Welcome to the first edition of our Timaru Monthly Market Report (You can download the PDF version here)
The median house price for Timaru fell in July to $191,500, compared to $218,000 in June 2010. The median price is down around 15% from July 2009. Please note that because of the relatively small size of our market our median tends to fluctuate substantially. Therefore the long-term trend line tends to be a more helpful indication of what prices are doing.
The volume of house sales in Timaru remained low in July with just 34 sales compared to 40 in June 2010. Sales for the first seven months of 2010 have averaged 41 per month. To put this figure into perspective, the average number of sales per month for the previous 15 years (Jan 95 – Dec 09) is 62 sales.
The median days to sell rose from 80 in June to 89 in July 2010. This is double the median days to sell in July 2007 (44). We estimate there are currently 347 properties available for sale in the residential market. Therefore, based on the average number of sales YTD, there is 8.5 months or 36 weeks supply of stock.
There is no denying that low volume of sales and high availability of stock is putting downward pressure on local property prices. We are finding however, that there is actually a shortage of ‘well priced property’. Many of the current sellers on the market who have yet to adjust their asking prices are helping those well priced properties sell reasonably quickly (often with multiple offers).
August 17 2010 | Property market Timaru and Timaru Property and Timaru Real Estate | 2 Comments »
The fallacy of ‘No Price’ marketing.
If you have interviewed agents recently in regard to selling your home you will have no doubt experienced agents avoiding telling you what they think your home is worth, and then advocating the supposed benefits of ‘no price’ marketing.
You would have heard lines like:
“Don’t put a limit on the price – you might be very surprised at how much the market is prepared to pay…”
Whichever lines they use, proponents of ‘no price’ marketing claim you will attract more buyers, sell faster and achieve a better price. Sounds great doesn’t it?
Our concern is that our industry only tends to tell clients the ‘so called’ benefits of this method. Yet how can you to make an informed decision without considering all the facts?
So in the interests of consumers – here is the other side of the story. We will then leave it up to you to decide which is best for you.
Your house has a price – even if you don’t display one.
Sound confusing? Keep reading and hopefully it will make sense.
Buyers aren’t silly – they know you (as the seller) have a price in mind. If you hide it from them they will use the following 3 ways to try and figure out what you want.
1. Simply ask the agent.
Now here is the interesting thing – the agent has often convinced the seller to market without a price. Yet when asked, they will often tell the buyer how much the seller is wanting. As soon as the agent mentions a figure – there has just been an asking price set. Why not save the buyer some hassle and just tell them from the outset?
However, lets assume that the agent gives the buyer no indication about the price whatsoever. The frustrated buyer, still trying to figure out how much you want, will have to resort to asking the agent …
2. “What’s the Rateable Value?”
If you know anything about our real estate market you will pretty quickly figure out that RV’s are not a reliable way of judging market value. Some are too high, some are too low, some are about right. The point is – do you want the buyer basing their judgement of your price on the RV? If your RV is too low, the buyers will be basing their offer on a low figure. If the RV is too high, the buyers may think you are unrealistic and go off to find something else.
3. The internet
We don’t think many sellers have figured this out yet – but smart buyers definitely have.
You need to understand that every property on the real estate websites must be loaded with a price range.
Here is an article by Alistair Helm, the CEO of realestate.co.nz explaining the issue.
So all a buyer has to do is start with a low price search and work their way up until your property pops up. Bingo, the buyer now knows the bottom of what you are expecting (or thinks they do).
We wonder how many sellers actually know what search range their agent has loaded onto the internet for their property? Lets say you want $280,000 the agent suggests no price marketing but then enters a search price range of $200,000 to $300,000 onto the internet. Your home will pop up in a search of $200,000 which will attract the wrong buyers – continue that thinking through and we are back into ‘Bait Pricing‘ issues.
We think there will be a lot of disgruntled sellers out there when they found out how low their property search range is. If your property is currently marketed without a price, go to realestate.co.nz now and check it out.
What do the marketing experts say?
We can’t find one marketing expert, outside of the real estate industry, who suggests you should market a product without a price. There’s a challenge – if you can find one please let us know.
Basic marketing 101 tells you that there are 4 basic ‘P’s of marketing – Product, Price, Place and Promotion. It doesn’t say Product, Place, Promotion – hide the Price.
Can you think of any other major industries who use ‘No Price” marketing to promote their products?
You would think that international brands like Niki, Apple, or Toyota for instance would have some pretty top end marketing expertise on their side. So if ‘no price’ marketing was so great, why don’t they launch their products into the market without a price?
Imagine walking into a department store and everything on the shelf was without a price tag. You enquire at the counter as to how much the product is and the assistant says – “Make us an offer and if it’s good enough we may sell it to you”. It would be ridiculous and you’d probably walk out in disgust.
Why don’t major brands use no price marketing? Because they know that, contrary to what agents say, you will actually attract less buyers if you don’t display a price.
Buyers simply hate it when there is no price stated. But don’t take our word for it. Do your own research. Ask everyone you know who is looking to buy what they think of ‘no price’ marketing. (Any buyers reading this, we would love your feedback and comments).
What does the research say?
On 28th October the Christchurch Press ran an article by John McDonagh, senior lecturer in property studies at Lincoln University. His article pointed to some research done in the USA. You can find it here, but in essence the study boiled down to:
“In contrast to claims of the strategy’s proponents, the results indicate that houses take longer to sell when using the range pricing strategy after controlling for physical characteristics and market conditions. Furthermore, there is no evidence that this strategy has any significant impact on transaction prices.”
Why don’t the proponents of ‘no price’ marketing tell you about this research?
Where is the evidence and research that backs up their claims?
Many of you may be wondering “why then do so many agents suggest no price marketing?”
That’s a great question and here is one possible answer that we will expand on in a future article:
‘No Price’ marketing is better for the agent!
November 13 2009 | No Price marketing | 13 Comments »
Imagine for a moment you are a genuine buyer. You have been looking for some time and are getting a bit frustrated that you haven’t found the right home yet. Finally you walk into a property and get that feeling – “this is it!”
By the end of your tour you have decided that you definitely want to buy it. Based upon other homes you have inspected you feel the asking price of $285,000 is fair and can comfortably afford to pay it, if need be.
However, as a buyer you naturally want to try and get the property as cheap as possible, so you innocently ask the question “why are they selling?” You cant believe your luck when the agent replies “It’s a marriage split” or “they are on transfer” or “they have purchased another property” or similar.
So you then ask “what do you think they will take?” To which the agent replies “well they have to sell it, who knows you may get it for $275,000 just make an offer.”
Based on the agents comments you decide to make a cheeky offer of $270,000. The agent returns a couple of hours later with a counter offer from the sellers at $280,000. You decide to meet them in the middle and counter offer back at $275,000 – which is then accepted by the seller.
You are delighted, and will probably name your next child after the agent, for helping you save $10,000.
This situation is great for you as a buyer, but who is the agent supposed to be working for? The seller of course. Yet in this case they have just helped you get the property for less than you were happy to pay.
The seller has effectively lost $10,000.
If you doubt this happens, then ask the next 10 people you come across these 3 questions.
- When they bought their home – why were the sellers selling?
- If the answer is divorce or something similar then ask – how did you find out?
- Would they have paid more for the home if they had to?
It is amazing that our industry has been able to get away with this for so long. Some agents even put the sellers personal reasons for selling in the advertisement. (What’s with that?).
In this situation the agent is clearly in breach of their duty to their client (the seller) under agency law, yet we know of none who have been taken to task on this issue. Why? Often because the seller has no idea of what happened, or the thought of taking lengthly legal action is all to daunting.
As long as the sellers personal and confidential reasons for selling do not effect the material value of the property then it should not be disclosed to the buyer.
The new Real Estate Agents Act which comes into effect on 17th November 2009 has thankfully addressed this issue. Clause 9.21 of the ‘Professional Conduct and Client Care’ Rules states:
“A licensee must not disclose confidential personal information relating to a client, unless -
(a) the client consents in writing; or
(b) the licensee is required by law to disclose the information; or
(c) disclosure is necessary to answer or defend any complaint, claim, allegation, or proceedings against the licensee by the client.”
Again, congratulations to all those who drafted this legislation. Fixing this one issue will, in our opinion, go a long way to towards raising our industry’s reputation within the community.
To all you buyers, of course you will keep asking the question (you want to try and get it cheap). Just don’t expect agents to give you the answers like they use to. If you do manage to find one that tells you the clients personal reasons for selling – then lucky you. Just think to yourself “we won’t use that agent when we go to sell.”
To all you sellers. Please, please, please – mystery shop your agents both before and after you select them.
To all you agents, if you already act in your clients best interest, then it’s business as usual and you will be glad to see those ‘other’ agents having to change their ways.
More information regarding the new legislation is available on the Real Estate Agents Authority website at www.reaa.govt.nz or if you would like a copy of the new Real Estate Agents Code of Practice – just give us a call on 03 688 9029
Your comments and thoughts to this article are welcome.
November 06 2009 | New Real Estate Act 2008 | 4 Comments »
Many a frustrated buyer has experienced bait pricing, but in our opinion it is just as bad for sellers.
You are probably wondering “what exactly is bait pricing?” Bait pricing is where a false low price is advertised in order to attract more buyers. It comes with many names such as ‘Offers Over…’, ‘By Negotiation Over…’, ‘Price guides’ etc.
Lets say you are a seller and you want $300,000 for your property. Your agent suggests that you should advertise it as “Offers Over $280,000 as this will attract more buyers, and the more buyers you attract the better the price you will get…” (or something similar).
Of course it will attract more buyers – but think about it – it will attract buyers who can afford $280,000 (when you want $300,000). Why would you want to attract buyers who cant afford your price? It doesn’t make sense (unless of course the agent intends all along to talk you down in price).
Also, as a buyer, if you inspected a home that was advertised as “Offers Over $280,000 – would you make your first offer at $300,000? Even if you could afford $300,000, like most people you would probably offer $280,000 or less. Why? Because the lowest price you see will often become the most you want to pay.
Why is bait pricing bad for buyers?
Because most buyers have a price limit and they tend to look at properties at the the upper end of what they can afford.
For example, If you could spend no more than $280,000 you would probably look at property priced up to $285,000 or maybe $290,000 but is is unlikely you would be attracted to look at a home priced at $300,000.
So, a buyer who can afford around $280,000 inspects a property advertised as “Offers over $280,000” (thinking they can afford it). They get emotionally involved and excited about buying it. They make an offer of $280,000 and then are horrified to find out the seller actually wants $300,000.
They have just wasted time, energy and sometimes money (on building inspections etc) trying to buy a property they could never afford.
“Why didn’t they just tell us they wanted $300,000?” is a common statement from buyers. They feel mislead and don’t like it one little bit.
On 17th November 2009 the new Real Estate Agents Act will come into effect and change our industry for ever. Just one simple line in the new legislation should fix the problem of bait pricing. Clause 9.6 of the new ‘Professional Conduct and Client Care’ Rules states:
“The advertised price must clearly reflect the pricing expectations agreed with the client.”
Congratulations to all those who drafted this legislation – you have simply and clearly addressed the issue of ‘bait pricing’.
To all you sellers – if your agent suggests you use any form of bait pricing that doesn’t clearly reflect how much you want – we suggest you find another agent.
To all you buyers – if you are attracted to a property and then discover that the seller is expecting more than you were lead to believe – then please report it to the Real Estate Agents Authority. This is great new legislation that is designed to protect the best interests of consumers, however we need your help to really make a difference.
So is Bait Pricing a thing of the past in the real estate industry? We certainly hope so.
It will be interesting to see how some agents will try and get around clause 9.6. Our guess is that you will see even more “No Price” marketing (which will annoy even more buyers), but that is a topic for another day.
More information regarding the new legislation is available on the Real Estate Agents Authority website at www.reaa.govt.nz or if you would like a copy of the new Real Estate Agents Code of Practice – just give us a call on 03 688 9029
November 03 2009 | New Real Estate Act 2008 and No Price marketing | 10 Comments »
It’s an age old problem in the real estate industry. We call it the ‘quote trap’ and it goes something like this…
A seller calls in several agents and asks them all what their home is worth.
This seems to be the right thing to do – after all, as a seller, you want to make sure you get the best price possible.
However, the life-blood of real estate agents is listings; without listings the agent will not survive.
Agents know that most sellers naturally want a high price and therefore tend to choose the agent that quotes them the most.
So the agent has a dilemma – tell the seller the truth about their likely selling price and risk losing the business, or tell the seller what they want to hear and win the business.
The problem doesn’t finish here – in fact this is just the start. Assume for a moment you are a seller and have just listed your property with the agent who showed the most enthusiasm towards getting your dream price.
You are probably now basing your future plans on the high price your agent suggested you may get. Maybe you even go out and put an offer on another property. Imagine the position you could end up in when reality finally hits and offers are presented to you much lower than you were lead to expect.
There is also a problem for the agent. They now have a seller who is expecting too much.
In order to achieve a sale the agent somehow needs to change the seller’s expectations to a more realistic level. Our industry calls it ”conditioning the vendor” and in our view is a horrible way to do business.
Many of you will have unfortunately experienced it – that enthusiastic, positive, high price talking agent all of a sudden becomes the bearer of bad news. Of course it’s not the agent’s fault, they put the blame squarely on the “market”. By then it is too late – the seller has probably signed a lengthly agency agreement and is stuck with their agent for months to come.
After 17th November 2009, when the new real estate legislation comes into effect, this scenario will hopefully become less frequent.
Under the new “Professional Conduct and Client Care” rules:
“An appraisal of land or a business must be provided in writing to a client by a licensee; must realistically reflect current market conditions; and must be supported by comparable information on sales of similar land in similar locations or businesses.”
So what does this mean to you?
It simply means that an agent has to do a lot more homework regarding the potential sale price of a property. The days of a quick tour of your home followed by plucking a figure out of thin air, or simply agreeing with the high price you want – are gone.
The agent will now be required to take a lot more care. They will have to ensure that the price they quote you “realistically reflects market conditions” and their opinion must be supported by “comparable information” of sales of similar properties.
Effectively, they will be required to tell you the truth regarding the likely selling price of your home (even if it’s not what you want to hear) and because it must be “in writing” they better make sure they get it right.
It will be a lot harder to mislead you in order to win your listing.
In our opinion an agent has always had a duty to give their client the right advice regarding price.
Now however, that duty has been made loud clear and large fines await agents who flaunt the rules.
Several years ago we introduced the ‘Price Quote Guarantee’ whereby if the property sold for less then we quoted, you didn’t have to pay us. This was our solution to the ‘quote trap’ and ensured we took care with our appraisals.
It’s now great to see every other agent will need to meet the same standards.
More information regarding the new legislation is available on the Real Estate Agents Authority website at www.reaa.govt.nz or if you would like a copy of the new Real Estate Agents Code of Practice – just give us a call on 03 688 9029
October 30 2009 | New Real Estate Act 2008 | 9 Comments »
On 17th November 2009 the new Real Estate Agents Act will come into effect.
At the Professionals Timaru we welcome this change and believe it will bring about a whole new era of professionalism, accountability, transparency and much higher standards of ethics within our industry.
Over the next few weeks we will talk more in depth about what these changes mean to you – but in the meantime, here are the Top 10 improvements that we think will help lift the professionalism of real estate agents.
1. An appraisal must be provided in writing, must realistically reflect current market conditions, and must be supported by comparable information on sales of similar land in similar locations.
2. When inviting signature of an agency agreement an agent must explain to a seller in writing -
(a) How commission is calculated, including an estimated cost (actual $ amount) of commission payable.
(b) How the property will be marketed and advertised, including any additional expenses that such advertising and marketing will incur – it must be explained to the client that he or she is not obliged to agree to such additional expenses…
3. An advertised price must clearly reflect the pricing expectations agreed with the seller.
4. An agent must not mislead purchasers as to the price expectations of the seller.
5. An agent must not disclose confidential personal information relating to a seller…
6. There will be a one working day cooling off period after signing an agency agreement in which the seller can cancel the listing.
7. Sellers will be able to cancel any listing agreement after a period of 90 days.
8. Agents will have to disclose any rebates, kickbacks, commissions or benefits they receive in connection with the transaction relating to the agency agreement.
9. The qualifications and training required to become a salesperson will be much higher.
A salesperson will not be able to draft a sale and purchase agreement until they have worked in the industry for six months.
10. Individual salespeople will be held more accountable for their actions – complaints and discipline will be handled by an independent authority who will have much more power to protect consumers.
More information regarding the new legislation is available on the Real Estate Agents Authority website at www.reaa.govt.nz or if you would like a copy of the new Real Estate Agents Code of Practice – just give us a call on 03 688 9029
October 29 2009 | New Real Estate Act 2008 | 3 Comments »