The tactics agents used to sell needless newspaper ads, are now being used to sell expensive internet campaigns.

WRITTEN BY | PETER O’MALLEY

warning-signReal estate agents love a ‘motivated vendor’. Why? Because a motivated vendor is far more likely to sell, even if the price is below their expectations. Unmotivated vendors are more likely to reject lower than expected offers.

You may have heard the saying, ‘the best time to sell is when you don’t need to.’ It’s  this lack of  motivation  in the seller that causes indifference, inadvertently creating an advantage  of sorts for themselves, over the buyer. The buyer and/or agent need to pander to the seller’s demands when the vendor’s motivation to sell is low.

Unmotivated vendors can be a nightmare for many real estate agents if they are ambivalent about selling, but the agent only gets paid if they do sell, which creates conflicting motives for the seller and their agent. Sometimes, strong market conditions deliver agents easy negotiations, resulting in both the vendors and buyers being happy with the end result.

In normal trading conditions, real estate agents are often left to deal with a gap between the vendor’s ‘sell price’ and the buyers ‘buy price’. If the buyer is focused on a fair market price and the vendor wants an above market price, then the agent will usually work on the party they can exert the most pressure on, the seller. When a vendor signs with an  agent, they are exclusively signed to that agent’s firm for the duration of the agreed listing period. This arrangement provides the real estate agent with a degree of control, particularly if they have a motivated vendor. A buyer is free to wander in and out of as many real estate agent’s offices as they choose to, during their search for a new home. Therefore during negotiations, real estate agents have a lot less influence on buyers than they do on sellers.

Two types of motivated vendors

There are two types of motivated vendors. The first is the ‘pragmatically’ motivated vendor. They may have bought elsewhere, be in control of a deceased estate or be selling a long held, yet profitable investment. Pragmatically motivated vendors accept the best market price and sell.

They are motivated enough to sell so that the agent does not have a particularly difficult time ‘controlling the vendor’. This allows the agent to focus more on attaining each buyer’s best price, confident that the vendor will accept the highest offer.

The second type of vendor is an ‘artificially’ motivated one. They ‘were’ only motivated to sell if the price was right. Strangely enough, they find themselves having moved the tenants out of their investment property, committed thousands of dollars towards hiring furniture and spent several thousand more on internet ads.

Internet ads which cost several thousand dollars! When did that happen? How did that  happen?  And most importantly, why is that happening?

Real estate agents may have been weaned off newspaper ads (very, very reluctantly), but they are now embracing a new form of advertising like there is no tomorrow, expensive internet advertising.

Expensive Internet ads

‘Bigger photos equal more buyers’, sellers are assured. ‘Make your property standout amongst the crowd. You cannot sell a secret’. The cheap lines that agents used to sell needless newspaper ads are now being used to sell unnecessarily expensive internet campaigns.

‘Vendors…If you are not on page 1 of the buyers search you have erected a signboard in the forest’ screams the real estate trainer hired to increase the amount of ‘Vendor Paid Advertising’ (VPA) sold by agents.

Negotiators call it the ‘sunk cost syndrome’. If you can  get someone  to invest upfront – emotionally or financially – in an outcome, they are substantially more motivated to want a return on their investment.

The sunk cost syndrome allows agents to sell unmotivated vendors a poison pill in the form of increased exposure. Once the vendor swallows that pill, they have unwittingly increased their motivation to sell, tenfold. Agents therefore now love expensive internet ads for exactly the same reason they loved expensive newspaper ads.

The real estate industry still proudly spruiks the idea that campaigns which utilise print marketing have higher clearance rates than those that don’t. That’s a really weird conclusion to draw when you consider that home buyers rarely look at print ads now! What is not said by the industry, is the fact that vendors cajoled into spending money on a print campaign have needlessly spent good money on bad advertising. While their agent has caused them to become more motivated to sell, they have also caused them to pay for advertising in a medium where buyers don’t look anymore!

To ascertain whether expensive internet ads work, let’s look at them from the perspective of a buyer.

As a buyer, would you accept or reject homes based on the size of the home’s respective ads or photographs? Do you like homes that are on page 1, more than homes listed on page 3? Are you more or less likely to inspect a home because the internet site allows you to go on a video tour? If you are like most buyers, and the answer is less likely to inspect the home because you have now seen inside, then why would you pay to run a video tour ad in the first place?

A few probing questions uncover some surprising answers!

Agents now buy subscription packages from advertisers, which  force  them to run expensive web campaigns. The rules are simple. Either the consumer or the agent pays upfront for these ads, but pay upfront they must, regardless of the outcome of the sales campaign. It is easy to see then, where an agent’s passion for selling vendors this type of expensive internet advertising is derived from.

Stockbrokers love big real estate websites – they are ‘high margin businesses’.  That  is,  they  have low costs and high incomes. Their cost base has barely risen as their volume of business and income has exploded in recent years. ‘Rightmove’ the premier real estate site in the UK, has seen its share price rise four times in the past five years based on this very same model. Rightmove’s defacto sales people are real estate agents in the field talking to homeowners about the benefits of Rightmove.

‘Zillow’, the number 1 real estate portal in the US, is attempting to replicate elements of the Australian model of VPA, amongst other strategies. Many  of the major  shareholders  in  Zillow are Australian. They appreciate the profitability of a dominant real estate portal where real estate agents act as unofficial advertising salespeople for the portal.

In Australia, the real estate industry’s greatest fear is ‘digital disruption’. Industry forums are full of agents who fear their ‘Uber’ moment is imminent. And it may well be if they continue to unnecessarily charge home sellers thousands of dollars for expensive internet campaigns, when inexpensive internet campaigns work just as well, if not better.

The leopard may have changed his spots from newspaper ads to internet ads, but vendors should be aware, he is still a leopard.

Bathla Group Sells Kellyville Site For $43.7 MIllion

Western Sydney construction company the Bathla Group has on-sold a major Kellyville site for $43.7 million in one of the suburb’s largest ever property deals.

A Chinese mining company has secured the 17 Balmoral Road site in a deal negotiated by CBRE’s Alex Mirzaian.

“Bathla Group utilised their experienced in-house team to secure a development approval for 290 units after which CBRE presented the opportunity to a Chinese mining company seeking to break into the Sydney residential development market,” Mr Mirzaian said.

“This is by far one of the largest sales in Kellyville’s history and represents one of the highest prices paid per unit for a DA approved site in the area.”

Mr Mirzaian said the sale followed two months of negotiations, with Bathla Group making the decision to take an immediate profit rather than proceed with the 12-24 month project.

The high profile, 2.2ha Hills Shire Council site has an R4 High Density Residential Zoning and is 1km to Kellyville Station and 650m to Bella Vista Station.

It is within an area that has been targeted under the draft Bella Vista Station Precinct Proposal – the vision of which is to create “The Hills’ premier living and business precinct”.

The proposal incorporates new public spaces including a town square opposite the station and neighbourhood parks. It is part of the Sydney Metro Northwest Priority Urban Renewal Corridor, which looks at how areas along the $8.3 billion Sydney Metro Northwest line can be revitalised.

Developer plans to demolish homes and build residential towers at Cecil Ave, Castle Hill

Hills Shire Times

Artist’s impressions of the proposed Cecil Ave apartments which developers say will likely have positive social and economic impacts in the area.

MORE  than a dozen homes in Castle Hill could be knocked down and 12-storey towers built in their place, under plans submitted with the council.

Private company Merck Property is proposing to ­develop five buildings with 424 apartments and 4000sq m of commercial floor space at Cecil Ave, Castle Hill.

The planning proposal seeks to change the zoning from partly general residential to mixed use to allow residential flat buildings, office and business premises and cafe/restaurants on the site.

Street view artist’s image of the proposed Cecil Ave apartments.

It also proposes increasing the maximum permissible building height from part 16m and part 9m to 47m.

The site is mostly made up of existing residential houses from 93-107 Cecil Ave and 9-10 Roger Ave with a combined area of 17,610sq m.

It is located about 550m from the under construction railway station and is within the Castle Hill Major Centre, identified by the NSW Government’s North West Rail Link Corridor Strategy.

The proposed development is in excess of the state government’s plan for Castle Hill, which allows potential development up to three to six storeys on the site.

The proposal is also inconsistent with the council’s draft corridor strategy, which earmarks the land for “businesses and offices”.

However, the developer argues there is a strong logic for increased height and density around the Castle Hill town centre.

According to documents submitted to the council, the two taller 12-storey buildings would be concentrated in the centre of the site and to the north, closer to the core of the station precinct where high density development is expected in the ­future.

There would then be a “stepping down” of the ­development to the south to reduce the impact on the lower scale built form to the south.

In addition, the proposed development would have positive social and economic impacts including boosting housing stock and variety in the area and creating ­employment for people.

In regards to car parking, the proposal suggests a total of 1072 car spaces.

The proposal states a ­detailed traffic study will be carried out at the development application stage.

Study reveals best times to sell or buy

Posted on 1/01/2016 | By Terry Ryder

636834-9512cf52-7374-11e3-82a9-fbdd3ae7c5dfReal estate professionals have been arguing about it for years – when is the best time to sell a house? Some advocate Spring because the garden is at its best and the moderate weather entices buyers out to inspect properties. But the nay-sayers point out that this can also lead to an oversupply of properties for sale.

Conversely, some property die-hards maintain Winter is the best time to sell because there is less competition, while there are those who are adamant that holiday periods bring the best results because buyers have free time to look around.

Each argument has its own merits, but regardless of which theory you subscribe to, there is now scientific evidence that the month does matter. However, there are other influences apart from the seasons at play, and they differ from city to city, with the results drilling down to houses and units.

The Seasonality in Australian Capital City House and Unit Prices, carried out by Monash, Griffith and Swinburne Universities, found there were five key measures that affected property buying patterns from 1995 to the present day – including start of the new school year, the beginning of public service contracts, the weather, tax time and holiday periods.

The data reveals that an average of 2.52% can be saved when buying a house in Melbourne in May. That’s a saving of $20,657, based on the 2015 median house price for the Victorian capital. Similarly in Sydney, a house bought in June will save $12,276.

The most expensive month to buy a house or a unit in Melbourne is July, with house prices increasing by an average of 3.22% and unit prices rising by 2.79% for that month.

For those looking to sell their home in Sydney, an extra $23,638 on average could be gained if the property is sold in July.

The smaller markets, like Hobart and Darwin, are the most volatile for houses and units; Adelaide and Brisbane are the least price volatile house markets; and Sydney and Melbourne are the least price volatile unit markets.

The report indicates that buying behaviour has changed since the pre-2008 period (GFC) when patterns were more stable and traditionally centred around November and December.

“Both house and unit prices were noticeably more volatile in the more recent period, compared to the period before the GFC, where they were much more stable,” Economics Professor Abbas Valadkhani from Swinburne says.

The following is a summary of the best times to put your house on the market or go property hunting:

Houses

CITY

BEST MONTH TO SELL

BEST MONTH TO BUY

  Month

Extra cash earned

Month

Cash saved

Sydney July

$23,638

June

$12,276

Melbourne July

$26,395

May

$20,657

Brisbane January

  $4,106

May

  $3,211

Perth December

$12,462

February

  $8,246

Adelaide April

  $9,948

July

  $7,019

Canberra March

  $9,980

October

$11,708

Darwin March

$21,925

June

$17,713

Hobart January

  $9,682

September

  $8,717

 

Units

CITY

BEST MONTH TO SELL

BEST MONTH TO BUY

  Month Extra cash earned Month Cash saved
Sydney June

$20,682

December

  $6,871

Melbourne July

$14,426

May

$19,080

Brisbane November

  $3,234

May

  $4,751

Adelaide September

  $7,202

June

  $5,630

Perth March

  $9,323

February

  $4,225

Hobart February

$17,913

October

$20,321

Darwin August

  $6,843

September

$10,901

Canberra February

  $4,604

November

  $2,200