Finding The Best Way To Sell Your Property
When it comes to selling it can be difficult to know which method to choose. From auction through to deadline treaty, it’s all about picking what works best, writes Sally Lindsay.
1 February 2023
There is a lot to look at before putting a property on the market. Let’s face it, a house is the biggest investment most people will make in their lifetime and making sure they get the best value for it is paramount.
Housing market dynamics changed last year. As the market slowed and the pool of buyers able to buy unconditionally declined, more homeowners started considering alternative methods to auction.
In a hot market, auctions are popular for sellers and agents as they maximise the sale price by encouragingcompetitive and sometimes crazy bidding. But in quieter times, the success rate can drop off significantly.
The latest REINZ data shows 14.7 per cent of properties (812) were sold across the country at auction in November last year, compared with 32.1 per cent in 2021.
Despite the auction headlines, sales by advertised price, deadline sale and by negotiation still make up the lion’s share of the residential market.
Property Market director Antonia Baker says auctions are not the be-all and end-all. “There are more negotiated sales happening as sellers get a wider selection
of interested buyers to deal with.”
Barfoot & Thompson’s Takapuna branch manager Nicky Rhodes says a notable difference in the market last year was auction rooms devoid of profit makers and profit takers as sales fell, listings soared and investors took to the hills. “In recent years buyers have had to compromise, but now sellers do, and price and terms of sale are what they have to compromise on.”
Many investors and homeowners are nervous about how best to sell their property as it is the culmination of several stages and a lot of groundwork. The first step is to decide when or if you want to sell. Experienced agents advise sellers to look at property prices, interest rates, capital gain, rental prices, yield and any recent or likely changes to government and Reserve Bank policy, and then make a decision.
Agency bosses say choosing an experienced agent goes a long way to selling a house in a market with soaring listings and few buyers.
Both Bayleys Canterbury investment division head Angela Webb and Baker say experience counts. “Those agents know how to do deals,” says Webb. “When the
market was booming 18 months ago, experience was not so important, but when the market is flat and prices are falling vendors will pay for good agents as they have the buyers, knowledge and grit to get offers and work on them to get them across the line.”
Webb says while there has been a decline in auctions because of plummeting sales, it is still a sales method her team recommends to clients. It is also the same for Rhodes.
“Everybody is nervous in this market and numerous contracts have fallen over because buyers can’t get finance – whether the property is being auctioned or put on the market with a price or by negotiation or deadline sale,” says Webb.
However, Webb and Rhodes say auctions are still popular. “They don’t set a limit on price and they deliver unconditional contracts to the vendors on the day of sale,” says Rhodes.
Webb says auctions are a way of removing price expectations from the equation.
“What sellers want is traffic through their door, especially now when open home numbers are dwindling.
“If a property sells under the hammer the vendor has an unconditional contract with a deposit and that is of high value in this market.”
Buyers at auction are mainly existing property owners who are moving or investors.
Webb says there is typically a 60 per cent clearance rate in the room on the day, although the number of properties for sale has fallen dramatically.
“First home buyers are unlikely to buy at auction. Those who have pre-approval to buy a property have to run any house they are interested in past the bank to guarantee finance before they bid.
“Banks are testing mortgages at interest rates of higher than eight per cent and the amount buyers can borrow has dropped.”
Baker’s West Auckland-based company has the capacity to do auctions but hasn’t done any for more than a year.
“They aren’t the be-all and end-all and they just add an extra layer of complexity to an already convoluted market,” she says.
‘Selling by negotiation is a great option if the price range for a property is difficult to gauge because it is at the top end or there is a lot of movement in the market’ ANTONIA BAKER
• A property is offered for sale subject to a reserve price in a fast-paced, public sale. The reserve price is the minimum amount the vendor will accept to sell the property.
• Buyers generally won’t know the property’s reserve when the auction starts. Subject to the reserve price being met, the highest bidder becomes the purchaser. When purchasing a property at auction, all bidders must be unconditional and all conditions, such as a building report, LIM or finance need to be satisfied prior to the day of the auction.
• Auctions are successful when more than one buyer is interested in buying the property, as highly competitive bidding can result in a premium price.
• An auction date can be brought forward if a buyer submits an acceptable, unconditional offer. In this circumstance all buyers will be notified of the new date of the
auction and bidding will begin at the purchase price offered.
• All auction sales are unconditional
• The auctioneer’s cost and a focus on high profile marketing can mean an extra marketing budget.
• Auctions can rule out potential buyers who aren’t able to secure finance by auction day.
• Potential buyers tend to assume auctions will rise to a price beyond their means.
• Not every property will sell on auction day, although a sale is quite often negotiated shortly after and in many cases for not much more than the last bid.
• If your house doesn’t sell at auction and you need to relist it, you will be facing even more expenses.
SELLING BY NEGOTIATION
A negotiated sale is the most preferred method of selling for her clients, says Baker.
“Selling by negotiation is a great option if the price range for a property is difficult to gauge because it is at the top end or there is a lot of movement in the market.”
This allows buyers to make a cheeky offer to see if the vendor is interested in negotiating depending on how desperate they are to sell.
Genuine offers are made based on what the buyer feels the property is worth. Baker says in this market properties her team sells are typically sitting on the market for two to four months and a lot of work goes into getting a sale across the line. “After years in real estate, I have never seen the market as tough as this to get sales
Sellers can attach terms and conditions to the sale; for example the settlement date and which chattels will be included.
Equally, buyers can attach conditions to their offer; for example an expiry date for the offer, making the offer subject to a property inspection report, a valuation or approved finance, or on condition of selling another property.
• Sale by negotiation may help to maximise the sales price of a property as the seller is not setting an upper limit, as they would in a sale by advertised price. This can result in achieving a premium price without the risk of over-pricing the property.
• Having no advertised price may also make the property attractive to a wider pool of buyers and, unlike an auction, the sale can draw in conditional and unconditional buyers.
• Unlike an auction or deadline sale, no sense of urgency is created by a sale by negotiation.
• Vendors looking to sell by negotiation may also have a fixed idea of the value of their property and be reluctant to drop their expectations on price.
• If there is little interest in a property at the desired price level it may be necessary for the vendor to reconsider what to accept. The longer a property stays on the market the less desirable it may seem to potential buyers.
• Another downside may be that instead of attracting a wider pool of buyers some buyers may be intimidated or put off by the lack of an advertised price.
Bayleys does have vendors who don’t like the auction process and opt for a deadline sale.
However, many deadline sales have been falling over because the buyers can’t get finance. “Banks these days are demanding property valuations and often they don’t come in high enough to secure finance,” Webb says.
While the changed market means more people are using deadline sales, it is still beneficial not to disclose what the price expectations of the seller are to the marketplace, she says.
“Listings with prices do not help the seller on what they can realistically expect to achieve. Buyers can use a listed price as a leverage point,” she says. “They compare the price to other properties and look elsewhere for better options and if the property is priced wrongly it can ruin the sales campaign.”
However, deadline sales have been popular for high-end apartments where there are fewer buyers and other owners with expensive properties needing to sell because of a marriage break-up, work relocation or other family reasons so the ability to negotiate settlement transfer dates is important.
Under a deadline sale the seller sets a date and buyers can make an offer at any time before that date. Webb says it is important to have a deadline date because it allows engagement and competition and prevents the sale from becoming an ad hoc process. Also, taking conditional offers expands the buyer pool.
• Deadline sales are “blind” – all offers are private.
• There is usually no cap, reserve or advertised price.
• Sellers can add terms and conditions to the sale.
• At the end of the deadline period the seller can accept any offer, usually the highest, and/or start negotiating.
• An offer can be rejected and the vendor doesn’t have to tell the buyer why it wasn’t accepted.
• When an offer is presented the agent will usually ask any other interested parties if they want to put in an offer too. If there is more than one offer in writing it becomes a multi-offer situation.
• Negotiating with a buyer doesn’t mean an offer is guaranteed to be made. The vendor can choose to negotiate with other buyers.
• It can be difficult to decide which offer to accept. Sellers may have to weigh up offers with differing conditions or requests to the contract.
• Sellers don’t benefit from emotion or impulse, such as with auctions.
• Hesitant buyers can be put off by the absence of a guide price.
• The inclusion of conditional offers presents the risk that an accepted offer may fall through.
Selling by list price or advertised price was once the norm, but other methods have come to rival it for popularity in recent years.
Selling at a fixed price can enable conditional and unconditional buyers to purchase a property. It makes it easier for the buyer to negotiate a sale and helps to ensure that a property only attracts buyers who are willing to offer the price being asked.
The overwhelming theme is to give buyers as much certainty as possible around what it’s going to cost to buy the property.
What’s the “right” price for your property? No-one knows for sure, so choosing a list price takes a certain amount of confidence. It is important to get the price right: too high and you’ll scare off potential buyers; too low and you’ll do yourself out of money.
Even when a property has been listed with a price, in a competitive market a purchaser will often submit an offer higher than the listing price to secure the property. This method of sale certainly does have its place, particularly in a flat real estate market where it gives buyers more certainty. It can also attract buyers who are not able to buy at auction due to conditions around their finance or other issues.
• With the advertised price, that’s the price.
• It gives buyers certainty.
• It doesn’t mean they can’t negotiate, but it does mean they have a clear idea of what they’re going to have to shell out for that property.
• Listing your property at a fixed price forces you to set your maximum price without any chance to test the market and determine the level of interest from buyers.
• It can remove any sense of urgency among buyers because there is no fixed sale date (unlike an auction where the house will be sold on the day).
• More notably, there is a risk of setting too high a price and frightening off potential buyers, or pricing your property too low and underselling it.
• In a rising market the disadvantages are clear: a vendor could set a fixed price one week only to find a week later buyers would have been prepared to pay $10,000 or more for the home.
FEES AND EXPENSES
When selling a property, all of the following should be agreed/negotiated prior to signing an agency agreement with a real estate company:
• real estate commission fees
• marketing and advertising costs
• term of your agency agreement
• sale price range entered into real estate websites.
Don’t, however, base your decision entirely on a percentage fee alone.
Many firms, such as The Property Market, offer a flat fee. For The Property Market the minimum fee is $14,000 up to $500,000 and any sale over that is charged at 2 per cent. Baker says this has been successful for her company.
However, other firms say if vendors do look at discounted real estate companies, they should watch out for other “minimum marketing investments” charged up front and non-refundable.