The Elusive Carrot…
So it’s time to sell your property. There are two major things that effect profit made on a property transaction – the purchase price and the sale price.
I can only presume you purchased the property below market value, so now its time to achieve the best sale price.
But how can we do this?
As a property investor, I am asked all too often who is the best agent to sell a property in any given area. Now everybody has a different view in this arena, so I will be intrigued to see some of the responses here and what you have done to achieve this as well.
Before even starting to make some calls and getting a few agents around to have a chat with and getting their opinion on the sale price, we must prepare a few things in advance.
Presentation, although obvious, is a large part of the sales process that is missed by many vendors when selling a property. It’s amazing what a coat of paint, new carpet and yard tidy up will do to a properties appeal and sale price.
We must also firstly understand what makes a real estate agent tick…
By nature real estate agents are sales people. The good agents are paid by commission only, so if the don’t sell they don’t earn… simple math.
As a sales person who is good at their job, they are motivated by money. So if its money that makes them tick, then your sales tactic to sell your property must be driven around this motivation.
So why do we drive so hard in getting their commissions down as low as possible?
As an investor I spend many hours per week looking for properties to purchase. All this looking is done online and on the phone. I rarely look in the real estate booklets, as they are catergorised by agency.
When I search for properties online I can search by suburbs, property type and price point all at once. That makes sense doesn’t it?
The real estate booklets only help the real estate agencies and agents market themselves… If they have many listings and many sold signs on properties in these booklets, then other vendors looking to sell think they are the best agency. I disagree…
We live in a digital age and by far the Internet is the No:1 avenue used when purchasers research properties to buy. Sure some buyers still look at these booklets and when they find suitable property they jump online and look at the listing online to view more photos and particulars. Those same potential purchasers will also look online anyway for other houses and even have alerts set up for new listings for suburbs, property type and purchase price range.
So really these booklets are simply fluffy marketing…
Wouldn’t your marketing dollars be better spent in offering the real estate agent a tiered performance commission?
Whenever I sell my properties I make the agents work for their commissions… let me explain:
You have had three real estates present to you and give you their market opinions. They all believe your property is worth between $380,000 and $420,000. They all believe that $400,000 is round about where it will sell. So the natural thing is to go with the agent who offers, or can be negotiated downwards, the lowest commission rate.
This is the same person who is suppose to be negotiating you the best price for your property, and you (the non expert) just made them drop their commission rate?
This is not the agent for you…!!!
State pending, real estate commissions are around 2.2%. On a property worth $400,000 the agent will receive $8,800 commission on the sale of the property. If that agent were to push hard and obtain an offer of $410,000 for the property, their commission would be $9,020.
So for all the extra work, and potentially losing that buyer, they will receive and extra $220 commission.
And if the agent is not the licensee, they only receive a small part of the extra commission… so all their extra work may well be for only $100 commission in their pocket before tax. So in reality they may put an extra $60 cash into their pocket…
Now lets be realistic, would that drive you to achieve the extra $10,000 for the vendor?
What about this as an idea… offer the agent 2.2% commission if the property sells up to $405,000. For a sale between $405,001 and $420,000 they receive 10% on all money above the $405,001… yes 10% and for everything over $420,001 they receive 25% commission.
I can hear the outrage already from you all… but if you believe you are only going to receive around $400,000 then any amount above this that you receive in your hand is a bonus!
If they achieve $425,000 for the sale then they stand to make $11,659.
That’s all great for them but you stand you increase your cash in hand from $391,200 to $413,341.
You have just used the prime motivation behind an agent selling your property to your advantage… it’s a win win situation…
If you think this drive of incentive doesn’t work, well this is exactly how I sell and I can tell you that it definitely does and I have achieved some well above average sales on my properties.
The key is listing with the right agent.
I look for young to middle aged gun ho sales agents who are over the top in personality… almost like you are attending a Motivational Seminar… you always feel good when you leave a “Rah Rah” seminar as they are known… these people make everyone around them feel invigorated, including buyers…
A common mistake from vendors is to list with an agent who has many properties for sale in that price bracket. To me that says, that if the agent has many properties for sale then he is unable to sell them. Agents who are well connected often sell properties that are not even listed for sale. They know how to connect buyers and sellers together without having to spend a lot of money on marketing the property nor themselves. Two of the biggest selling real estate agents in the Sutherland Shire, where I live, do exactly this.
For me, a simple listing on realestate.com is sufficient.
Now if your property is an investment property, then here are a few essential tips:
- If its financially viable, a vacant property allows easy access for the agent to gain access
- If your property is being managed by a different real estate office to the one who is selling your property, then make plans to switch this over. Your sales agent will have a tough time trying to get access through another firm to get access to your property. The real estate agency that manages your property has no real financial interest in helping your chosen agent to gain access. In fact they could lose money as they may well lose a property to manage.
- At the same time as switching agents, keep the tenants on a periodic lease. This will allow you to sell to both owner occupiers or investors
- Let the tenants know you are selling the property and that you will reduce the rent for them on the proviso they allow the real estate agent access to show prospective purchasers and keep the property neat and tidy. It will be your best chance to get access as often as possible.
So don’t just go list with any agent, be prepared and do your homework. For a great result, a real estate agent is going to be far more likely to go out of their way and work hard for you if are going to reward them accordingly…