How can I save when buying a home?

Which agent should I choose to sell my home?

Do I choose an agent based on price?

How much should you pay the agent?

When is the right time to sell?

Private sale or auction: What’s best for you?

What price is my home?

How much should I pay for a property?

Common mistakes made when buying a property!

Why do some homes sell almost immediately while others seem to stay on the market forever?

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How can I save when buying a home?

Before choosing an agent you should test them on their negotiation skills not their price opinion skills.

By asking the right questions, and with a little research before buying a property, you could save tens of thousands of dollars.

The following questions will have a varying effect depending on the competency of the sales person you are dealing with. A true professional real estate sales person should be able to answer these questions confidently, but unfortunately many will not.

If you want to sell your home these questions are great to use to “mystery shop” the agents you are considering.

  • Why are they asking this price? This question puts the agent in the position of having to defend the price. The agent may agree the price is too high and will often give a reduction in price. This is a good question for any product.
  • Why are they selling? This is a common question. If the property is being sold because of divorce, death or financial reasons, who can blame you for offering a lower price.
  • How long has it been for sale? The longer a home has been for sale, the more likely it is to sell for a lower price. The owners often get desperate and accept a low offer.
  • What is the lowest price the owner will accept? This is a great question. Whatever the answer, if it’s lower than what you’d pay you have saved.
  • Have the owners bought something else? The answer to this question tells you if they have to sell and may be forced to take whatever they can.
  • Who put the price on this home? If the home is priced too high the incompetent agent will blame the owners for being too greedy or unrealistic.

If an agent gives you, as a buyer, the incorrect answer then you will know not to choose them to represent you when selling.

If you learn these questions, you could save more money, than many people could earn in a year.

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Which agent should I choose to sell my home?

Selling a home is not something you do often in your life, so how do you know what to expect and which agent to choose?

How will you know if you’ve made the right choice? This is the $20,000 question.

Sellers generally use one of two methods to select their agent: They will either pick the agent that quotes the highest selling price and/or charges the lowest commission or they will base their choice on the agent’s marketing and negotiation ability.

The negotiation ability of the agent you select has a huge bearing on the final price you receive. The average gain for having the right agent and their team working for you is $20,000 or more. Many sellers however make the mistake of selecting the agent with the highest price or the lowest fee, without realising that no ones knows what the final market price of your home will be.

Astute sellers will select the agent whom they feel will get them the most in their pockets. They realise that while they may save a few dollars in lower commissions, their greatest potential for huge gains lies in the agent’s ability to negotiate a higher selling price for them. But every agent says they are good negotiators, so how do you determine who is and who is not a good negotiator?

Do all agents have the same qualifications? All sales people have similar legal qualifications, these are the basic qualifications needed to practice as a real estate sales person. Sales people however do not have similar negotiation and marketing qualifications. These skills require time, expense and dedication to acquire.

This explains why only a small percentage of real estate sales people achieve great results for their sellers. So please test the agent’s negotiation skills and make sure they are of good character.

Finally since you are entrusting them with your home, do you think it would be wise to ask them for references?

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Do I choose an agent based on price?

If you choose the agent based on the price they quote you and their fee, you could be making the first and most costly mistake.

Be careful choosing the agent because you like the price he or she quotes you. The price they give you is only their professional estimate, it’s just their opinion and you don’t know whether it is an honest opinion or not.

The price the agent quotes you does not have any bearing on the price the home finally sells for, which is the price they are capable of negotiating with the buyers.

Choose the agent who is the most competent and above all choose the one who has the best negotiation skills to negotiate the highest price with the buyers for you. This can represent tens of thousands of dollars more in you pocket. If you don’t choose wisely it can mean tens of thousands of dollars less.

Again, remember that the price the agent quotes you is an opinion and it means very little because most agents will not or cannot guarantee they will achieve this price for you.

The price they quote you has no relevance on the final selling price they can achieve. It’s not what the agent says your property is worth that’s important, it’s what they are capable of persuading the buyer to pay and this depends greatly on the way they treat buyers and their negotiation skills.

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How much should you pay the agent?

Most agents will charge you a commission as well as other expenses associated with the marketing of your property. These include such things as advertising - boards, internet, flyers - and can range from a thousand, to tens of thousands of dollars. On average agents receive between $3,000 and $8,000 for advertising a property. Sadly I often see much of this money wasted on unnecessary and ineffective advertising.

The most expensive advertising campaigns are commonly for properties listed for auction. These costs are payable regardless of whether the marketing campaign is successful or not.

The commission the agent charges is separate to these costs. Commissions charged are negotiable and range from 2.5-3.5%. The inner suburbs charge less while the outer suburbs often charge more than this.

When you add the advertising costs to the commission charged it can often work out very expensive. If you speak to enough agents you will find one who will not charge you for any marketing expenses.

When comparing agents fees, in order to calculate the total cost, remember to add the advertising costs to the commission they charge. It’s within your rights to negotiate the fee but be very careful about selecting the agent with the cheapest fees, they may work out to be the most expensive in the end. Remember the old saying; you get what you pay for - if you pay peanuts, you may get monkeys.

If you can get them down on their own fee easily, you have to wonder how hard it will be for buyers to get them down on your asking price. Would they accept a lower price from the buyer just as easily in order to get the deal done?

Negotiate a fair fee but don’t base your choice on the cheapest, select the most competent agent. Their superior negotiation skills will translate into thousands of dollars more in your pocket.

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When is the right time to sell?

There is a general perception in the market place that the best time to be selling your home is during the spring and summer months when the garden is in full bloom.

Contrary to this general belief, the best time to be selling is when supply is low and demand is high. This is generally during the winter months, May through to September.

Logically, the more houses there are on the market for sale, the lower the price you’re likely to achieve. This is because buyers have the upper hand as they have more options with more houses to choose from.

Statistical evidence in our office shows that we achieve better than market prices during the coldest months of the year because there are fewer properties on the market. Many properties during this time sell within days of going on the market and some sell at full price or even above the asking price due to the high demand and competition.

If you are selling and buying another property in the same market, timing your decision is of little relevance. This is because the change over price which is the difference between your selling and buying price is not effected greatly by whatever time of the year you decide to act. That’s why your personal and financial circumstances, should always dictate your decision to sell or buy.

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Private sale or auction: whats best for you?

Contrary to what many people believe the most common and popular method of sale is the private sale. REIV research shows that the proportion of homes sold by private sale in Melbourne over the last few years is between 70-80%.

For a private sale the agent will ask you to sign an exclusive sale authority, giving them the exclusive right to sell your property. This period is usually 60 days, but can be more or less. The private sale gives your agent the best opportunity to use their negotiation skills to get you the highest price from the buyers. It is also the safest and least expensive compared to auction.

If you want to leave the final selling price of your home to the buyers on the day, you can auction your home. About 20-30% of all properties in Melbourne go on the market for auction. Not all sell at auction.

For this method of sale the agent will ask you to sign an auction authority which gives your agent exclusive right to sell your property at public auction. The date of auction is usually set about six weeks from the signing of the authority. Be very careful with this authority because when you sign for auction you are also, unknowingly, signing an exclusive sale authority for a period of time after the auction date, quite often another 30 to 60 days. So if the property doesn’t sell at auction, and it may not, you are still committed to staying with the agent for this length of time. Know what you are signing.

If you are using the auction method to sell, you will also have to commit to several thousands of dollars for an advertising campaign, which you have to pay whether you sell or not. Not only does this add to the cost of selling it can also leave you out of pocket with no result.

Weigh up all your options and know your total costs and risks before committing yourself.

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What price is my home?

Contrary to popular belief, when selling your home its value is determined by one thing only – What a qualified buyer is willing to pay.

Many sellers will argue their home has a replacement value, a capital improved value as displayed in the rates notices or what a real estate agent has appraised it for. But unless the real estate agent, the bank or the Council is willing to write you a cheque for the home, guess what? None of that matters.

A home without a buyer has no value in the marketplace. Sure, it may have a certain value to you, the seller, or it may have a value to your bank or the real estate agent, but none of these people are buyers.

So here is the secret to pricing your home to sell. Think like a buyer.

It’s not what you think the home is worth, but what a reasonable buyer will think your home is worth that will ultimately determine if your home will sell.

You may think if you left it to a buyer, they would pay as little as possible for your home. True, they would. But in the real world every buyer knows that you, the seller, will not sell your home for just any price. To purchase your home the buyer will have to make you an offer that is better than any other buyer and one that any realistic seller couldn’t refuse.

Some sellers fall into the trap of thinking they can hold out for an inflated price and eventually the market will catch up, but buyers are under no obligation to buy and no amount of marketing will motivate them to purchase an overpriced home. Why? Because they can buy one around the corner for less.

Successful sellers have learned to price their home accurately by thinking like a buyer. Most buyers start by looking online to get a general feel for prices. A typical internet empowered buyer will become knowledgeable about the market.

The only other important ingredient in the selling process is to have a real estate agent who has competent negotiation skills in order to get the maximum price the buyers are willing to pay.

Please go to What price is my home? for a free online appraisal.

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How much should I pay for a property?

The usual way to work out a property’s market value is by researching sale prices of comparable properties. These should be recently sold properties with similar land size, style, number of bedrooms and bathrooms, location, age, condition and overall presentation. Most sales results are published in the Sunday and Monday newspapers or can be found on various websites.

As a last resort, if you are unsure about how much you should pay for a property, it may be wise to get a valuation from a sworn valuer. An expert valuation may not reflect what the property actually sells for, but it will give you a good indication.

Once you have a good idea of market prices you then set a realistic, but financially comfortable limit and don’t exceed it.

Finally, the key to successfully buying property is to be realistic about market values, otherwise you will find yourself chasing the market and paying more than you have too.

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Common mistakes when buying a property!

The right home will have the right ‘feel’. Don’t be pushed into making a hasty decision. If it doesn’t feel right, don’t buy it.

However, don’t procrastinate or be over cautious either. If the home is right and you hesitate, it may be sold to another buyer. You could then be looking for months, always comparing everything you see with the one you missed.

All homes, particularly if they are old, have some small faults. For your safety and peace of mind it would be advisable to make your purchase subject to a building inspection. If you discover major structural defects you can choose to either walk away or renegotiate the price.

The other condition you may want to include in your contact of purchase is a pest inspection. You want to make sure there is no infestation and if there is you want it treated.

If it’s the right home, give yourself the best chance to buy the home by paying the highest price you’re prepared to pay. The lower your offer, the less chance you will have of buying the home and the greater the chance of losing it to another buyer. It’s no good saying you would have paid more after it is sold to someone else.

A word of warning, don’t pay more than you can afford. Financial stress is terrible and it tears families apart. Make sure that when you buy a home, you will be able to keep it and enjoy it.

Put your offer in writing with all your terms and conditions. Your offer is not a legally binding contract until the owner signs the contract accepting your offer.

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Why do some homes sell almost immediately while others seem to stay on the market forever?

Apart from changing market conditions, the answer often lies elsewhere. If a property doesn’t sell within the first couple of weeks of being on the market, there is a good possibility the asking price has been set too high.

Another factor that could be deterring buyers is its perceived value based on the internal or external condition of the home compared to other similar priced properties.

The appeal of similar looking or similar presented properties can also vary widely. For example, one house may have a better outlook or better views, or maybe the house at the end of the street may get more traffic noise from a nearby main road. These types of factors and many more will have an impact on the appeal of the property and hence the final selling price.

Buying a home is an emotional decision. Win the hearts of buyers by giving your home a good street appeal followed by a warm and homely atmosphere when they step inside. Then, with a good agent working for you, you’ll have the best chance to get the best price for your home.