Real Estate Dangers and How to Avoid Them

A Guide to Making Smarter Decisions as a Buyer, Seller and Landlord

Andrew Trim

• Publisher: Wiley
• Year: 2018
• Print ISBN: 9780730359203
• eBook ISBN: 9780730359227
• Edition: 1
• Topic: Business
• Subtopic: Real Estate
• Index: Business

Essential information for anyone with property

Real Estate Dangers and How to Avoid Them is a must-read guide for anyone thinking of buying or selling property, or becoming a landlord. Whether you're looking for your dream home, to sell a property, or to invest, flip or rent out an existing investment, this book is packed with the insider information you need to avoid getting ripped off. By shining a light on the flawed and unnecessary aspects of the real estate industry, this book will help you make smarter decisions based on knowledge rather than "advice, " saving you time, money and headache. Stories of those who have seen the dangers highlight the ways in which this outdated system takes advantage of first-timers and experienced investors alike—and expert guidance shows you how to steer clear of the traps and pitfalls lurking around every transaction.

Nearly everyone will have their hands in real estate at some point, and the real estate industry can be intimidating—after all, you rarely make financial transactions this large. But the truth is that the industry can be quite simple and can go quite smoothly, if you eliminate the distractions and focus on making smart decisions. This book shows you the real truth about the industry, helping you:

• Avoid the traps that rip off buyers and sellers
• Make smart decisions, minimise financial risk and let the system work for you
• Identify unnecessary add-ons and bogus charges
• Learn the tricks of the trade so you can save your money
• Become a smarter landlord and attract quality tenants.

With clear, no-nonsense advice for buyers, sellers, landlords, and flippers, Real Estate Dangers and How to Avoid Them arms you with the knowledge you need to succeed in the property business.

PART I
BECOMING A SMART SELLER

CHAPTER 1
THE IMPORTANCE OF PRICING

There are four steps to selling a property:

1. choosing a real estate agent
2. setting the price
3. marketing
4. presenting the property.

Ideally, all four are in place and combine for a positive result.

However, getting the right pieces in the right places is not always easy. It is here where the danger of significant financial loss for the property seller looms larger than in any other part of a real estate transaction.

If the four steps don’t all fall into line seamlessly, will three out of four lead to a good result?

Sometimes.

With a good agent, marketing and the right price, even a property that has been trashed will most likely sell.

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SMART TIP

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There are real dangers in overpricing a property.

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But the right price is critical. If the price is wrong, you won’t get the sale — even if the other three pieces are a perfect fit. An overpriced property — even if it is advertised on the front page of every major daily newspaper, or placed at the top of every page on every real estate website in the country — won’t sell. There are real dangers in overpricing a property.

The digital footprint

Before the internet, properties were mainly promoted via newspaper advertisements, flyers, signs and agents’ windows. These locations had a remarkable and often overlooked advantage over modern forms of advertising: they left no easily traceable marketing or sales history.

There is an old saying: ‘Nothing is as useless as yesterday’s newspaper’. In the newspaper age, a property owner could dip their toe in to test the waters. If they didn’t like the result, they would take the property off the market or reduce the price. With no digital footprint, there was very little long-term harm to the property value. The marketplace quickly forgot.

Now, the rules have changed: the internet records everything and forgets nothing.

Properties advertised in Australia appear on several real estate marketing websites, including the two majors, which advertise almost all properties for sale in Australia: realestate.com.au and domain.com.au.

CoreLogic is the largest supplier of property information in Australia. Major online advertising portal realestate.com.au routinely shares all advertising and known property information with this major data collection company. All property information from these two sites is stored in perpetuity, and is easily accessible.

Before the internet, the only indication a property had been on the market for an extended period was a faded card in a real estate window or a crooked, worn sign in the front yard. Once these were removed, the attempt to sell faded quickly from the marketplace’s collective memory.

That’s no longer the case. The internet creates a digital footprint: a visible record of a property’s advertising and pricing history.

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SMART TIP

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The internet records everything and forgets nothing.

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A digital footprint intensifies the danger posed by an extended marketing period. If a property is launched on the main real estate websites at an inflated price and doesn’t sell, this can cause significant damage to the property’s recorded history — and thus the eventual selling price.

The market price is now partially driven by the digital footprint, and any attempt to beat the market is risky. In the past, it was sometimes possible to ‘jag’ a buyer at a high price. But this is a dangerous strategy in the digital age, and it can easily backfire and drive down the final selling price by creating an adverse digital footprint.

Many websites provide easy options for buyers to explore information that was previously hidden. On realestate.com.au, one click shows the number of page visits, giving a buyer an early idea of a property’s time on the market and desirability. The CoreLogic homepage for agents is one click away from showing all listings that have been advertised for more than 60 days. Agents use this to find owners who may be fed up with their current agent and are ready for a new start at a new price.

This is a powerful resource for the agent, and many property sellers don’t realise their every move is being tracked — and those moves are easily accessible to buyers.

The majors are not the only websites offering buyers property information. Countless others offer buyers the chance to find a bargain: oldlistings.com.au, for example, has a complete digital footprint on properties marketed in Australia — for example, a unit for sale in Essendon, Victoria, had nine different marketing campaigns over a 10-month period, with every detail recorded, including its various prices. This is valuable information for a buyer considering buying this property.

Buyers have a wealth of knowledge available at the click of a mouse — and, in negotiation, knowledge is power.

This knowledge helps buyers answer questions such as:

• Has it sold in the past?
• For how much?
• Did it get passed in at auction?
• Why hasn’t it sold?
• Why have so many people looked but not bought it?
• Why did it get withdrawn from sale?

Having answers to these questions increases a buyer’s negotiating position.

As Peter O’Malley says in his book Real Estate Uncovered, ‘All this public information is forming a “pseudo credit rating” for your property’.

Agents encourage owners to increase their digital marketing spend on property websites by pointing out that a premium advertisement — costing thousands — will, compared to a stan-dard advertisement, increase the number of views (for a full explanation see chapter 5).

But increased views don’t necessarily mean a better price. As a rule, the more a property is viewed, but not purchased, the more the price drops.

Why is this?

To genuine buyers, an ever-increasing number of views indicates a longer time on the market. Time on the market leads to questions that lead to certain perceptions:

• Why hasn’t this sold yet?
• Plenty of people have looked at it. I wonder what’s wrong?
• Is it the price or is it the house?

The perception of an unwanted property comes from exposure — excessive views are one of the most direct and visible forms of exposure. To a property’s price, it is akin to sunburn: the greater the exposure the greater the pain. When selling property, the pain comes in the form of a lower selling price.

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SMART TIP

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The greater the exposure the greater the pain. When selling property, the pain comes in the form of a lower selling price.

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Real estate consumer advocate Neil Jenman used to describe properties that stayed on the market for a long time as ‘lemons’ — bitter to the marketplace. As with most things in the digital age, the creation of lemons is now faster and more efficient. Poor advertising strategies now reach more people in a shorter time.

The only strategy for selling a property after it becomes a lemon is a significant reduction in the price, often considerably below where the property would have sold if priced correctly at the beginning of the marketing campaign.

Poor pricing and testing the market at a higher price are no longer feasible strategies because they leave a damaging digital footprint. When you make the decision to sell, the asking price must be close to the market price.

The multiple agent digital footprint

If a seller chooses to use multiple agents, multiple advertising will appear online. Although this may sound like a good way to receive maximum exposure for your property, it is important to consider the digital footprint this will leave.

When bu...

Table of contents

• Cover
• Epigraph
• Title page
• Copyright
• Dedication
• ABOUT ANDREW TRIM
• ACKNOWLEDGEMENTS
• INTRODUCTION
• PART I BECOMING A SMART SELLER
• PART II BECOMING A SMART BUYER
• PART III BECOMING A SMART LANDLORD
• CONCLUSION
• REFERENCES
• INDEX
• Wiley End User License Agreement