Market drives method of sale
Miriam Bell explores how to pick the best way to sell your home in this market.
Housing market dynamics have changed, and sellers should opt for the sale method most likely to generate the best price in the shortest time, agents say.
As the market has slowed, the amount of homes available for sale nationwide has increased significantly. There were 26,271 listings last month, according to the latest Realestate.co.nz figures, and that has left buyers spoilt for choice.
Fear of missing out (fomo) has dissipated, and sales are taking longer. In some parts of the country it now takes twice as long as it did a year ago to sell a house.
Auction activity has cooled, with new Real Estate Institute figures showing that 12.0% of sales nationwide were by auction in June, compared to 26.3% in June last year.
This shift is reflected in an increase in listings with more price-transparent methods, such as ‘‘inquiries over’’ or ‘‘asking price’’.
Real Estate Institute chief executive Jen Baird says that as the market has slowed and the pool of buyers able to buy unconditionally has decreased, more homeowners are considering alternative methods to an auction.
‘‘There is much more negotiation happening as buyers are more cautious of potential price declines after they have purchased, and vendors understandably want the best prices possible in an uncertain market.’’
But many homeowners are nervous about how best to sell their properties, so here’s what agents say they should think about when choosing a sale method.
Ray White chief operating officer Daniel Coulson says that in the current market sellers should go for a method that will secure the best sale price in the shortest time frame.
‘‘Auctions aren’t the be all and end all, but they provide the best opportunity to do that. Property type doesn’t come into it much, it is more about who the buyer, or buyers, might be.’’
If a seller thinks there could be more than two interested buyers, they should put the property into competition, as they want as many potential buyers as possible, and auctions encourage that, Coulson says.
There is a misconception that lower end properties struggle at auction because buyers are struggling to get finance, but that is not the case, he says.
Nationally, his agency’s figures show properties priced under $1 million have a 58% clearance rate at auction, and those priced above $1.5m have a rate of 60%.
It is properties priced between $1m and $1.5m that are now challenging to sell at auction, so it is the gap between seller and buyer expectations around that midpoint that is the most significant.
‘‘In recent years, buyers have had to compromise, but now sellers do, and price and terms of sale are what they have to compromise on. Auctions are a way of removing price expectations from the equation.’’
But what a seller wants is traffic through their door, especially at a time such as now when open home numbers are down, Coulson says.
To find out what is driving buyers, some of his agency’s central Auckland offices have been measuring traffic through properties by method of sale on listing over the last four weeks.
The figures show 43% of properties were listed for auction, and they were responsible for 84.2% of traffic.
In contrast, 23% of listings were for set date sales and attracted 6% of traffic; 31.5% of listings were for private treaty and got 9.8% of traffic; and 2.5% of listings were for tender, and they had 0% traffic.
This suggests auctions do attract buyers, and Property Brokers Bay of Plenty regional manager Simon Short says they also provide valuable market information for buyers and sellers.
Listings with prices do not educate the seller on what they can realistically expect to achieve, and can be used negatively as a leverage point from a buyer perspective, he says.
Buyers compare a listed price to other properties and look elsewhere for better options, so sellers miss out on offers and, potentially, a sale. There is also the risk a property could be priced wrongly, which can derail a campaign.’’
‘‘There is much more negotiation happening as buyers are more cautious of potential price declines after they have purchased . . . ’’ Jen Baird Real Estate Institute chief executive
‘‘In recent years, buyers have had to compromise, but now sellers do, and price and terms of sale are what they have to compromise on. ’’ Daniel Coulson Ray White chief operating officer
The changed market means more people are using tender or deadline sales, but it is still beneficial not to disclose what the price expectations of the seller are to the marketplace, Short says.
‘‘In this market, the danger for sellers is not getting offers, but attracting offers is in the skill set of agents. So a seller needs to choose a good agent and then listen to their advice.’’
Bayleys head of insights and data Chris Farhi says that when choosing a method of sale, objective advice around where a sellers price expectations should be set, and where the market is at, is key.
Generally, it is important to have a deadline on a sales process, whether it is via an auction process or a set date of sale, he says. That allows engagement and competition, and prevents the sale from becoming an ad hoc process.
‘‘For properties at most price points in most locations, we would advise auction as the preferred method of sale. Auctions show where the market is at, which helps with any subsequent pricing and negotiations.’’
If a property doesn’t sell at auction, there is a second-round process that follows where conditional buyers come into the picture, Farhi says.
‘‘With properties that have gone through the auction process, after 90 days their sale rate is still higher than that of those using other methods of sale.’’
But there are some exceptions to this advice, Farhi says. One is the Wellington market where the tender process has long been the dominant method of sale.
Another is the extreme top end of the market where his agency is currently seeing fewer auctions and more negotiation, often around settlement dates, he says.
‘‘We are talking about $10m plus properties. Those sales often involve buyers needing to make other sales, so the ability to have time and negotiate conditions to allow for the transfer sequence is important.’’
The final exception is high-end apartments, where deadline sales are a common method of sale, because there are fewer buyers in the market for that type of property.