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Preparing to sell with realistic expectations

Selling in a cooling property market

3 June 2022

8 Claude Road, Epsom

Bringing your home to the market in the coming weeks might be causing you a bit of concern because of economist forecasts of price drops.

But, unless you’re prepared to wait two or three years before putting it on the market to move on with your life plan, now might still be the best time to sell, according to senior agents. And, in turn, if you’re making another transaction, you’ll pay what you’re prepared to pay and benefit from the changing market.

Claire and Michael recently sold a large family home in Epsom for $400,000 less than their hoped for price. They were selling before buying their next home, so they weren’t under pressure, but they wanted to get on with a change of lifestyle and to move to the Auckland’s Eastern Bays so they met the market to sell. They had owned the home for four years and in that time it had gone up by $600,000 so they still reaped an excellent capital gain.

Because they were buying and selling in the same market – they were downsizing – they bought well, finding a modern, light airy three bedroom home in one of Auckland’s prettiest Eastern Bays which still had room for Michael’s guitar collection. Paying a very competitive price, they estimate they paid around $200,000 less than the vendor’s ideal price and they couldn’t be happier and can’t wait to move.

“We’re looking forward to evening walks along the waterfront and Michael’s commute to work will be much more pleasant,” says Claire. She’s excited about the friendly community and the great local library. The price they got on their house will soon be a distant memory.

Will you be poorer? What the economists say

CoreLogic chief property economist Kelvin Davidson says it’s important for home sellers to face up to the fact that they’ll not get the price they would have six months ago. Standard forecasts are that prices will fall 10% in this time of correction and with inflation perhaps a bit more. “It’s down around 5% already and we’re maybe halfway through,” says Kelvin.

In the Global Financial Crisis (GFC) prices fell 10% and it’s not often acknowledged that it was five years til the market was back to the previous peak, he adds.

“Some might look at that as losing money but are you really?” asks Kelvin. Think what you paid for your house ( a few years ago) and it’s still worth a lot more than that, he says. And if you’re going on to buy, then you’re getting a better house for cheaper money, he argues.

Those extraordinary times weren’t going to last

It’s all about managing your expectations. Ed McKnight, resident economist at Opes Partners, says price growth has been up to 45% from January 2020 until the end of 2021. If you put it in that context, and you’ve owned for five to seven years, you’ve done well.

He offers a few silver linings on the current market. One of the things about selling in a hot market is you don’t know when it’s going to stop. When the market is rising, you can kick yourself for not holding out until prices went higher. When you’re coming down from the peak it doesn’t matter, you’ve had the full upswing of the market, says Ed.

“And if you go and buy in the same market then you’ve not lost anything,” he says. But you should be prepared for your sale to take longer. There are a lot more listings than six months ago so more options for buyers, meaning they can take a bit more time until they find a house that meets more of their criteria.

“If you’re selling, not to buy another house but for instance selling your parents’ house, I’d probably put it on now,” he advises. It might be a bit slow but there’s going to be a continued decline until the end of the year, he forecasts.

In a market like this, Ed says home staging is non-negotiable, you want someone to fall in love with the house, and staging tends to mean selling more quickly and at a premium price. And he recommends twilight photography so people can imagine driving home to the house.

Meanwhile, if you’re getting to the stage where you’re choosing your first or second agent, Ed suggests you “mystery shop” ones you have your eye on.

“See them at work in an open home, see what their follow up is like, do they leave you to yourself at the open home or do they ask what you’re looking for?”

What leading agents say

Auckland Ray White agent John Covich is still seeing plenty of listings coming through because there are always reasons to sell, he says.

Some want to be closer to family in the South Island, some want to downsize or upsize.

In this market, if there’s anything glitchy about a house, if there’s any reason not to buy, it’s very hard. You have to make it like there’s a real opportunity, says John.

1 Moreland Road, Mt Albert

Vendors, at times, are having to accept their “grumpy price” rather than their happy or dream price, he adds.

The Ray White agent is seeing the high CVs of some homes putting buyers off, making them think they can’t afford the home, so in some cases, in an unusual move, he’s making the reserve price public before the auction.

In the case of one home with a $1.6 million CV, the vendors’ reserve price was posted as $1.395 million. As a result, John is now expecting multiple offers.

Interior of 1 Moreland Road, Mt Albert

He and fellow Ray White agent, Rachel Berry are still keen to do auctions, with good clearance rates in the 62%, 63% range. If you put a price on a listing then you’re stuck with it, he says.

“If you go to auction you get feedback and you don’t get that when selling by negotiation,” he adds.

Auction still playing a role, albeit a different one

People need to stop having these expectations of capital gain every year, says the agent. Look for some straight talking from your agent, advises the Bayleys agent. From the very beginning of the appraisal, she’s honest with sellers about what they’re dealing with, the facts and the statistics in the current market.

“I’ll be really crystal clear about the market and how it’s impacted their property,” she says.

“We’ve had it so good and now it’s coming back,” is her message at the moment.

“If you’ve bought in the last 18 months, you’re likely not to make capital gain on that, if you bought before that, you’ll have made very good capital gain and that gain has dropped back a bit but you’re still selling for good capital gain.”

1/44 Northboro Road, Takapuna

This is a normal market, buyers have time and choice and will be careful and do their due diligence, she tells sellers. How well the property sells depends on any objections about the home. If there’s a busy driveway, buyers will be price sensitive, if the local market had a huge spike last year, there will be a fall back.

On the North Shore, suburbs like Beach Haven, Birkdale and Glenfield, had a big spike last year because they were very good markets for first home buyers. Now those prices have come right back, says Kathryn.

Why sell now?

If you’re considering selling but are scared about what price the market will put on your home, rip the bandaid off, says Kathryn, and get going.

If you’re waiting for the market to get better, the agent expects inflation and interest rates all take time to come down.

“I would say I don’t see the benefit in waiting unless you wait for two to three years,” says the North Shore agent.

What makes one home easier to sell than another? It’s about the intrinsic value of the property, says Ray White agent Rick Mozessohn. People buy and sell for many reasons and a lot of them happen irrespective of the market.

“People upsize, downsize, divorce and get together,” he says.

As for the ability to sell, the appeal of a home can be about why it’s nice to live there.

He’s not a big believer in comps. “ I don’t like that there’s a crossover between objectivity and subjectivity,” he notes. With properties there are so many uncontrolled variables. A home he sold last year with a CV in the $2 millions that he thought would sell for $3 million, sold for over $5 million and it did this because it was just awesome, says Rick.

“Every property is saleable and if you’re not getting a result, there’s blockage somewhere,” he says.

And to those scared of ending up with a low price on their property, the Ray White agent says the overall thing is for the client to come out happier or better off.

“It doesn’t need to be a simple financial exercise,” he says. A good agent will be looking for a positive return on the process, to provide customer service, and to do right by their clients.