Methods of sale
When it comes to selling property, emotions rule! Establishing exactly what you want and why from the very beginning will assist you to choose the best method of sale for you. So what do you really want?
There are three things that remain consistent when it comes to deciding to sell. They are:
· PRICE – best/premium price.
· URGENCY – a quick sale.
· PRIVACY – as little inconvenience and publicity as possible.
Ranking these three things in order of importance that suits you will help you and your agent establish the best marketing method of sale and campaign for your situation.
Caillard & Kaddour’s experience confirms the two most successful methods of sale statically even if they are not the most popular in Vanuatu are private treaty (for sale) and auction (including Tender). In fact, both can and do yield excellent results when accompanied by the right marketing campaign and skillful negotiation by the agent.
Type of sales agreements:
You should choose the agreement that best suited to your personal requirements. Also look at the types of buyers in your area. Ask your agent to compare the success of each method. There is likely to be a trend for one of them, which may help you achieve greater success.
This is when a number of agents are invited to sell a property. The agency that eventually puts the deal together quite rightly receives the reward.
A significant number of property listings start out this way and are favoured by agents that have other interests. Most professional agencies dislike this method, because it often means working for no reward; however some vendors believe they are getting the best market coverage this way.
The key issue for vendors is to manage the price question. Agents operating on an open listing are keen to secure a sale quickly. They may push offers more aggressively than when they have an exclusive agency appointment.
Some considerations of this method include:
- This is basically relying on chance to sell the property.
- That the buyer will ask the agent to sell them the property.
- That the agent will remember that the property is on their books.
- That the agent will not steer the buyer to a vendor that has shown more commitment.
Note: in a buyers market this amounts to putting your property in the doldrums
- There is a misconception that this is going to create competition between agents; the reality is that the professionals don’t waste time on a possibility of a sale, which leaves it to those that are unable to obtain exclusives to work the listing, usually the untrained agent who may have lots of enthusiasm, but little skill, which the vendor can very easily become caught up in.
- It is very unlikely that an agent will provide any feed back to the vendor; it’s not in the agents interest to educate the vendor so that another agent can sell the listing.
- Good agents will use open listings to educate buyers to the local market “Now you’ve seen what’s on the market, doesn’t my exclusive listing represent great value?”
- The temptation for an agent is to go in with a conservative offer on behalf of a buyer because the buyer, if not satisfied with the agent’s performance, can just as well make an offer through someone else.
- Often there is a selection of signs on the property which sends a message to potential buyers that the vendor is desperate; the same applies to internet advertising, the reality is that after time, they are.
Open listings do have their place, its questionable whether this is related to selling the property or just appeasing someone directly related or not to the property, particularly in a slow market, but even then the best price is not necessarily guaranteed as over exposure is interpreted as desperation.
For a serious operator this is the only type of listing and the same could be said of a motivated vendor.
By far the most common type of listing agreement is an exclusive listing. This is when a real estate agency is given the exclusive right to represent the vendor and find a buyer for the property. This can be achieved by making the sale through their own office or going through a networked or local real estate agency, this is called a conjunction. As a result, the seller agrees to pays a commission, because the agent is actively working on selling and representing the property.
Considerations to take into account:
There is but one reason why any vendor elects to have a exclusive arrangement, commitment from the agent.
- Before the agreement starts the following points are agreed upon and included in the contract:
a. the term, normally 60 to 90 days.
b. the percentage of commission on the sale.
c. whether the agency can conjunct with other offices.
Sole Agency Listing:
This type of agency agreement is similar to an exclusive, but at the same time the vendor retains the right to sell the property to certain people, without having to pay the agreed commission on the sale. The seller would need to disclose to the agent in writing, the names of the potential buyers with whom negotiations had been conducted up to and including the date of the appointment.
Your property is placed onto the market with a predetermined asking price agreed between you and your agent and based on a market analysis. In most cases and markets, this price, or a guide to it, is publicly stated. In some others it is not.
There is no official sale date. Your marketing strategy may vary in the use of some or all of the tools at your disposal, depending on your individual situation, budget and time frame. In some cases you may wish to utilise the agent’s buyer database only and rely on the negotiation skills of the agent. In more competitive markets, you may require a more targeted promotional strategy.
Your agent may still recommend inspections through regular ‘open homes’ and will discuss the options for your marketing strategy to spotlight your property in the marketplace.
Potential buyers will either accept the predetermined price or, more likely, start by making a lower offer. Your agent will handle the negotiations, which will be aimed at raising the offered amount to your predetermined price or, possibly, higher if more than one buyer is interested.
This method of sale is effective in the long term and targets buyers who want to visit properties in a specific price range. It allows you, the seller, to assess market interest in a calm atmosphere and make any adjustments to your campaign and sale price that seem appropriate.
It is attractive to those buyers who feel they are more likely to succeed in obtaining the property at a better price rather than bidding in the competitive atmosphere of an auction, where they could also risk spending more than they had intended
Some considerations of this method include:
The predetermined price will generally turn out to be the maximum paid or the basis of lower offers.
The initial listing price is very important if it is too high those that could well be interested perceive the property to be over priced and move on. By the time the price has been adjusted it’s to late, potential buyer have purchased else where or believe the property to have problems.
The open ended time frame can result in the property being on the market for a longer time, increasing advertising costs. Note: if your property is on the market for a long time and has several price reductions, it may give buyers the idea there is something about it that makes it hard to sell, which is why a good promotional campaign can be very important.
Auctions are highly focused marketing campaigns designed to expose your property to the maximum number of buyers, maximise your sale price and minimise the number of days your property is on the market.
Your property is put up for sale on a specified date and this is preceded by a high impact marketing campaign and selected ‘open days’ all of which indicate your commitment to selling.
The contract of sale is on your terms and the conditions of the sale are predetermined to suit your situation. The nature of the marketing campaign means that the agent will be able to give you regular feedback from buyers in the market, which will assist you in setting the reserve price.
The impending auction date can create a sense of urgency and ‘call to action’ amongst buyers. You are not obliged to accept an offer that does not reach your reserve price. You can, however, decide to negotiate with the highest bidder(s).
Auctions offer extra opportunities for the sale of your home because an offer can be made before, at, or after the auction. Once a sale is made, either by accepting an offer in writing before auction day, or at the fall of the hammer on the day itself, the buyer must pay a 10% deposit then and there and at the same time execute the contract.
This method of sale puts a clear time frame on your campaign and creates a competitive atmosphere on auction day that is aimed at letting the market determine the highest price for your home.
Some considerations of this method include:
The chance that some potential buyers will be excluded, in particular those who don’t want to risk losing money on the cost of building, pest and other inspections if they are outbid.
Some buyers may not feel comfortable with the competitive bidding involved in auction.
Auction attracts serious buyers as they know the owners are serious about selling.
By marketing without a price, buyers can judge the property on its merits, rather than on how the price compares to other properties on the market.
A sale by tender is one where no asking price is advertised. Potential buyers are invited to compete for the property or right to be the first to negotiate with the vendor. This is done by placing confidential written bid and often a sizable deposit with a non interested party, normally a solicitor. These are opened at a specified time and place with all interested parties related to the sale present.
Tender as a means of sale in most modern countries has given way to auction which is considered by most professionals as a more transparent process, in keeping with modern business and real estate practices.
To find out more about how Vanuatu’s leading real estate agent can help you contact us.