It's not rocket science
For most of us, the family home is one of our greatest assets. From the moment we first take possession of the property and begin making re-payments on our mortgage we begin to understand what our parents meant by "Sacrifice".
If it’s an investment property, we have to deal with shortfalls in rent, unexpected maintenance costs and management issues. We strive not only to meet the mortgage repayment, but we also try to add a little extra each week or each month in order to reduce our debt.
Whatever the case in the process, we give up many of life's little luxuries in order to add to our monthly finance re-payments. We may even sacrifice small pleasures to be rid of the burden of the debt that much quicker.
And so we believe that our mortgage becomes in effect, a forced savings program. By reducing our debt more quickly than the lender may have originally specified, we are increasing our equity in the property and therefore developing a sizeable asset.
Then one day our circumstance change or we have a bright idea! Someone says, “Let's sell the property and move up to a bigger, brighter, better home for the family” or, “We need to redistribute the funds to suit our new lifestyle”.
From the second that light comes on we begin to "study" the local real estate market. We start to devour the real estate web sites we scour the pages of our local paper, we look forward to browsing the pages of the weekly real estate magazines, we spend hours browsing agents windows and "junk mail" from real estate agents suddenly takes on an air of authority and importance. We make it our business to find out what Mrs. Jones down the road sold her property for. Above all else, however, is this one overriding thought!
"What is the key to maximising the sale price of my property?”
After sacrificing so many little luxuries or putting up with the problems for so many years, we all want what could be our biggest investment to pay handsome dividends when we sell.
But… what can the average homeowner or investor do to ensure the best price when their property sells?
Over the years here at Caillard & Kaddour real estate we have seen some people do well, some do really well and others do less well when they sell and in our experience it all boils down to 8 simple rules. The value you achieve for your investment is dependent on your understanding and how you apply these rules, its not rocket science. In fact, you will probably be saying they are nothing more than applied common sense, but all the indications are that common sense is not as "common" or as widespread as you might think.
Before you go any further - "Be clear on your motivation to sell"
Is time the decider or the sale price? Are you prepared to wait for the tooth fairy or that magic number despite the fact that you may have missed the very opportunity that was the reason for placing the property on the market in the first place?
Take your time as you read between the lines…… absorb everything.
1. Presentation is (nearly) everything!
When we go out on a date the first thing most of us think about is our appearance, we may even go to the hairdresser. We want to stand out and create a memorable impression. Astonishing as it may sound, not everyone thinks of doing the same for their property prior to listing their big investment for sale.
Why? Perhaps some people fail to appreciate how an outsider may view their asset. Or is it perhaps others merely don't know how to restore the sparkle to their property?
There are undoubtedly numerous reasons; either way, Caillard & Kaddour has created this simple checklist as a good starting point.
- Walk around the area looking at the other homes (on the market or not, these are your competition) in your vicinity then up to your own house and take a critical look. What can be improved? Look carefully at the grounds, the lawns, the front windows, the gutters and down pipes, the driveway the general streetscape, etc. This will be a buyer's first impression of the property. Is this how you want a buyer to remember your property? Remember many purchasers first see their new home on a drive by.
- Add some colourful and sweet smelling plants around the entrance. Place a mat with the word "welcome" on it, this is a mind game.
- Make sure all external gates, latches and hinges function, no squeaks please.
- Clear all gardening paraphernalia from the lawn, tidy the patio and clean the BBQ, no dirty smelly water features either, please.
- Replace "holes" in the garden beds with new plants; replace worn or broken panels, posts or palings in the fences cut the hedges.
- Clean the pool - and keep it clean, make sure the pumps create a ripple, its more inviting.
- Have the windows and mirrors cleaned inside and out including the tracks .
- Wash down all the internal and outside walls - paint where necessary.
- Clean all the floor areas including skirting’s - steam clean all carpets.
- Tidy up the cupboards - buyers will look.
- Buy showy new towels and matching soap for the bathroom areas - buy potpourri for other rooms make sure there are no damp smells
- Make sure all lamps work - fix leaking taps make sure there is pressure and the water is warm.
- Children’s toys are best in boxes - keep all kitchen benches free of clutter, drawers and doors closed properly - keep all bedroom walls free of posters and limit your personal effects on show to the bare minimum, if at all
- Open the blinds put the lights on during an inspection - lots of light is very important
- If you have pets keep them out of the house and out of the way of any potential buyer.
- Percolate some coffee, the aroma will put buyers at ease.
There are dozens more ways to improve the presentation of your property. These suggestions are only a starting point, but the important thing is to take the time to present yourself and your property at its best before you begin the selling process.
Given how many people do nothing to improve the presentation of their property, simply doing something will not only give you the edge over the competition to increase your chances of a sale, it will probably improve the potential sale price as well.
2. Create an optical illusion
The longer we live at any one house the more belongings we will accumulate, furniture (formal and occasional), "bric-a-brac"; we surround ourselves with our possessions. We quite rightly make them a reflection of ourselves, but we are not buying this property.
Ever taken a tour of a Developer's show home? Can you remember noticing the difference? A Developer's show home is furnished - minimally. There's just enough furniture in each room to illustrate its purpose - and very little else. Now walk through each room in your house. Can you reduce the amount of "extras" in each of the rooms?
When you reduce the amount of clutter, reduce the amount of additional furniture and "knick-knacks" in a room you create an optical illusion - the room begins to look bigger.
So if you were to apply this thinking to the whole of your property, the whole property will have the illusion of looking bigger. Now ask yourself… would your home sell for more if it were larger? Of course, but the solution will not be breaking the bank. Most property sellers can create the impression of a more substantial home by simply reducing the amount of "personal paraphernalia" about the property.
Here are a few tips …
- Strip each room systematically back to the bare essentials. If you don't need it, get rid of it.
- Now, organise a garage sale lots of adverting flyers posters even in the local paper, sell everything you have stripped from the rooms. But be brutal – if you don't need it, get rid of it. You needn’t worry about selling it - remember the old saying "one man's trash is another’s treasure" – almost everything will sell its just a question of the right person and the right price.
- If you just can’t bare to face the mother-in-law if you sell the melamine side board she gifted to you, ask a friend to store it or organise a storage unit until you move to your next home. You can often hire a garage sized store for a daily price of a cold drink
Don't forget, it's very simple; a larger home will usually sell for more and you can create the illusion of a larger home at very little cost by simply reducing the number of your belongings in the property.
3. Forewarned is forearmed – have all your ducks in a row.
When a buyer decides to purchase your property, their solicitor or legal representative will ask for documentation and could well recommend they obtain both a pest report and a building report for the property.
A pest report identifies hard-to-see problems such as termite and borer infestations, as well as more obvious problems such as cockroaches, mice, etc. There is very little call for this here in Vanuatu, but if you can see a problem down the track then sort it now. On the other hand, a Building Report will identify possible problems with the physical structure of the property; in the case of any purchase involving finance this will be required.
This is a typical scenario.
The agent negotiates a good deal the buyer and the seller agrees on a sale price, everyone is happy. Next, the buyer obtains either a pest report and a building report or both often for the bank.
These report are not cheap, the inspector will always air on the side of caution and could well knowingly or otherwise feel that the fee has to be justified.
One of these reports highlights a previously unknown or unseen problem and the property does not come up to valuation or the bank calculating the perceived risk requires a bigger deposit. As a result, the buyer either decides not to proceed with the purchase or invokes the right to re-negotiate to compensate for the problem.
If you're thinking of selling your property you probably want the highest and best possible price. You certainly do not want to be ambushed by an unforeseen problem in a building or pest report - especially one that puts you in a position where you have to reduce your price in order to complete the sale.
The solution is simple! Obtain your own reports prior to putting your property on the market, make it clear that this report is to be used as an aid to sell the property. If a problem is found, correct any problems or get a quote to rectify the problem that might be discovered. Notify the agent and begin the sale process confident in the knowledge that you are now well prepared for all eventualities. Your professional agent will be able to overcome the issue before it arises.
3. Choose the right agent
The average person will only sell a property every 7 – 9 years that’s about 5 real estate transactions in a lifetime. There are those that buy and sell every 2-3 years, often investment properties. Whatever your circumstances the choice of the right agent to sell your asset can make thousands of dollars difference in the final sale price.
Here are 3 simple tips to help you choose the best agent to sell your property;
A. Brands mean nothing. Most real estate franchise companies want you to believe that each of their branded offices deliver a similar level of service. This is not true. Each franchised office is owned by an independent operator, who pays as much a 10% of the sales commission to use the name of the franchise company, but does not necessarily adhere to the recommended operating systems of their franchisor. Therefore, the service you receive from a "Brand X" real estate office in one suburb or town can sadly differ greatly from the service you receive from the same brand in another suburb or town. The franchisee puts pressure on its offices to meet financial targets; recognition is given based on the number of sales not the best prices attained.
B. Survey your local area. Check out the offices; those that are well established and look prosperous probably are. Drive around and note down the agent that seems to have the most FOR SALE signs erected or listings on their website. This agent will also have the most buyers on his books for properties in your area. After all, buyers are attracted to the agent with the greatest variety of property for sale. Also note the agent that has the most SOLD signs erected in your local area or sold properties on their website. This agent is the most active agent - they actually sell homes. Often these two agents are one and the same, making your choice that much more easy. The simple answer is that the most active agent will generally bring you the most offers, if you are working with your agent, more often than not securing the best price for your property in the market at that time.
C. Survey your friends and neighbours. Ask them who they bought their home from, ask them about the service they received, ask them who they would list their home with. Get a general feeling about who they think are the most pro-active agents in the area and who would do the best job selling your home.
The choice of the best agent is critical so take your time, study your local marketplace and make an informed decision about the one or two agents you will interview based on your conclusions.
Note: Never engage an agent that is either family or a “friend” this is not a love in this is business. You can only make good business decisions based on good truthful advice – from someone that is not preoccupied with their relationship with you.
4. Forget the agent's fee
In Vanuatu there are no regulated agency fees so agents are able to charge whatever they fee the market will allow.
Therefore, in Vanuatu there are agents feel that a lower fee is expectable, buy the same token there are agents often those with better success that will negotiate a more substantial percentage of the sale.
In Port Vila agent's fees can vary greatly. Unfortunately, there is a commonly held belief that all agents do the same job. Therefore, many people wrongly surmise that it's smart to shop for the agent with the lowest fee.
Nothing could be further from the truth. In fact, the opposite is true.
The agency with the highest fee generally invests more in to marketing, has a higher profile, receives more and better training to negotiate a higher sale price for you than the agency with the lowest expectation.
Quite simply, choosing the agent, because their fee is lower, can be a recipe for disaster.
Here is the best approach.
Think in terms of the nett sale price of your property.
- That's the eventual sale price of your asset less any fee charged by the agent.
- At the end of the day, most people would be happy to pay the agent a reasonable fee so long as they (the property owner) achieved a fair and agreed sale price.
When it comes time to employ an agent to sell your property make sure you enter into the listing agreement the sale price having already established and agreed with the agency the commission element, which is included. In this way you'll end up with the price you feel comfortable with and the agency will earn the fee that it deserves, good business.
There is a practice where by the vendor nominates a sales price and indicates to the agent that anything over and above that figure is payment to the agency, on introduction of a buyer that results in a sale. Consider the following:
- Where is the motivation, in a buyer’s market, to introduce your property to prospective buyers who will be making offers, if the agency could find itself working for no reward?
- In a vendors market or if after sometime and a few price adjustments the agency introduces a buyer that they feels will pay well over the asking price where does that leave the vendor?
You have the right to negotiating the commission as does the agency. Ultimately the commission is a small part of the sale during your discussions should the agent be unable to justify or negotiate to protect its own income, would that agency be able to negotiate the best sales price on the day, on your behalf, or are they just desperate?
5. Marketing - "you can’t sell a secret”!
At the moment there is a belief in the Vanuatu market that it is not necessary to advertise a property in order to secure a buyer at the highest and best price. More than likely this opinion is held by those with little or no professional training and who see the preparation and running of an advertising campaign and the enquiry it will create as a daunting task.
This is nonsense!
There are two key factors that will attract enquiry to your property from the market:
When you attract a buyer using this method you are pitching to a purchaser with a certain mind set so when it comes time to negotiate you have nowhere to go.
The more people who know that your property is on the market, the easier it will to find the person that will pay your asking price. You never know, the ideal buyer could be your next door neighbour's sister. It is a well-accepted and proven fact that a broadly based property marketing campaign will achieve competitive interest from the buying public and therefore the best chances of a sale at the highest price.
In some areas, a vendor will be expected to pay for the cost of a marketing campaign in addition to the agent's fee. In other cases, the advertising component is included in the agent's fee.
There is a point to note when an agency pays for advertising. You’re now "new business partner" is motivated to recover the cost of the investment. Whilst you may see this as an incentive to sell, which it is, do you think that the primary aim will be to get the best price or to recover the investment?
In either case price or advertising, you should expect a written marketing plan from the agent you choose. Such a plan should specify when and where advertisements would appear so that you are able to track the campaign for the sale of your property. No matter what agreement you reach with your agent for the sale of your property, be sure that it includes a well considered marketing plan. Such a plan will invariably increase your chances of a sale at the best price.
6. Be sure to price your property correctly
The sale of residential property in Vanuatu generally takes one of two forms.
- A private treaty sale is one where an asking price is advertised and potential purchasers are invited to enter into negotiations with the owner’s agent for the purchase using the asking price as the initial benchmark.
- A sale by tender or auction is one where no asking price is advertised and potential buyers are invited to compete for the property or right to be the first to negotiate with the vendor by placing confidential written bids to be opened at a specified time and place.
In either case, you the owner should have complete control of the pricing of the asset - either the initial asking price (in the case of a private treaty sale) or the reserve price (in the case of a tender or auction). You can do this by taking the time to research property prices in your own area before your property comes on the market. It's simple and doesn't take a great deal of time.
Here's how …
1. Carefully read the property pages of your local websites every week for about 3 weeks noting new listings. As you read, be sure to note any advertisements for properties that seem similar to yours and are located in the same area, take a careful record of those that have been on the market for more that 8 weeks, they are probably over priced.
2. Visit at least 3 real estate offices in your area, read the advertisements in their windows, take note of any property that seems similar to your own.
3. Once you have undertaken the simple research steps described above you will be able to properly assess the likely selling price of your own property - here's how…
a. First, take the average price of properties for sale in your area that appeared to offer similar features to your own.
b. Now, deduct 15% from this price.
c. You now have a high price and a low price – creating a possible sale price range for your property.
d. Statistically, the eventual sale price of your property will most likely be in the bottom half of this price range.
Many factors can contribute to the eventual sale price of a property and the process described above will never be 100% accurate. Nonetheless, it is generally very useful for most property owners when determining an approximate eventual sale price for their property.
Once you have an idea of the probable sale price of your property, you will be better able to handle any offers to buy your property from potential purchasers. Moreover, such knowledge will invariably lead you to a better price for your property through informed negotiations.
One final matter needs to be addressed on the issue of price.
If your property comes on the market at a certain price and fails to attract any inspections within the first 14 days or an offer within 21 days of placing it on the market, it is a sure sign that your initial asking price was over ambitious. You will need to adjust the price in order to maintain the momentum created by the first 3 weeks of marketing.
If you fail to correct the price at this point the property runs the risk of "going stale", buyers will avoid it from this point believing it is overpriced or there is an undisclosed problem.
It is far more prudent to correct the price and secure a sale, than hope that a buyer (emotional or otherwise) will pay you an over the market price for your property. Those that are prepared to wait for their “price” invariably do, if they are in a rising market then the real benefits are inevitably missed, in a falling market it very quickly becomes a nightmare.
Property owners wishing to obtain a more accurate assessment of the eventual sale price of their property are advised to contact a registered property valuer that specialises in their area.
7. Let your agent do their job
Most property owners quite rightly feel very strongly about the positive attributes of their investment. Sometimes a vendor’s enthusiasm for their castle can get the better of them resulting in a lost sale.
When your agent calls to arrange an inspection with a potential buyer the best thing a vendor can do is leave the house and let the agent do their job.
You have selected your real estate salesperson on his/her merit, identifying that he/she is well versed in the finer points of property salesmanship. If the potential buyer shows a glimmer of interest, most salespeople will pursue that interest until it becomes a sale or is otherwise exhausted, you will be given a full report on the inspection and the opportunity to analyse the outcome.
Unfortunately, some vendors, in their boundless enthusiasm for their property often take over the inspection when the agent arrives on their doorstep with the buyer in tow.
Most serious buyers will feel very uncomfortable in circumstances where they believe they are intruding, therefore, do not respond positively to the property.
If the buyer approaches you directly it will be to educate you. If you stand firm you will not be in a position to re-open negotiations; a good agent will never close the door on a possible sale while he/she could be very enthusiastic about your investment there is no emotional attachment. The result is generally a lost opportunity.
So, no matter how enthusiastic you may feel about your home, the best advice is to make yourself scarce and let the agent do the job you are paying them to perform. The result will invariably be a sale in a quicker time and at a better price than you would otherwise have achieved.
8. Negotiating the best price
The most crucial stage of any property sale is negotiating the final sale price.
Here's a list of our best negotiating tips to ensure the best possible price for the sale of your property.
a. Never say NO to the first offer, because you think it has arrived too quickly and there may be someone else out there who will offer more. This buyer may have just been disappointed at losing another property and the money is still in the bank, waiting to be spent.
b. Never say NO to any offer, because it is well below your asking price - always provide some counter offer, a price lower than the asking price but a price at which you are still prepared to sell.
c. Answer all offers quickly - certainly no longer than overnight. Buyers can quickly lose patience and interest.
d. Do not allow your "feelings" about the home to cloud your logic when it comes time to answer an offer.
e. Trust in your own research. We are all surrounded by well-meaning relatives, friends and neighbours, all of whom have good advice for you whilst you are in the middle of negotiating a sale price for your property. But, in the end you must remember - you've done the research and you know better than anyone else the value of your own home.
f. At the end of the day, remember that any property is worth what a willing buyer is prepared to pay and a willing seller is prepared to accept - but both parties must be "willing".
g. Negotiation is all about compromise. You give a little and the buyer gives a little until you arrive at a mutually acceptable position - but there must be some "give" from both parties.
h. When you are negotiating on the sale of a property, remember there is more than the sale price to negotiate. What about the time for settlement, the inclusions and the exclusions, the deposit etc.
Your property may or may not be your most valuable asset, but when it comes time to sell you deserve the highest possible price in the shortest time.
To find out more about how Vanuatu’s leading real estate agent can help you contact us.