer
Timeframe: 24 hours – 1 week (depending on conditions)
Table - Example of each data
Great, now I know how much I’ll be offered. What will this cost me?
Private Trademe Advert: ca. $500
Real estate agent – ca. $15,000 - $25,000 (dependent on sale price)
Private buying company - $0
Developer - $0
But, How do I know if I’m going to get a good offer?
The best offer doesn’t always mean the best price. As you can see from the above information, depending on who is going to be buying your property you are going to have a range of potential prices. Who the buyer also depends on how well you can negotiate. What you will find is that when you negotiate with friends and family, you’ll find it much harder to get the best price because you are emotionally involved. This is where real estate agents negotiating skills come into use as they work solely for you and have no emotional ties with the potential buyers. Their job is to get the highest price possible, and if you find a good one this can be really worthwhile, regardless of the buyer.
What do you mean, the best offer doesn’t always mean the best price?
Your Offer will consist of 3 things
When you go through the traditional real estate channels such as listing online and using a real estate agent you will more often than not receive a traditional buyer who will need standard terms such and finance, building report, LIM and title, and insurance.
These terms usually come with a time frame of 10 – 15 working days at which anytime the purchaser can pull out of the contract. If this does happen you will be required to find another buyer who will need to go through the same process. During which this increases the uncertainty and stress levels. If you are going down this track it is important to know that a building report will be required by the majority of purchasers. This building report usually goes to the bank for finance and if they aren’t happy with the building report they can decline the finance. So if you’re selling a property with a few issues, be sure to get these fixed up before you go to market or run the risk of having an offers fall over on the building report clause and finance clause.
Developers and private home buying companies can offer you certainty through unconditional contracts and quick settlement dates. This scenario can be ideal for sellers who need certainty in a short amount of time. Terms like these do come at a price. Typically the offers you receive will be slightly under market value. Keep in mind that there are no fees associated with these offers and the money is usually in the bank the next day. Be sure to seek legal advice before signing any sale and purchase agreements.
Every property and every seller has a different situation. Whether it is the kiwi can-do attitude of selling your house privately, employing a Real Estate agent to take your property to the market via a full marketing campaign, your property has differed maintenance or structural issues, or you're looking to move on quickly and just want certainty there is a range of options out there for you that will produce a range of different results to suit your situation.
If you're looking for a no-nonsense private offer on your property within 24 hours
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