Real Estate

Real estate values in the market.

In today’s real estate market, knowing the "fair" price of real estate can be difficult.

The best way to buy or sell real estate in Australia is in our opinion to use an ethical real estate agent, someone you can trust; it does not matter whether the agent is a local "one office" company that knows your area, or a franchise of a major real estate franchise.

Both can argue why they are best placed to sell your property to achieve its highest possible price, and that is for you to decide which agency is best for you, with the personal feelings about the people involved playing a major role in the decision.

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Its a known fact in the industry that a real estate agent will overprice a home to get the listing, only to "condition" the vendor later when offers are not forthcoming. That's when you will here about the market determining the price, not the agent and not the seller. This can make the job of selecting an agent even more difficult, because advertising your home is usually at the sellers expense, and this advertising could be wasted if the price is set too high. Some real estate agents will pay for the costs of advertising out of commissions, and some will upfront with a no sale on charge policy. These may be a better guide to the realistic guide to values and if they don't sell, they not only don't get paid, but they pay for your advertising.

This may look a smarter option, but it may place the real estate agent in a position where he asks you to take a low offer to recoup his or her advertising expense. There is the dilemma

The reason we believe that you should use an agent [as well as an independent conveyance lawyer and building inspector] to sell or buy real estate is for your protection. They can give you important information and advice and support in selling your home. They will know the prices that homes have sold for in the area, which may be substantially different than the price the property was advertised for [lower usually, but can be higher.]

Agents by law have to get the highest possible price for the vendor [where the vendor is the principal of the agent]. They must also be honest and fair to the buyer.

Real Estate Market

The real estate market is just that, a market, where buyers and sellers meet and transact. Whist the agent has pledged to get the highest possible price for the real estate property of the vendor, the market dictates what that price will be. A good agent may be able to get more, and a poor one less where the buyer is a strong negotiator.

Many people believe that the price of real estate is affected by the improvements and inflation. Whist they may have some affect on the price, there are other more important factors that determine the price of real estate. In fact real estate prices can go down below the replacement cost of a home, even in times of high inflation

Things that influence the price of Real Estate.

Time in Real Estate

The more time the seller has, and the less time the buyer has, the higher the likely price of real estate. If the buyer wants to sell fast, he has to take what is offered. The buyer may have time, but the property is seen by more than one buyers, so even if demand is weak, a good price can be achieved by the seller if two or more buyers are interested in buying the property. The open inspection is designed to fuel the thinking in the buyers where many people [most lookers only] may view the property together.

One thing real estate agents hate is buyers or sellers with too much time. They will term these as "uncommitted". Obviously they like people who are pressured by time to make a decision to buy or sell, because then higher offers come from the seller and the buyer will accept a lower offer. Don't overlook the value of time in real estate values.

Supply and Demand in Real Estate

In a "perfect market" when supply meets demand in real estate, buyers and sellers get what they want at a price both are happy with.

When demand exceeds supply, Same day sales and prices higher than the seller asks can be possible, with buyers only too willing to pay the full price, or even a higher price than asked, in anticipation of further rises in prices and many buyers. This in turn can create "hot spots" of real estate demand that fuels higher prices again, as happened in 2001 to 2003 in Queensland real estate, where land prices trebled and house prices doubled in two years, in markets that had been flat for eight years prior.

Scarcity and location in Real Estate

When property types are scarce and demand is high prices will tend to rise, sometimes very high very quickly. An example of this is canal homes on the Gold Coast and elsewhere and real estate properties "with a view." In fact many lenders are willing to lend more on properties with a view, and up to double in some areas, than real estate in the same area without that view.

I know one builder who was selling an identical new home for $215.000 around the corner from his own home. The buyer offered the builder $245,000 for the home he was living in. He took the deal in a heartbeat [and is wife agreed], because to the builder it was a newer version an identical home. To the buyer the older home was a better because it was a flatter block and  in a cul de sac and he had young kids with bikes. The newer home was closer to the main road that wound through the estate.

The True Value of Real Estate.

The best definition of the true value real estate I have ever heard is that "Real Estate is only worth what someone else will to pay for it." To that I would add "At any given time"

Whether you are a buyer or seller of real estate We believe its good to know this definition and bear it in mind. Good luck

Buying a home guide

Access everything you need to know when buying a home - from choosing a real estate professional to home inspections and mortgages.

Selling a home guide

View our tips to maximizing your property's exposure and curb appeal to prospective buyers.

• Choosing a Real Estate Professional
• Real Estate Agencies
• Interviewing Real Estate Sales Professionals

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It is important that you know the differences between a professional who represents a seller (the "traditional" role of a sales associate), a professional who represents a buyer, and one who represents both. In most areas, real estate professionals are now legally obliged to disclose, in writing, information on the various types of real estate agency relationships that exist. You should assume the real estate professional is working for the seller unless otherwise stated.

• Seller's Agent - A real estate professional becomes a Seller's Agent by entering into a listing agreement to represent the seller's interests. Seller representation may also be created when a real estate professional shows a property on the Multiple Listing Service and "buyer agency" has not been created. The Seller's Agent can provide information to assist the buyer, but they must place the interests of the seller first. A buyer should not disclose anything to the Seller's Agent they do not want the seller to know.
• Buyer's Agent - A real estate professional becomes the Buyer's Agent by entering into an agreement to represent the buyer. A Buyer's Agent can assist the seller, but does not represent the seller. The Buyer's Agent must place the interests of the buyer first. A seller should not tell the Buyer's Agent anything they would not want the buyer to know, because the Buyer's Agent must disclose any pertinent information to the buyer.
• Dual Agent - Dual agency occurs when a real estate professional represents both the seller and the buyer. It can also occur when the Listing or Seller's Agent works for the same real estate firm as the Buyer's Agent. In most states, the buyer, the seller, and the Agent must agree in writing for the creation of dual agency. The Dual Agent is required to treat the buyer and seller honestly and impartially. In dual agency, the professional's duties are more limited and there is potential for conflict of interest. You may hear the terms "transaction broker" and "intermediary" in association with dual agency.

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• Pricing your home
• Increasing your home's value
• Marketing strengths
• Negotiating the sale -The seller's agent should review every offer with you and help you evaluate all aspects of each offer and its financial implications.
• An overview of the local standard Contract For Sale along with typical addenda and a copy for your review

• Agency relationships
• Many real estate professionals who primarily represent buyers have been specially trained to do so and have received the Accredited Buyer Representative (ABR) designation
• How much home you can afford
• The difference between being "pre-qualified" for a mortgage and being "pre-approved" for a mortgage
• Key features you "must have" in your new home vs. those you would like to have
• How to evaluate and compare the homes you see
• An overview of the local standard Contract For Sale along with typical addenda and give you a copy for review
• The types of inspections you will want to have done on the property you select

can eliminate any concern of potentially over- or underpricing your home. It mirrors the natural buying and selling process, and can reduce the number of days a home is on the market.

Fair market value is defined as the likely price a ready, willing, and able buyer is willing to pay for a property when:

• The property is offered for sale on the open market.
• The property is marketed for a reasonable period of time.
• The buyer has a complete understanding and knowledge of the property.
• Neither the buyer nor seller is under abnormal pressure.

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Competitive Listing and Sale Prices–To form an opinion of value, a Prudential Real Estate Professional will analyze current listings and sale prices of similar homes in your area. He or she will consider properties that have recently sold, are currently for sale, or were offered for sale but did not sell. Although none of these properties is identical to yours, only those that have a high degree of similarity are noted in this report.

Comparative Evaluation–A Prudential Real Estate Professional can prepare a detailed description of your property and an estimate of the selling price range in today's market. This is known as the comparative or competitive market value of property.

Staying Current with Market Value–Once your property has been listed, a Prudential Real Estate Professional will continually collect and review updated information to monitor the offering price. Our observations may include:

• Professional opinions
• Industry (broker) response
• Buyer reaction
• Current market conditions
• Competing properties
• Availability of financing
• Number of showings
• Length of time on the market
• Interest rates
• Condition of the property
• Seller motivation
  

Factors that Do Not Affect a Property's Value

• What the owners paid when they built or bought the property
• Some of the improvements and upgrades the owners have made to the property
• The cash proceeds the owners want or need from the transaction
• What friends, neighbours, or relatives say a property is worth

Factors that Do Affect a Property's Value

• Style, condition, age, decor
• Location
• Time of year
• Property and neighbourhood
• How quickly seller needs to sell

Competitive Pricing: The Pricing of Choice

The probability of receiving an acceptable offer on your property and completing a sale diminishes significantly when your asking price is higher than the current market value.

Here are the factors that will determine price range:

• Your property - its strongest selling points
• The competition - the asking prices of other homes for sale in your area
• The expired listings - homes offered for sale that did not sell
  

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