20 Apr What NOT to do when you get a low offer + 1 hour Speed buying + Data impacts design
Highlights from this week:
- Speculation vs investment
- Why women spend less time in the shower than men
- How great is our need for privacy?
- Your rights to sack an agent
- The risk of speculation
- What you need to disclose when listing for sale
1 hour speed buying – Darren Piper
Kevin: Here’s some startling news for you. In the period of time it takes to watch an episode of Game of Thrones, or anything on television for that matter, even cook a lasagna or listen to a podcast – although ours is a little bit shorter than what I’m going to talk about in this timeframe – Australians are making one of the biggest decisions of their life, and that is to buy a property.
Would you believe that some research out by ME Bank, where they surveyed about a thousand property owners, revealed that a vast majority of them will make a decision to buy a property in one hour? I want to talk about this with Universal Buyers Agents director, Darren Piper.
Good day, Darren. How are you doing?
Darren: Good. Thank you, Kevin. How are you?
Kevin: Good. I hope you spend more than an hour making a decision about a property to buy.
Darren: Mate, we certainly do. We certainly do go through all the checks and balances, and that’s what it’s about to ensure you’re buying right.
Kevin: Let’s have a look at this. I’m not disputing the research, but they say 58% of people spent less than an hour checking out a property. Really, this is one of the biggest purchases you make in your life.
Darren: Yes. It’s pretty crazy to think… When you look at the statistics that have come out with that survey that ME Bank have conducted, it’s startling – it really is. To put things in perspective, to go through and make the biggest purchasing decision in your life, to spend half an hour, 45 minutes, or even an hour there, it’s an interesting fact, that’s for sure.
Kevin: The fallout from this must be pretty high, too. Just reading a little bit further on, 26%, a quarter of homebuyers, found issues after they’d purchased the property.
Darren: That’s exactly right. Another interesting fact: around 36% of that group said that they missed picking up these issues because they just fell in love with the property and let emotions get involved or simply overlooked them. And that also might mean not understanding the complete transaction process and how to protect themselves.
Kevin: Pretty valuable lessons here for homebuyers, too, and that is to not show your emotion, particularly if you’re with an agent because that’s what they look for. They look for you to fall in love with the property. They look for you to start placing your furniture. These are the things that you shouldn’t do when you’re looking to buy a property.
Darren: That’s exactly right. A lot of the problems that have come up can be as small as paintwork or construction quality, gardens and fences, fittings, chattels – the list goes on. So, it’s very important to understand the transaction process and to put things in place to avoid making mistakes and costly ones at that.
Kevin: We talk quite often about doing due diligence. But there’s another aspect to this, too – and we’ve aired this on our program on a number of occasions – and that is to have a building and pest inspection done. No matter what, that should be just part of your contract, part of your due diligence.
Darren: Yes, that’s exactly right. There are a lot of agents out there at the moment, given that the market is competitive, trying to get buyers to go cash unconditional or absolute minimum terms. Every client we deal with, we always advise a building and pest, even if it’s pretty much new construction. It’s always worth having that clause in there to protect yourself.
Kevin: I think ME Bank – or it might have even been your advice – saying that people need to go back and look at a property a couple of times rather than just do it once and then make a quick decision within an hour. And even building and pest inspections, it’s a bit like insurance.
Darren: It is. That’s exactly right. Having that clause in the contract will protect you. It has to be satisfactory by your standards, so to speak. As I said, we always advise it. It’s a no-brainer for us, and it does protect the client. And whether you’re using a buyer’s agent or not, it does put that safeguard measure in place for you.
Kevin: So, bottom line here is don’t make decisions with your heart. Those emotional decisions may end up costing you something in the long run. Treat it like a business, and certainly have your building and pest inspections done before you secure the property.
Any other final messages from you, Darren?
Darren: Yes, the other thing, too, is to look at getting third-party advice pre-contract, whether it’s using a buyer’s agent or a company that does a pre-purchase inspection, whether that is just building and pest, depending on the sale method. But there are companies out there, including ours, that can assist to help avoid making mistakes.
Kevin: Universal Buyers Agents, that’s the company that Darren is from, and you can reach him on his mobile, 0423 853771. We’ll have a link associated with this interview, as well. Universal Buyers Agents. Mate, thank you very much for your time.
I guess the last message I want to give, too, is that if you miss a property, if you fall in love with a property and you miss it, remember, there will be another one around the corner. It’s not the only property on the market.
Darren: Could not agree more. There is always the next one, so, you have to be patient. You don’t want to be rushed into any transaction, that’s for sure.
Kevin: Good talking to you, Darren Piper. Thanks very much for your time.
Darren: Thanks, Kevin. I appreciate it. Bye-bye.
The questions to ask an agent – Kevin Turner
Kevin: I’m prompted today to answer a question – a simple question with a detailed answer – that came in from Tim. I’ll give you a bit more detail about Tim’s question in a moment.
It is known that the home buying process comes with many frequently asked questions, and the home selling process is no different. Whether you’ve never sold a home, or you’ve in fact sold a half a dozen, there are many questions that come with the process. This certainly is due to the fact that selling a home isn’t a process that is practiced regularly by homeowners and also that rules, regulations, and the industry itself changes on a regular, if not daily, basis.
If you’re going to be selling your home I suggest you are prepared and you have a strong understanding about the process. Many times, the best way to understand the process and be well prepared is by asking questions. The important part is to know what questions to ask and then probably know the types of answers. That’s where I’ll help you.
The importance of knowing how to interview a real estate agent when selling your home certainly cannot be overlooked. An agent worth his or her salt will be able to reduce the amount of questions you might have to ask because they’re going to address many of those frequently asked questions before they become a question.
So, what are the most frequently asked questions from home sellers? I’m prompted to talk about this because of a question that I mentioned earlier from Timothy Ryan who wrote to me during the week and said “I don’t know what I don’t know. What questions should I ask to know that I’m getting a good agent and not running the risk of selling too cheaply?”
I’ve e-mailed back to Tim in some detail the key questions to ask, but I wanted to give them to you right now in summary. There are a good dozen of them, so I’ll break them up. I’ll do some now, and I’ll do some in the question segment at the end of today’s show.
The first question is “When is the best time to sell my home?”
Well, in most cases the spring months, as we’ve discussed in the past, are the best time to be selling your home. But that’s not always the best time for everyone. Now, since every home seller’s situation is different, you should really discuss the timing of your home sale with your agent and get their advice.
Another question: “How is the real estate market going right now?”
Well, there are many market indicators that top-producing agents should be able to share with you to help you understand and to help explain the condition of the local real estate market you’re in. And one of the most important indicators on market conditions is average days on market. The average days on market can indicate to a seller how quickly homes are selling when they’re listed for sale.
“How should you prepare your home for sale?”
Another great question. Not properly preparing your home for sale can put a homeowner at a huge disadvantage. The expression “You’ll never get a second chance for a good first impression” is absolutely true when it comes to selling a home.
“What do you need to disclose to potential buyers?”
Well, when selling a home, it’s important that you disclose to potential buyers anything that you are aware of in the home that may be a defect. Nobody likes getting the raw end of the deal, so to speak, when it comes to buying a home, a car, or anything for that matter.
If you’re aware of defects, say, with the roof, appliances, or the home in general, you’re always going to be better off being honest and upfront, both with the agent and with the potential buyer.
If you’re aware of defects, whenever possible, fixing them before going on the market is always the best thing to do. This can avoid potential issues and possibly even getting sued a little bit further down the track.
“How much is your home worth?”
Agents are not valuers. An agent will give you a guide, but the best valuation will come from a registered valuer.
And finally in this segment before I leave you, another question: “Should you price your home higher to leave room for negotiations?”
What a great question. A well-priced home will sell quickly and will sell for close to the listing price. A seller who prices their home high to leave room for negotiations can actually be costing themselves more money and possibly a missed opportunity. Real buyers know value. They can pick an over-priced property, and they’ll more than likely pass over your property because it is over-priced and go and buy another one.
Later in the show, I want to share a few more classic questions you should be asking an agent or an agent should be able to answer for you – questions like “How much commission do you charge?” and “What happens if you’re not happy with the agent you’ve chosen? Can you cancel the contract?”
Lots more. That’s coming up a little bit later in the show.
Data shapes design – Greg Dickason
Kevin: One of the big challenges, I guess, for any developer is to understand where the market is headed. And they can do that a couple of ways: they can do it by talking to people, they can do it by getting a gut feel for what’s happening, and they can also do it by looking at their sales volumes. But that’s always very late.
So, trying to get ahead of the market is what I want to talk about in this interview, because it deals with data and how data can provide insight into where we’re headed with housing, what’s going to influence people to buy a particular property. I’m talking now to CoreLogic’s Chief Technology Officer Greg Dickason.
Hi, Greg, how are you doing?
Greg: Great, Kevin, and yourself?
Kevin: Mate, I’m wonderful. I’m prompted to talk to you about this because I saw a blog article that you wrote that we’ll deal with very quickly. I thought it was quite hilarious that we talked about shower cubicles and what data tells you about how women look at shower cubicles differently from men. Why is that?
Greg: Yes, it was a really interesting insight. This little company that we’ve been working with, they integrate data from a building, and they were looking at things like where your swipe cards tell you where people are going, what kind of water usage happens, how people are using lifts, and all of that. And while they were doing that they noticed that women showered for far less time. The length of time that a woman spent in the shower compared to a man was much less, and they said “Well, why is that?”
They got that from the data, looking at the plumbing data and looking at the swipe card data. And the reason was that the women felt that they needed to get changed in the cubicle as well, so they showered quickly so that they could get changed so they weren’t stopping other people from using the showers. Whereas men, they showered but they left cubicle and they got changed in the open change room area.
As a result, it showed that the men and women approach that whole grooming process differently, and as a result, the actual design of the shower cubicles and the way showers should be designed for women and men is different and should be different.
Kevin: Yes. And you only have to look at the bathroom configurations to know that there is a stark difference between the two. I’ve quite often wondered about this. I don’t want to talk too long about bathrooms and toilets, but for men, it’s a much easier process, isn’t it? We’re not as bound by the restrictions of privacy… I don’t know, I’m a male, I’m struggling with this.
Greg: Exactly, and for me; I’m a male, too. But I think that the point is that you don’t need to come with your own biases, as such. The data tells you something, and as a result you can design your buildings more optimally for different people. This obviously is a male-female thing, but it’s the same for your Gen Y versus people who ride to work versus people who use public transport, cars – the whole way you should look at building design.
And as a result of this particular piece of work, there’s a number of developers in Sydney that are looking at different ways in which they can do buildings that are more optimally designed around people.
Kevin: What are some of the other lessons that came out of this research? Was there anything else that you can share with us, apart from bathrooms?
Greg: The other thing was really how different people use facilities differently – things like air-conditioning in the rooms. In this case, they’re starting to produce smart sensors that work out where you are in the building and can change room temperature and air conditioning based on who’s in the room, which I think is quite remarkable.
So, the fact that you actually download a little app on your phone and that app actually tells the building where you are, and as a result, it says “Okay, I’m in a room here where most people prefer their air-conditioning a bit colder, so I’m going to drop the temperature by a couple of degrees.” It’s quite amazing how that kind of stuff is beginning to emerge.
Kevin: Yes. And you can understand in a commercial building where you have workers coming and going, that that could be a huge cost saver, but also in motels where… I don’t know about you, but sometimes when I leave a room, I don’t always turn the air-conditioning off, and I think, wow, that’s an incredible waste of power.”
Greg: Yes, exactly.
Kevin: In an era where we’re looking at privacy too, I guess this does raise some concerns about being monitored – how much are we being monitored, and is it all being used to our benefit, Greg?
Greg: Yes, that’s huge. Obviously, you’ve seen what’s happened to Facebook in the last couple of weeks, with the mass leakage of data. I think it’s going to be a massive question for all of us. Europeans are moving much more towards privacy.
But I think there is a middle ground, there is a way in which you can gather this data, anonymize it and use it for really good insights for the developer. But you have to be careful about what you do with your collection of data.
Kevin: Yes, it does actually come down to disclosure, which is, I guess, what Facebook are going through right now. I’m actually surprised in recent times – this has only been going out for a couple of weeks now – how many people are now jumping in to things like Facebook and saying “Well, where is my data going?” So we’re becoming more aware of it, aren’t we?
Greg: We are. I think people were fine if they felt that all that was happening with their data was they’re getting advertised to, but we’re starting to realize that that advertising is actually influencing our behaviors and making us do things that we may not be comfortable with.
I think people are getting more aware of the fact that there is a lot more power in a company having a lot of your data.
Kevin: There’s another broader question too, and I’d love to get your input on this, and that is companies that have been relying on social media and Facebook, particularly to do marketing, they’re probably going to have to change their focus or how they do it, Greg.
Greg: I think so, definitely, especially if a lot of what you’re doing is through trying to gather and create your own insights. I think if you’re using Facebook’s platform on its own, you’re probably okay, but the moment you’re trying to pull data out of Facebook and use it, I think you’re going to have to change the way you do that.
Kevin: Wonderful talking to you, Greg. Greg Dickason is from CoreLogic. He is their Chief Technology Officer. Great insight into what’s happening with technology, and in this instance how it’s framing how we live, how we work, and how we build.
Greg, thanks very much for your time.
Greg: Thanks, Kevin.
Speculation vs Investment – Luke Harris
Kevin: In a previous conversation I had with my next guest, Luke Harris from The Property Mentors, he made the point about having a plan when you invest, when you want to look at creating wealth and setting yourself up for the lifestyle that you like. It led me to think about the difference between speculating and investing. He joins me once again.
Good day, Luke. How are you doing?
Luke: Good day, Kevin. How are you?
Kevin: There’s a lot of speculation around property investing, in particular when we start to chase things like hot spots, and there is a big difference between speculating short term and investing for the long term, Luke.
Luke: That’s right. Look, we’ve the same people speculating for the long term as well. What they’ll do is they’ll make financial decisions based on what’s happening in their life right now. And what we did here at The Property Mentors is really work out “How does the average investor fail so often? Why do most mum and dad investors and most investors who are trying to get ahead, why do they not end up with those 1% or 5% results that they’re after that the high-fliers do in the industry?”
And what we realized was that there a lot of people that are actually going through their life making financial decisions; and they are trying and they do mean well and they’re going out there trying to invest in things, but a lot of the time they’re not making those decisions based on a long-term plan.
And if you haven’t mapped out a plan on what you’re trying to achieve and specifically what investments or specifically what investment returns you need to actually achieve that result, then a lot of the time, you’re probably just speculating. You think you’re investing, but you’re not actually basing that around any long-term plan; you’re actually just trying to get the best result that you can get right now.
And a lot of people are going out there and buying investment properties without having a specific purpose for that property.
Kevin: But there’s sometimes nothing wrong with speculation, is there? Sometimes you have to have an element of that, the quick return?
Luke: A quick return can be risky for some people. The biggest problem that I have with speculating instead of investing is that investing can give you results that you can actually know in advance. So, with investing, you know with a property, you can get all of your tax benefits and you know your loan amount, you know the growth rates of the suburb. You can do some planning around that.
A lot of people are speculating, and they’re going out there in the marketplace and they might see something advertised that you can get a 30% return on something, but they don’t actually understand the investment. And the difference with speculating is that you may not understand the investment but you’ll throw your money into it, anyway.
And that might take a year or two years, and you may or may not get the result one time. But the problem with that is that that’s not making you a professional investor; that’s making you a professional speculator. And you may not be able to replicate that result again into the future to be able to build long-term wealth.
So, you might make some money one time, maybe a second or third time if you’re lucky; but it’s not something that you can do sustainably to build wealth for the long term.
Kevin: So, just in summary, Luke, what is the difference between speculating and investing, and what advice would you give someone?
Luke: The difference between speculating and investing is that if you’re investing, you’re investing for the long term as part of a plan. If you’re speculating, you’re looking for a one-off type of arrangement.
So, my advice today, what I teach people, is if you’re looking to build long-term sustainable wealth, put together a plan and invest according to that plan.
Speculating is not something that you can often repeat; it’s not something that you can actually go out there and replicate over and over again. So, if you are doing one or the other, there’s no right or wrong; it’s just knowing which one you are doing.
And if you’re investing you should be investing for the long term with part of a plan. So, the advice that I give people is start with a plan and invest accordingly.
Kevin: Okay. Check it out for yourself. Go to ThePropertyMentors.com.au. Luke Harris has been my guest. Thanks for your time, Luke.
Luke: Thanks, Kevin.
More questions to ask an agent – Kevin Turner
Kevin: Earlier in the show, I addressed a letter that I received from Tim Ryan who wanted to know what he doesn’t know, wanted to know the questions he should be asking an agent. I want to continue with that series because there were just a couple of others that I want to talk about.
“What happens if you’re not happy and you want to cancel the contract with your listing agent?”
Well, yes, you can. Make sure that you put that in the listing agreement. If you’re not happy with your chosen agent, you should be able to terminate the contract without penalty. Just a rider here, though: if you have undertaken to pay for any marketing, you will need to honor that part of the agreement.
“How do you respond to lowball offers?”
When you’re selling a home, it’s best to think of any decision as a business decision rather than an emotional one. Lowball offers still happen, unfortunately. Dealing with them can sometimes lead to a sale if it’s handled properly. The worst decision you can make if you receive a lowball offer is not to respond.
“How do you plan on marketing my home?” – a question you should be asking an agent at the point of listing.
A comprehensive marketing plan is something that you should expect from your agent. The days of placing a sign at the front of the property and waiting for someone to walk into an office or a responding off a window, well, those days are gone.
With the evolution and the impact the Internet has had on the real estate industry, it’s critical that not only is your home marketed through the traditional avenues like the newspaper and with mailouts, but also it’s also given maximum exposure online.
Another great question you can ask you agent: “What happens if we don’t get any inspections?”
In most cases the reason that your home is not being looked at by potential buyers is due to the price. Buyers who feel a home is priced too high will choose to look at other homes before yours, likely finding one before they even reach yours.
A good question to ask an agent is “How are they going to communicate with you?”
At the bare minimum, you should expect to hear from the agent every week. Great agents will be in touch every day even if there’s nothing to report. They should be doing that to see if you have any questions or concerns.
“Should you be present at inspections?
Well, the easy answer to that is “No.” There are many reasons why sellers should not be present during any inspections. The primary reason why you should not be there at inspections or at open homes is potential buyers can feel uncomfortable to talk openly and freely with the agent about your home. They don’t want to say something that’s going to offend you. Best advice: just get lost.
The bottom line here: there are no dumb questions when it comes to selling a home. The reality is that selling a home is not something that’s frequently done, therefore questions are a great way to be prepared and be well educated on the process.
If you’d like to send me an e-mail at Kevin@RealEstateTalk.com.au, I’d be more than happy to send you all of those questions and my explanation.