Answers to questions I get asked a lot ...
If there is something bothering you about real estate and you'd like to know the answer, you can either Ask Me Anything via the blog or flick over an email.
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What's the difference between an Appraisal and a Valuation?
An Appraisal is carried out by a licensed real estate agent. It takes into account all the statistics and data of past and current sales but also deals with the emotional side of the purchase, looking at the features, location and lifestyle offered by the property. A Valuation is carried out by a licensed Valuer. They deal with the bricks and mortar side of things; the size of the land, the house, each individual room and any extras at the property (sheds, pools, that sort of thing). It's all facts and figures with Valuers; they have no concern and give no consideration to the psychology surrounding buying a house. |
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How come the Appraisal and the Valuation figures don't match?
There's a couple of reasons for this. Firstly, see question 1 ... and to expand on that - the emotional side of buying a house can make a huge difference in the final sale price. If a buyer has found their dream home, they will generally pay what is required to secure it and in a scenario where there's more than one buyer interested in the property, sale prices can exceed expectations from a little to a whole lot.
Secondly, a Valuation is always conservative. The Valuer needs to establish a price based on a 'sell it tomorrow' theory - meaning if the property needed to be sold immediately in 'as is' condition and in whatever state the market is in at the time, what's the most likely outcome. And further, is that final 'fire sale' value more or less than the mortgage sought?
Having said that, if the Appraisal and Valuation figures are worlds apart, someone's pulling your leg and you should get a second opinion.
There's a couple of reasons for this. Firstly, see question 1 ... and to expand on that - the emotional side of buying a house can make a huge difference in the final sale price. If a buyer has found their dream home, they will generally pay what is required to secure it and in a scenario where there's more than one buyer interested in the property, sale prices can exceed expectations from a little to a whole lot.
Secondly, a Valuation is always conservative. The Valuer needs to establish a price based on a 'sell it tomorrow' theory - meaning if the property needed to be sold immediately in 'as is' condition and in whatever state the market is in at the time, what's the most likely outcome. And further, is that final 'fire sale' value more or less than the mortgage sought?
Having said that, if the Appraisal and Valuation figures are worlds apart, someone's pulling your leg and you should get a second opinion.
Why are Appraisal values from different real estate agents so varied?
It would be really easy for me to say that the simple answer is some real estate agents tell big, fat porky pies, but that's not always the case and I don't want to perpetuate the bad press we already get.
In reality, it can come down to the agent's knowledge, their personal experience and reputation within their area and the resources they use to complete their research. A good agent will be able to show you how they arrived at the figure suggested, backed up with facts. If the agent can't show you where the extra value comes in, they may be trying to 'buy' your listing.
It would be really easy for me to say that the simple answer is some real estate agents tell big, fat porky pies, but that's not always the case and I don't want to perpetuate the bad press we already get.
In reality, it can come down to the agent's knowledge, their personal experience and reputation within their area and the resources they use to complete their research. A good agent will be able to show you how they arrived at the figure suggested, backed up with facts. If the agent can't show you where the extra value comes in, they may be trying to 'buy' your listing.
What do you mean by 'buy' my listing?
It's a term used in real estate to describe a scenario where a higher value is agreed to ensure the seller signs up with that agent. The agent knows that it's unlikely that the value will be reached at the point of sale, but they feel that they can 'educate' the seller after they've signed up and bring the price back to a realistic level.
In some cases, it's just inexperience or lack of current market knowledge; in other cases it's deliberate and can be borne out of desperation to get a listing. And in some cases, the agent is just plain wrong. It's also pretty obvious and easy to spot.
It's a term used in real estate to describe a scenario where a higher value is agreed to ensure the seller signs up with that agent. The agent knows that it's unlikely that the value will be reached at the point of sale, but they feel that they can 'educate' the seller after they've signed up and bring the price back to a realistic level.
In some cases, it's just inexperience or lack of current market knowledge; in other cases it's deliberate and can be borne out of desperation to get a listing. And in some cases, the agent is just plain wrong. It's also pretty obvious and easy to spot.
What do you mean by 'educate' the seller?
In days of old, (before the Internet and when you had to believe what a real estate agent told you without being able to verify anything) real estate agents could put whatever value they chose on a property and use whatever excuses they could think of later to justify to the seller why they needed to reduce the sale price by $10.000 (or more). This practice was called 'crunching' or 'educating' the seller and is one of the main reasons why no one trusts real estate agents. It assumed that everyone was stupid and should be treated accordingly and gave real estate agents the misguided impression that they had some sort of superiority over the general public; their vast knowledge meant that the public should believe whatever they were told without question.
Fortunately, times and attitudes change. The Internet took 'educating' sellers totally out of the hands of real estate agents and placed it firmly back in the grasp of the selling community themselves. Access to any number of websites enables sellers to not only verify the information provided by real estate agents, but to challenge it and seek further proof.
In days of old, (before the Internet and when you had to believe what a real estate agent told you without being able to verify anything) real estate agents could put whatever value they chose on a property and use whatever excuses they could think of later to justify to the seller why they needed to reduce the sale price by $10.000 (or more). This practice was called 'crunching' or 'educating' the seller and is one of the main reasons why no one trusts real estate agents. It assumed that everyone was stupid and should be treated accordingly and gave real estate agents the misguided impression that they had some sort of superiority over the general public; their vast knowledge meant that the public should believe whatever they were told without question.
Fortunately, times and attitudes change. The Internet took 'educating' sellers totally out of the hands of real estate agents and placed it firmly back in the grasp of the selling community themselves. Access to any number of websites enables sellers to not only verify the information provided by real estate agents, but to challenge it and seek further proof.
What's a conjunction? and what does it mean to me?
A conjunction happens when two real estate agents get together to sell your house.
Real estate agents guard their clients jealously so if the client of one agent wants to buy a house listed with another agent, one of three things can happen:
1. Both real estate agents work together to make the sale and split the commission at a pre-determined rate. This is a conjuncted sale.
2. The real estate agent with the buyer client agrees to hand their client over to the selling agent for a referral fee. This is not a true conjunction, but gets the job done.
3. The real estate agent with the buyer client hands their client over to the selling agent and walks away with nothing. This is not a conjunction and is thought of as folklore .... no one's ever seen it but we'd like to think that it exists, kind of like Unicorns.
When you list your property for sale, there's a clause in the listing agreement (PAMDA Form 22a - Appointment to Act) which seeks permission for conjuncted sales. You should always allow for conjunctions, even if your real estate agent says not to. If you decline conjunctions you are effectively blocking one avenue to potential buyers. The only reason to deny conjunctions is that the real estate agent risks loosing part of their commission should another agent introduce the buyer to the property. The question is, should you risk loosing a sale because your real estate agent doesn't want to risk sharing their commission?
A conjunction happens when two real estate agents get together to sell your house.
Real estate agents guard their clients jealously so if the client of one agent wants to buy a house listed with another agent, one of three things can happen:
1. Both real estate agents work together to make the sale and split the commission at a pre-determined rate. This is a conjuncted sale.
2. The real estate agent with the buyer client agrees to hand their client over to the selling agent for a referral fee. This is not a true conjunction, but gets the job done.
3. The real estate agent with the buyer client hands their client over to the selling agent and walks away with nothing. This is not a conjunction and is thought of as folklore .... no one's ever seen it but we'd like to think that it exists, kind of like Unicorns.
When you list your property for sale, there's a clause in the listing agreement (PAMDA Form 22a - Appointment to Act) which seeks permission for conjuncted sales. You should always allow for conjunctions, even if your real estate agent says not to. If you decline conjunctions you are effectively blocking one avenue to potential buyers. The only reason to deny conjunctions is that the real estate agent risks loosing part of their commission should another agent introduce the buyer to the property. The question is, should you risk loosing a sale because your real estate agent doesn't want to risk sharing their commission?
What's a 'Buyer's Agent'?
It's a service and a term not widely used in Australia and happens when a client appoints a real estate agent to find their new home exclusively. There are provisions in the PAMDA Form 22a (Appointment to Act) to engage an agent to find your new home and pay them commission accordingly. This guarantees that the buyer has the full attention and exclusive services of the agent to find their new home, under the same terms and conditions as if they were selling a property. It also guarantees the real estate agent will be paid for the time they spend researching and locating properties for you to inspect and following through on the sale to settlement. The commission rates are the same as commission on property sales.
Very few, if any, agents will ask a client to sign an Appointment as a 'Buyer's Agent' as very few buyers work only with one agent when looking for their new home.
It's a service and a term not widely used in Australia and happens when a client appoints a real estate agent to find their new home exclusively. There are provisions in the PAMDA Form 22a (Appointment to Act) to engage an agent to find your new home and pay them commission accordingly. This guarantees that the buyer has the full attention and exclusive services of the agent to find their new home, under the same terms and conditions as if they were selling a property. It also guarantees the real estate agent will be paid for the time they spend researching and locating properties for you to inspect and following through on the sale to settlement. The commission rates are the same as commission on property sales.
Very few, if any, agents will ask a client to sign an Appointment as a 'Buyer's Agent' as very few buyers work only with one agent when looking for their new home.
Why do some real estate agents charge less commission?
Until now, agencies discounted their commission to offer a 'point of difference' and to help attract new clients. Some sellers considered that the discounted commission came with a discounted marketing campaign and services and from a statistical standpoint, discount agencies have not made the huge impact they were thought to make on the industry overall.
Sellers have always had the right to negotiate commission with their agent but the stability of the Government set commission rates meant that very few commissions were negotiated because everyone charged the same rates.
Things are on the brink of change however, with new Bills introduced to Parliament regarding changes to the Property Agents and Motor Dealers Act 2000 and involving the deregulation of real estate commissions. If these Bills are passed into Legislation, real estate agents will be able to charge whatever commission they choose and the current model goes out the window. There's a lot of chatter about which way it will go, most seem to agree that fees will decrease rather than sky-rocket.
Until now, agencies discounted their commission to offer a 'point of difference' and to help attract new clients. Some sellers considered that the discounted commission came with a discounted marketing campaign and services and from a statistical standpoint, discount agencies have not made the huge impact they were thought to make on the industry overall.
Sellers have always had the right to negotiate commission with their agent but the stability of the Government set commission rates meant that very few commissions were negotiated because everyone charged the same rates.
Things are on the brink of change however, with new Bills introduced to Parliament regarding changes to the Property Agents and Motor Dealers Act 2000 and involving the deregulation of real estate commissions. If these Bills are passed into Legislation, real estate agents will be able to charge whatever commission they choose and the current model goes out the window. There's a lot of chatter about which way it will go, most seem to agree that fees will decrease rather than sky-rocket.
Should I list my property as Exclusive vs Open vs Auction? What's best practice?
In a nustshell, here's my opinion :
Exclusive = One real estate agent/agency dedicated to selling your property.
Open = However many agents not really giving your listing their full attention because there's always the chance that someone else will sell it out from under them (and then they will have done all that work for nothing)
Auction = Research.
Not all properties will benefit from Auction. Certain conditions must be met before an Auction is indicated. The property needs to be either :
1. A premium or high end property (think Hollywood mansion or the equivalent celebrity penthouse on the Gold Coast) and / or ...
2. In a popular and sought after location
3. In an area where property sales are currently high
4. The type of property that is in demand for the area
5. There are a lot of similar properties on the market
6. The standard and condition of the property is the same or better than competing properties
Having said that, any property displaying these characteristics can be considered for Auction; it doesn't have to be some celebrity's penthouse. Attempting an Auction in the absence of market demand and competition however would seem to be a bit of a silly thing to do, in my opinion. That's why Auction = Research.
In a nustshell, here's my opinion :
Exclusive = One real estate agent/agency dedicated to selling your property.
Open = However many agents not really giving your listing their full attention because there's always the chance that someone else will sell it out from under them (and then they will have done all that work for nothing)
Auction = Research.
Not all properties will benefit from Auction. Certain conditions must be met before an Auction is indicated. The property needs to be either :
1. A premium or high end property (think Hollywood mansion or the equivalent celebrity penthouse on the Gold Coast) and / or ...
2. In a popular and sought after location
3. In an area where property sales are currently high
4. The type of property that is in demand for the area
5. There are a lot of similar properties on the market
6. The standard and condition of the property is the same or better than competing properties
Having said that, any property displaying these characteristics can be considered for Auction; it doesn't have to be some celebrity's penthouse. Attempting an Auction in the absence of market demand and competition however would seem to be a bit of a silly thing to do, in my opinion. That's why Auction = Research.
If I only do one thing to prepare my home for sale, what would that one thing be?
Cleaning. That's it. Cleaning.
I'm not talking getting out the vacuum cleaner and dusting. I'm talking about a Spring Clean on steroids. Both internally and externally, from the ground to the ceilings and up onto the roof; walls, inside and out, ceilings, gutters, windows, fly screens, driveways, pathways, light switches and even the light bulbs; if it isn't nailed down, clean under it, including inside cupboards and drawers .... clean EVERYTHING!
If you don't want to do it yourself, bite the bullet and invest in a professional cleaner. You won't regret it and will usually find that the cost is returned (with interest) in the final sales price.
And a nice little bonus of all this cleaning (if you're doing it right) is a bit of de-cluttering naturally occurs at the same time. Take the opportunity to pack up the odd bits and stuff you don't use a lot; have a garage sale. Not only do you get a head start on the moving deal but you're opening up more space in the house (an impression you want to go to lengths to create and maintain)
Cleaning. That's it. Cleaning.
I'm not talking getting out the vacuum cleaner and dusting. I'm talking about a Spring Clean on steroids. Both internally and externally, from the ground to the ceilings and up onto the roof; walls, inside and out, ceilings, gutters, windows, fly screens, driveways, pathways, light switches and even the light bulbs; if it isn't nailed down, clean under it, including inside cupboards and drawers .... clean EVERYTHING!
If you don't want to do it yourself, bite the bullet and invest in a professional cleaner. You won't regret it and will usually find that the cost is returned (with interest) in the final sales price.
And a nice little bonus of all this cleaning (if you're doing it right) is a bit of de-cluttering naturally occurs at the same time. Take the opportunity to pack up the odd bits and stuff you don't use a lot; have a garage sale. Not only do you get a head start on the moving deal but you're opening up more space in the house (an impression you want to go to lengths to create and maintain)
Inspection by Appointment vs Open Home Inspections? What's the best option?
Here's what I think :
Inspection by Appointment = One interested buyer looking at the property.
Open Home Inspection = Potential for several interested buyers to look at the property at the same time, creating a sense of competition and urgency to act to secure the property before someone else does.
Here's what I think :
Inspection by Appointment = One interested buyer looking at the property.
Open Home Inspection = Potential for several interested buyers to look at the property at the same time, creating a sense of competition and urgency to act to secure the property before someone else does.
What does 'Offers Over' really mean?
There's a couple of different schools of thought here; one more ethical than the other (in my opinion).
In the true spirit of the expression, 'Offers Over' means that the seller is prepared to consider offers above the figure shown. The confusion comes in defining exactly how much is 'Over' ; I mean 'Over' could mean anything from $1 up, right? Wouldn't that be nice and ... no, that's not what 'Over' means.
Having said that, there's no actual written definition of 'Over' in any real estate related Legislation, Regulation or Code that I can find, but it's generally accepted that 'Over' means up to 10% above the figure shown. Some agents take the viewpoint that 'Offers Over' starts at 10% above the figure listed. And that's where it all goes pear-shaped.
So to summarise; ask the agent who listed the property ..... The most likely response will be "The only way to find out for sure is to put in an offer!"
There's a couple of different schools of thought here; one more ethical than the other (in my opinion).
In the true spirit of the expression, 'Offers Over' means that the seller is prepared to consider offers above the figure shown. The confusion comes in defining exactly how much is 'Over' ; I mean 'Over' could mean anything from $1 up, right? Wouldn't that be nice and ... no, that's not what 'Over' means.
Having said that, there's no actual written definition of 'Over' in any real estate related Legislation, Regulation or Code that I can find, but it's generally accepted that 'Over' means up to 10% above the figure shown. Some agents take the viewpoint that 'Offers Over' starts at 10% above the figure listed. And that's where it all goes pear-shaped.
So to summarise; ask the agent who listed the property ..... The most likely response will be "The only way to find out for sure is to put in an offer!"
How can I tell a good real estate agent from a bad real estate agent?
Google them.
Researching your real estate agent is just as important as researching the market. Treat selecting your real estate agent like a job interview; can you work with this person? Are they currently selling properties in your area? Are they achieving good prices? How long are their properties on the market? Do you like their campaign style? Take a couple of Saturday's and 'secret shop' their Open Home Inspections; observe them in their natural environment. Talk to other people and associates who have sold recently or know a real estate agent they would be happy to recommend (and then check them out for yourself). The point is, you will be working with your real estate agent quite closely while your property is on the market, so you want to at least like them. Do the research and go with your gut ....... or call me ......
Google them.
Researching your real estate agent is just as important as researching the market. Treat selecting your real estate agent like a job interview; can you work with this person? Are they currently selling properties in your area? Are they achieving good prices? How long are their properties on the market? Do you like their campaign style? Take a couple of Saturday's and 'secret shop' their Open Home Inspections; observe them in their natural environment. Talk to other people and associates who have sold recently or know a real estate agent they would be happy to recommend (and then check them out for yourself). The point is, you will be working with your real estate agent quite closely while your property is on the market, so you want to at least like them. Do the research and go with your gut ....... or call me ......