There is no question that from a sellers perspective the market is presenting some challenges at the moment, buyers are reluctant to commit waiting for the market to bottom (as if you’ll ever really know when that is unless it turns and it’s on its way up!). Knowing how to best approach a property sale is difficult and requires some careful thought. In this blog post I’m going discuss my view on the best method of sale, what’s working in our office and how vendors can minimise the discounting that is occurring to greater extent than necessary.
Traditonally, in Melbourne & Sydney (especially in the inner suburbs) auctions have been the preferred method of sale and I personally am a big believer that a well conducted auction campaign i.e. well marketed, handled and auctioned on the day is the best way to extract the highest price from the market in a given time frame (3-4 weeks). however, auctions work best when there is competition and without it, the outcome can be quite disastrous! Typically an auction clearance rate (which is the percentage of homes/properties that have sold at or very close to the auction day) of 60% or greater is an indication that there is some competition that should produce a favourable outcome for the vendor, of course 70-80% is really the area that produces the greatest competition with the highest results. You may ask the question, why are agents still selling by auction when the clearance rates (Melbourne wide) are below 50%? In fact in some areas the clearance rates have been as low as 15% meaning that 85% of all properties that have gone to auction did not sell! They say the definition of insanity is doing the same thing over and over again and expecting a different result, this is exactly what many agents are doing in the current market. I have attended a number of auctions in this market and on the occasions where there has been some competition, all be it very lacklustre, the auctioneers have announced the property on the market when there is very week competition only to sell the property under the hammer at the same price that it was announced on the market! Clearly in those instances the agents were just looking to make a sale and not maximise the returns for their clients as the best strategy in those situations is to pass in the property to the highest bidder and negotiate.
“The definition of insanity is doing the same thing over and over again and expecting a different result!”
In addition to the low clearance rates, the major real estate portals are overloaded with unsold properties making the typical marketing packages almost obsolete as properties now don’t get the exposure that they had when properties were on market for around 20-30 days, with properties staying on market for up to 60-90 days, a property just becomes a “small fish in a big pond” the opposite of what most major portal packages were designed to do!
“With properties staying on market for up to 60-90 days, a property just becomes a “small fish in a big pond””
So what is the solution? Well there isn’t any one solution, it’s important to consider the type of property that is being sold and the likely demand that the property will have in the market place. In a market cycle where prices are dropping it’s always a balance between the Vendor’s expected time frame to achieve a sale and price. I believe that when competition is lacking in any market it’s extremely important to increase the level of service to the buyers, after all they hold all the cards. When competition is not present, a private sale campaign is most probably the best method of sale and considering starting the campaign “softly” using social media reach and even Google is a great way to “feel out” the market before committing to large marketing expenses typically associated with the major realestate portals. I usually like to have a multi stage approach whereby the property is first offered to buyers from our large database (direct marketing) then exposed to social media channels such as Facebook & instagram (passive buyers), Google (targeting - “I’m ready now” buyers) and then finally the major portals like realestate.com.au (active buyers).
By staggering the exposure of the property there is a greater chance of finding the “right buyer” which is the critical factor in a soft market, “spray and pray” marketing strategies just don’t work and only increase vendor (and agent) anxiety.
When a market is tough, and by tough I mean buyers are slow to make decisions, banks are not lending as easily, competition is low and prices are declining it is imperative that the correct method of sale is deployed and that the agent heading that sale is highly skilled at identifiying, nurturing and negotiating with the buyer to achieve an outcome that is satisfactory and most importantly the best that is available in the given time frame.