Sunday, May 11, 2008

Saving Money or Making Money??

When business starts to slow – as real estate has recently, the real estate business people start to find ways to cut costs.
Finding ways to cut costs is always good practice, but the fact is, real estate businesses have to be careful not to cut off their nose to spite their face.
What I’m talking about is the practice of cutting costs in areas critical to the business. For example reducing paper and energy wastage is a good cost-saving idea, but cutting back on advertising the brand is a bad idea.
The same goes for property vendors. As the market begins to slow, vendors inevitably have to reduce their asking price. To compensate they often make the mistake of chopping other costs such as high-impact advertising and professional photography. Some opt to use real estate companies that don’t charge commissions.
While on the surface these all sound like good ways to save money, the so-called savings may well end up costing you big time when you fail to achieve a good price for your property.
As an example, let’s say you’re trying to save money, so you do without the $3000 marketing campaign. You save a further $300 by not bothering with professional photos, and even more by going with a discount real estate company.
Say you save $6000 on commission – that’s a total of around $10,000.
“That’s good,” you say.
But does it really work out that way? Not often.
I’ll assume that you have been realistic about your price. You go to market with a small advertisement featuring the usual fantastic photo of the garage door – the one that looks like everyone else’s photo.
Firstly, ask yourself this: Which home is likely to been seen amongst ads for the other 2000 houses on the market in Tauranga at the moment? Will it be the advertisement using a photo of your garage door taken by your real estate agent and squashed into a 6cm x 5cm space with a dribbly script about how many rooms it has? Or will it be the 14 x 18cm high-angle, professionally shot, full-colour photo, with a well crafted script?
The difference between the two is enormous and all going well, the latter marketing method will attract multiple buyers who will make offers on your property while competing with others wanting to do the same, thereby driving up the ultimate price.
As for the discounting brands, they usually have their sales team on retainers plus bonuses. Or they may even pool their listings and sales and divide the dosh amongst them. Now ask yourself this question: “If discounting commissions was an effective way to do business, why aren’t they more successful than so-called “high commission” companies?” Remember The Jones?
Two more questions: “If the company gives away their own money as a means of getting my home listed, how are they going to treat my money when they supposed to be negotiating on my behalf?
And, “If I want an agent to be hungry for a sale, would someone on straight commission be more effective at achieving that sale, or an agent who gets paid a salary regardless?
In a nutshell, the most important question to ask yourself when selling your house is this: “Do I want to save money or make money?”
Price it right, market it well, and get a good negotiator. Remember, good things cost money!

Get Your Price Right

All the “end is nigh” commentary about decreasing house prices should no longer be considered doomsday fear mongering that can simply be ignored.
On the contrary, if you fail to accept this truism it could cost you a lot more when you do eventually sell your home.
In a falling market, if you don’t price your property correctly right from the start, you could eventually find yourself dropping the price much lower than what you may have accepted had you got it right in the beginning.
What you need to do to avoid this harrowing experience is to ask yourself, “What’s the lowest price I will take now?”
Then ask yourself what you won’t accept, price your house just above that level and get the house sold.
Cheery stuff eh? Well all is not lost. Well, not yet, anyway. If you start to look a little more objectively at what is going on you can still make some money. If you’ve been in your home for a few years, keep thinking positively by contemplating your aggregate financial gain over that time rather than dwelling on the peaks and troughs that appear by looking at last year’s sales figures as opposed to this year’s.
If, on the other hand you are one of those unfortunate people who are staring down the barrel of a mortgagee auction, limit the damage by pricing your property at the lowest figure you’re prepared to accept, right from the start. Just as importantly, find yourself an agent who isn’t afraid of telling you the truth.
Remember, he (or she) isn’t your friend. He is the expert you are paying a lot of money to tell you what needs to be done. Tell him everything he needs to know from the start and then let him get on with his job. That means being prepared for him to give you what may sound like bad news. Remember this: it isn’t bad news, it’s the facts.
Finally, think about this for a moment. There are nearly 2000 houses on the market in this area. Less than 150 of them sold last month, and the owners of the ones that did sell, got their prices right.
They implicitly followed the economic axiom that says when supply is high, demand is low. For your home to be in demand and ultimately sold, it must priced at the low end of the supply.