I had this question posed to me recently.
As always, there are two sides to the story.
On one hand, registered valuations provided by an independent, trained valuer with experience in your local market and property type will give you a good indication of potential market value based on recent comparable sales in your area allowing you to make investment and refinancing decisions and giving your loan provider some surety in terms of your loan to value ratio (the market value of your home minus what you owe on the mortgage and other debt).
On the other hand, the valuer is not active in the marketplace as a buyer, is using historical data (even recent data can be out of date when used), is trying to make value judgements on things that are often intangible (how do you place a value on the particular view your home has looking towards the sunset, the landscaping, the loss of light resulting from the macrocapas that are in your neighbours property, the colours you have chosen to paint the inside of your home etc) and is often not as independent as may seem from the outside.
The Cynics View
Having been involved in the real estate industry for well over a decade, I know that registered valuers are generally well trained, competent, and professional in their business BUT they are also human. I have received many calls from valuers over the years who are needing fresh sale price info and often my opinion on the value of properties in my jurisdiction. It can be difficult to place a value on unique properties or places that have few comparable recent sales and yet they are asked to do just that by buyers, sellers, and banking institutions.
Independent? Not always. Impartial? yes. Objective? yes. Professional? yes. Can be influenced? YES!
There are valuers that value high, there are valuers that value low. Most people in the industry know how particular valuers work and hire them accordingly. Experienced investors and developers understand this also and use valuations to gain more borrowing, claim greater tax advantages, and convince unwary buyers of inflated values.
What options do I have then? Good question! I’m glad you asked.
First let me define Market Value
Market Value is what a willing and informed seller will sell their home for
and what a willing and informed buyer will by that same house for.
In the purest sense, this transaction should be without time pressure, duress, or any other influencing factors but this is never completely the case in reality. No one has perfect knowledge and there are always other people with opinions involved be it a real estate agent, valuer, builder, family member, work colleague, or local mechanic. Both parties can and are swayed in terms of value by other people, many of whom are totally ignorant of local market property values and construction methods but believe themselves to be resident experts. There is nothing worse than a fool who doesn’t know he’s a fool,and this definitely applies to real estate!
Option 1) If you are wanting an idea of value without putting your house on the market – obtain two valuations from independent registered valuers. Make it known that you are getting two valuations to both valuers but NEVER let either of them know who the other valuer is. You don’t want them to ring each other and decide on a satisfactory value for your property together. I have no proof that this happens but I wouldn’t take the chance. If I’m paying for two valuations, I want two separate valuations NOT one merged valuation that I pay for twice. Remember also, that valuers have to be accountable to the banking institutions that the valuations get forwarded to. As such, it is often safer for them to be conservative on the value if they are unsure.
Option 2) Get in touch with a couple of real estate agents and ask for a free market valuation from them. At least you don’t have to part with hundreds of dollars this way. Of course, real estate agents/licensees though professional in the main, are not totally objective or impartial either. They want your business and, therefore, want to please you. This can translate into a willingness to overvalue your property. Salespeople are also positive by nature and can be caught up the enthusiasm for your property that surrounds a potential hot new listing.
Option 3) Add both option 1 and 2 together – costly and involved. At least this way, you’ll get a good general feel for value. Remember that valuers often value low and agents value high.
Option 4) Put your house on the market. You will find out what the current stable of active buyers think about your place giving you the best indication of value available.
But what if I don’t want to sell?
If that is truly the case, why on earth do you want a valuation in the first place?
If it is simply for bank refinancing then get one valuation – the cheapest and highest value you can get. If you don’t have any such contacts, then ask a real estate salesperson or agent that you know and trust to give you a valuer contact that will work with you in the way you want.
Sometimes banks will let you get away with a written appraisal from a real estate salesperson. But be nice. Let the salesperson know this is why you are getting the appraisal. Some agents will charge you a paltry sum for this, others will d0 it for free to try and gain good will from you. Don’t be a user though, don’t pretend you are going to put your house on the market and get appraisals done for you only to use the info for your bank. It’s not nice and karma will get you in the end! Give them a bottle of wine and refer them to your friends and acquaintances so that they get something out of providing you with their time, expertise, and energy for free.
If you are wanting to sell your home but don’t trust the values that agents put on your property then try a no-price marketing strategy like a tender or auction. In this way you are allowing the buying market to show you the value of your home without artificially influencing it.
Be aware that with this strategy, buyers will take value hints from other sources if you don’t advertise a price eg the rateable value, their own registered valuation, the agent/s involved on the sale, and the influencing people in their lives that I’ve already talked about.
Have a read about getting your rating valuation up here
This week the Reserve Bank raised the official cash rate for the first time since the global credit crunch hit home. This is significant as an indicator that the Government sees the light at the end of the recessionary tunnel. The economy appears to be recovering in a subdued way which is predicted to solidify in the next 6-12 months. The OCR now sits at 2.75%.
A quick check of the current interest rates from the main banking institutions shows that the rise in the OCR has not yet led to any lift in floating or fixed term interest rates. There is the suggestion that this OCR rise has been expected and current mortgage rate offerings have already built this in. There was a small flurry of activity a few weeks ago which saw a number of banks raise shorter term fixed rates to catch borrowers moving from floating to fixed with this announcement.
BNZ chief economist Tony Alexander says in the next 12 months the Bank of New Zealand expects the average bank floating rates to be around 7%, and in the next two years 7.9%. So there is no great panic to move to longer term fixed rates currently sitting in the 7.5-9% range. Floating rates would have to rise significantly to make borrowers on floating or shorter term rates worse off.
The Real Estate Institute is saying that the increase in the official cash rate, which will eventually translate into higher mortgage rates, is good for the property market. Real Estate Institute president Peter McDonald claims the rising OCR will not adversely effect house prices.
“… home buyers are being promised a market environment in which they can safely plan long term,” he says. His reasoning in that the Reserve Bank has indicated any further increases in the OCR will be “only gradual if needed at all.”
He says because more than 30% of mortgage debt is now on floating rate and long-term interest rates are higher than short-term interest rates, the OCR will not need to be increased at the same speed as in previous recoveries.
“Interest rates are only one of many factors which influence the property market,” McDonald says. “While (Reserve Bank governor Alan) Bollard notes that households continue to be cautious about investing in homes, median prices are still up on a year ago as we have not yet caught up on the supply shortage caused by the fall in the building of new houses during the recession.”
“It must also be reassuring for home buyers and investors that the Reserve Bank has found clear signs we are well into a recovery with businesses planning increased investment and unemployment still trending downwards,” McDonald says.
“So those people who have been holding off on plans to buy a home can be confident it is a good time to go ahead.”
There is strong evidence of pent up demand in the local market in North Wellington with good traffic on the property websites. Now that we have got through the budget announcement and the uncertainty created by John Key’s focus on property and how that fits into the tax equation, buyers should move past the hype and look at the basics.
Softer prices, low interest rates, plenty of choice, a recovering economy, owners willing to negotiate = a great time to get onto the property ladder and good deals!
Uncertainty around the coming changes to the way investment properties will be taxed and how that is going to affect the rest of the market has made for a quiet market in the last month nationally. The local house market in North Wellington echoes this reserve. There are people buying but the investor market is all but extinct and the first home buyers market is very cagey.
Once we get through the budget announcement and buyers and sellers have a little time to assimilate what the tax changes mean for them, I believe we will see a flush of activity. There are plenty of lookers in open homes at the moment.
Interestingly, prices have not been too adversely affected in the quieter market conditions because homeowners are also holding off selling.
Watch the interest rates!
Banks are starting to hike shorter term fixed rates in the expectati0 on that the Reserve Bank will finally begin to lift the OCR. By raising their fixed rates now, they are in a position to catch mortgage holders coming off floating as the rates rise. If you have been waiting to move from floating to a fixed rate talk to your mortgage broker or bank person asap.
North Wellington Stats
Average Sale Price
The average sale price firmed slightly. This is possibly because of the number of sales at the higher end of the market and a quieter first home buyers bracket.
Average time to sell
The average time to sell leaped to 38 days in April. This is still well down on the 2 months to sell when the recession hit the house market in 2008 and early 2009.
The number of homes sold
The number of homes sold in April ducked below the 80 unit mark after a busy March.
The average sale price for homes in North Wellington took a tumble in March by about $40k. It is too early to make much of this as the margin of error from month to month is high, but it certainly came as no surprise to me to see this drop. The market response to the tax announcements made in late February began in the middle of March after a three week lag. Many rented out homes came into the market (and still continue to enter the market) which eased the supply shortage which extended from mid last year into February.
The time to sell in March sat at about three weeks, as it has for much of the last year apart from the summer holiday time that shows as a spike on the graph. I would expect this to lengthen in the next few months as stock levels continue to build up and demand is held in check through uncertainty.
There was a good deal of activity in March as buyers who had been looking for months snapped up the first of the influx of properties onto the market. April will show a much more subdued level of activity, as will May. A great time to purchase if you are in the market for a family home or you want to start out on the property ladder with slightly softer prices and low interest rates.
So what exactly is happening in the Property Market. There are conflicting reports. On one side you have a mini boom in the Auckland Property market in some areas and reports that there are plenty of Chinese buyers coming into the market to buy top end properties while the house market is more subdued. March generally was a good month in terms of price appreciations in many areas of the NZ property market.
BUT
The fear level has risen with a rise in the opinion that prices will fall in the next six months after about a three week lag resulting from the Government’s suggestions in late Feb that they are looking at all areas New Zealand’s tax system especially our over infatuation (as they put it) with residential property. Latest data suggest that coming into April, many home buyers are in wait and see mode, investors are virtually an extinct breed (except for the experienced and canny ones), yet homesellers are not wanting to budge in terms of asking price. It is a Mexican standoff that has resulted in plummeting market activity in many regions. Home loan approvals are at all time lows (also here).
The next month???
My pick – Quiet on all fronts until the end of May when the Budget is announced and the raft of tax changes are confirmed. It will take a few weeks for the population to assimilate what the changes will mean for them, and then activity will increase as a response to the changes to be passed into law.
Is it a good time to buy?
Depends on your attitude to risk, your debt/equity, your aim with the purchase (move in yourself vs rent it out), and your holding time (is this a purchase that you plan to sell again in the next couple of years or do you plan to hold it for longer?). IN terms of the cost of money, I think it is a good time to buy.
At a very basic level, there are four market variations that affect your weekly purse strings in terms of the cost of ownership.
A) high prices and high interest rates – a booming market and high confidence levels – The most expensive time to buy.
B) low prices and high interest rates – better option than C because demand for housing will be hampered by the interest rates BUT still not cheap on the purse strings.
C) high prices and low interest rates – dangerous time to buy in terms of the potential for capital losses. Low interest rates in this scenario suggests an underlying weakness in demand going forward or the top of a cycle. Not an issue if you are buying to hold for a while. Not cheap on purse strings, but better than A.
D)low prices and low interest rates – confidence will be weak, the media will be negative, demand for houses will be low. Most buyers will be waiting until the market begins to push up again. This is the cheapest time to buy.
The worst time to buy is scenario A, the best time is scenario D.
I have just inputed the latest rental data from the Department of Building and Housing market rent monthly release taken from bond lodgements for the Johnsonville- Newlands area. I use this market snapshot as a general guide to what is happening in the greater North Wellington area from Chartwell to Tawa. Click on the graphs for to zoom.
Rents appear to be firming slightly across the board in all house sizes. I believe we are seeing the first signs of the market response to what will be the first significant tax shake up in years alluded to by John Key a month ago and due to be outlined more fully in the May budget.
It is my expectation that rents will rise further in the medium term as investors re-look at their portfolios in the light of the new tax regime and divest of properties with marginal or negative returns. This loss of private rental housing will push rents up until the market again finds equilibrium.
Auction or Tender? By Negotiation or Fixed Price?
Every property sales agent has their favourite marketing method. There are also preferred methods within companies and franchises. A rather played up and public stoush between two big real estate players in the property section of the New Zealand Herald got me in the blog writing mood. So with cup of tea and ginger nut in hand, I sat at my laptop to pen this post.
How do you decide which method is right for you?
If we are to generalize, there are two main streams you can follow when selling a property. These streams can be succinctly summarized using the following words – “price” and “no price“. To easy!
Under the price stream we have the likes of fixed figure, Buyer Enquiry Over (or Buyer Budget Over), and any price range styles of marketing (which have fallen into disfavour in NZ currently). In the other stream we have Auction, Tender, By Negotiation, Private Treaty etc.
Which way to go?
In considering the following questions with your property in mind, hopefully the answer will become clearer.
To start though, it is profitable to dismiss the preconceptions and bias that you will have regarding certain methods of sale. Steady your nerves to consider such words as Tender and Auction with an objective eye.
Now to the questions…
In the current market conditions, who holds the balance of power?
To get an indication of whether it is a buyers or sellers market, ask your an experienced and active local agent what the average time to sell a home in your area is. Ask the agent whether prices are firming or weakening. Is there a build up of homes on the market or is demand outstripping supply?
If the power is firmly plugged in on the seller side of the scales, then no-price methods are usually favoured by agents. In a bouyant market, pricing is more difficult, and there is often the need to slow the pace of activity down to ensure that the property has been well exposed to a good portion of the active buyers in the market place before the owners decide which offer to take.
If the market is full of sellers and buyers are few and far between, then advertising your home with a realistic price point will get a much better response from the active buyers than any no-price methods.
What appears to be the predominant method of selling real estate in your area?
I pose this question because it will guide you as to what is potentially working, and what buyers are expecting. There is no point committing to an Auction, for example, if there are few or no auctions being undertaken in the area. The buyers will have no idea how to act in an auction situation and will turn up in droves on auction day out of curiosity and to learn but not to buy. In some areas (and countries), there is a good history of Auctions or Tenders, and this will make it easier to get bites on the deadline day if you pursue one of these avenues of sale.
Is your home unique and distinctive compared to homes in the surrounding area?
Of course every home is unique, don’t get me wrong, but I am looking for characteristics that truly separate your property from your neighbours. These characteristics can be either good or bad, and it pays to try and step back and consider your home objectively if possible. Does your home have a pool and spa area which your neighbours don’t? Is your home a heritage property? Is it brand new in an area that is predominantly older housing? Does it come with more land than your neighbours? Is your next door neighbour a power pylon, school, playcentre, or park? Does your home have expansive sea views?
True uniqueness in a property adds value uncertainty. Buyers and agents cannot easily gauge market value. Value in this situation, especially if the uniqueness is positive, can be more subjective and emotive. Each buyer will have to fight with their own ‘desire quotient’ (like that phrase? I just made it up) when deciding how much the home is worth to them. In this scenario, an auction or tender method may be the way to go to extract the best that the market has to give. The winner on the day will be the buyer who wants the house more than the others.
If your home is very similar to your neighbours then pricing will be easier and buyers will have a good feel for value when they walk in the door because there will be other similar homes on the market and recently sold that they can compare with. A fixed price or Buyer Enquiry Over style of marketing may work best for you.
How motivated are you to sell your home?
You may wonder what this has to do with the price of fish (or more accurately, with the price of your house). How does my motivation affect the the preferred marketing method of my house?
Motivation to sell has underlying causes. Do you have time constraints? Is there money pressure? Illness? Domestic stress? Major lifestyle changes imminent that require the sale of your home?
It is NEVER good being in a position of HAVING to sell. But if you find yourself in this situation as many do, an auction or tender may be right for you. Having a set marketing period with a distinct deadline can help mitigate some of the life stress and allow forward planning. When the final selling price is not the biggest issue, a tender or auction will get the house sold on the designated day and alleviate the stress.
Does the situation surrounding the sale of your home demand privacy?
When there is a separation going on, a death or major illness in the family, or sellers that need a buffer from the market, and privacy and time to make a decision, then I have found the Tender method of marketing can be great. As an example, I used this method when selling my own grandmothers home. She was moved to an aged care home with Alzheimers, her home had been in the family for 50 years, and my father and his sister, who were both brought up in the house, had to sell it to pay for her care. They were both in different parts of the country and had different opinions on the value of the property. It was advantageous in this scenario to put the home to Tender. On the deadline day there were 4 offers with a variety of conditions, prices, and settlement dates. The Tender method allowed the two children of the owner to discuss the offers, come to grips with selling in the first place, deal with the emotion surrounding the sale, and make a unanimous decision without feeling like they were put on the spot.
To summarize…
If you are considering selling, take the time to think about how you want to sell it. Do a bit of homework and spend some QTT (Quality Thinking Time) weighing the pros and cons. The estate agents you talk to will all have an opinion. Keep an open mind and value what they have to say as experienced professionals in their field, but if you don’t feel right about selling using a certain method, step back, rethink it all and try to be objective. Then make a call.
As an aside, I wouldn’t necessarily choose an agent because of the marketing method that they are promoting. Any experienced agent should be comfortable with all methods of marketing in vogue in your locale. If you like an agent but don’t like the marketing method they have suggested, talk it through with them. Ask them if they are comfortable and experienced with these methods, and if the agent is adamant, attempt to understand why. A good agent will be thinking about your home and your situation primarily, they will have very valid reasons why they are promoting certain methods.
2) Don’t demonstrate the benefits of a house for sale too intimately
These stories remind me of another scenario I heard of a couple of years back where a real estate agent enjoyed a stay with his girlfriend in a luxury lodge he was selling over a weekend. He argued that it was too far to travel home after conducting an open home. Unfortunately the rendezvous was discovered because the agent left the fire burning in the hearth and somehow the house caught fire!
Facebook has just passed google as the number one site on hitwise in the USA.
“The share of visits to Facebook.com for this week has increased 185% over the same week last year, while Google increased only 9% in the same time. Facebook and Google accounted for 14% of all US internet visits last week.”
The meteoric rise in popularity of facebook is evident in the graph
What next for this little company made massive?
Have you harnessed the power of web 2.0 for your business?
Do you even understand what social media networking is?
The aha! moment is upon us, the paradigm is shifting!
If you answered no to these questions you are not alone, the web is full of blogs about making the most of facebook but be careful! Facebook users are smart and experienced (the biggest block of facebook users are aged between 30 and 44), don’t try to sell yourself overtly on social networks, users just ain’t interested. In fact, it can backfire as nestle as recently found out.
Personally, I am an avid facebook user but am still trying to work out how to capitalize on the social networking phenomenon without annoying the huge band of FB friends I have gathered around myself. There are niches within FB that only a regular user will know about. Whole communities are gathered within certain games and applications, each community has their own language within the games and regular users within some of these applications will know most if not all other regular users. Farmville, Mafia Wars, Treasure Hunt, Four Square…. the list goes on.
There is now even a disorder related to Facebook overuse (FAD – Facebook Addiction Disorder). But is Facebook a Fad? It as moved well past critical mass and speaks into the lives of a huge percentage of the literate, Internet using people on our planet. For clues as to how to use this network to your advantage, have a look at what the best in their fields are doing.
David Garratt is a real estate salesperson living and working in Wellington, New Zealand. He specializes in residential property in Wellington's Northern Suburbs. David has an online focus and also has interests in photography, web design, and social media networking.
