Selling Options

There are more options than ever available for selling property, whether you choose your local real estate agent or to go it alone do so as informed as possible.

 

Setting a Price

How do you decide what price your house should sell for? As well as using a real estate agent for their opinion, there are several ways of determining what your property is worth in the current market in order to establish a fair price. Remember, if you are using an agent their fees will be coming off the purchase price.

The main ways to establish a price include:

  • Local, comparable sales - One way of establishing a price is to look at comparable market sales that have occurred in your area recently. Seeing what similar houses in your area have sold for can help you understand the market. You can easily do this by purchasing Local Sales information.
  • E-Valuer - An E-Valuer will give you an instant estimate of your properties current market value, using comparable market sales. 
  • Full Market Valuation - A Full Market Valuation will give you a current market value, and is completed by a Registered Valuer. It involves a full inspection of the property as well as analysis of local sales.
  • Rating Valuation - A Rating Valuation can also be used to establish a price at which to sell. As Rating Valuations are typically only done every three years, if the market has moved it can be out of date.

Negotiating the Sale

Selling your home isn’t as straightforward as setting a price and having a buyer agree to it. Regardless of whether you’re selling your home privately or through a real estate agent, you will need to decide how you want to sell – by auction, tender, or by offer and negotiation.

Offer and negotiation

Offer and negotiation involves setting an asking price then an interested buyer will make an offer. Further negotiations over price and/or conditions will occur before all parties are in agreement.

Most offers are made using a standard Sale and Purchase Agreement contract. As a seller you have the right to negotiate the price and conditions once the offer is made. Due to the nature of the contract and negotiation period, it also allows you and the buyer to take the time needed to think about the price, and any other changes to the contract each time it comes back to you.

Quite often buyers will make their offers conditional upon aspects like building reports and finance. This means that even if the offer is initially accepted, until the sales goes unconditional the buyer still has avenues whereby they don’t have to complete the sale. However, conditions can also be added by the seller. This can include clauses such as being allowed to accept a better offer, or a specific deadline to go unconditional.

Your real estate agent can provide you with a copy of a Sale and Purchase agreement. Otherwise you can buy forms online, including at the Auckland District Law Society.

Auction

Another option is to put your property up for auction. This can be a quick process as once your reserve price is met, the offer is unconditional. You also have all your potential bidders are there at the same time. Auctions also allow you to sell by a set date, with the option to still accept offers before the auction as well.

At auctions, the buyers have done all their due diligence beforehand so generally they are committed to getting the property. Auctions can be beneficial if there is more than one buyer interested in the property as a bidding war can eventuate, and prices can be driven up.

If your home doesn’t reach reserve you can negotiate with the highest bidder to reach an agreed sale price. Otherwise, you may need to re-evaluate your selling strategy and determine what to do next.

When selling by auction, your reserve price needs to be a price you’d accept, as once it hits this reserve, you are contractually obliged to sell.

Tender

Tenders are a way of selling your home privately. Each potential buyer submits their offer without knowing what any of the others is offering, and you get to pick the one to accept. Like auctions, tenders give you the opportunity to put a set date on the process, beneficial if you need to move out within a specific timeframe. 

Because buyers don’t know what any other party is bidding, they generally put their best offer forward. Although this can give you a good idea of their price range, you still have the ability to negotiate with any offer if you don’t want to accept.

Tenders can put buyers off. Because of the private, closed style of sale, some buyers prefer to avoid this method if possible.

Using an Agent

Especially if it’s your first time selling, deciding which agent or agency to go with can be tricky. With many options available, which one you pick can definitely make a difference in how long it takes your property to sell and how much you get for it.

  • Locality – Where your agent is based can make a difference as to the level of their local market knowledge. Although most work within certain suburbs, some have more knowledge and experience than others. Scout around for someone who is active in your area, who has a history of information on the area and whose previous sales are in and around the area you are selling within. 
  • Recent sales – Ask the agent about their recent sales in the area. Having an agent with a wealth of previous sales, especially recent ones, shows you they can get results. If the agent has quite a few active listings in the area it can also show you that others trust this person to sell their house. 
  • Ask around – You might be able to get a feel for an agent’s reputation by asking your friends and family. First hand experiences and anecdotes can be invaluable when establishing whether an agent will be the right fit for you.
  • Terms of your contract – What package the agent suggests for selling your place can also make a big impact. Especially if you scope out a few different options, the terms of their contract such as their commission fee, as well as how they propose to market the property and the associated costs, will all play a part in whether you choose to go with one agent over another. Make sure you think they are worth the price they are quoting, and that are going to work enough for their money. As well, check out what marketing options they suggest and think about whether those options are really going to find your target buyers.
  • Licensing – Lastly, one thing to check when you use an agent is whether they are licensed. Due to legislation real estate agents have to be licensed meaning you will be protected should on the off chance anything happen. The Real Estate Agents Authority can help you if anything does happen or if you want to check out your agent further.

Latest News & Articles

NZ Super Invests in Christchurch

Friday, 27 September 2019

 

Christchurch's commercial property market continues to tick over. The latest research from Christchurch Cityscope indicates CBD sales over the past three months had a total value of $64.2 million  and $178 million for the previous twelve months.

Included in these latest sales is the BreakFree on Cashel in Christchurch Central, a seven-storey hotel which was converted from an office building in to a hotel in September 2007; further refurbishment work was undertaken in 2015 after sustaining damage in the February 2011 earthquake. Its facilities include a restaurant, onsite bar, cafe, gym and office and conference rooms.

Recently, NZ Super Fund has invested $300 million into a hotel investment venture which includes an investment in the Christchurch BreakFree. The super fund, partnering with Russell Group of companies and Lockwood Group, is to form a partnership to own three hotels, the others being Four Points by Sheraton and Adina Britomart, both in Auckland. The New Zealand Superannuation Fund is a sovereign wealth fund in New Zealand, created in 2001 to help prefund the future cost of the New Zealand Superannuation pension. The Russell Group is a family owned and operated group of companies originally established by the late Alf Russell back in 1965. It now employs over 900 people and focuses on construction and property ownership and management. Lockwood is also a private investment group.

Colliers International’s specialist hotel adviser, Dean Humphries, who played a key role in the negotiations said that the ‘$300m was the indicative value of the current portfolio’.

OCR on hold; mortgage lending stable too

Wednesday, 25 September 2019

Earlier today the Reserve Bank decided to keep the official cash rate unchanged at 1.0%, which in truth isn’t much of a surprise. Meanwhile, mortgage lending activity in August was pretty stable too, with owner-occupiers driving the market but investors more subdued. The LVR speed limits are seemingly having quite a strong effect on investors. However, there may be respite on the horizon, with a potential loosening of the rules in November.

CoreLogic Senior Property Economist Kelvin Davidson writes:

Official cash rate on hold at 1.0%, but watch for cut on November 13th…

The first key piece of news from the Reserve Bank (RBNZ) today was the decision to hold the official cash rate (OCR) unchanged at 1.0%, having surprised the markets by cutting it from 1.5% back on 7th August. Although you can never say never with this Governor and Committee, a cut was always unlikely today. However, with signs that general (CPI) price pressures are still pretty subdued and that the economy has perhaps lost a little momentum, there’s a decent chance that we’ll see a 0.75% OCR at the next meeting on 13th November.

Mortgage lending activity stable…

Hot on the heels of the OCR decision, the RBNZ has also just published the latest mortgage lending figures for August. The figures showed $5.4bn of lending last month, unchanged from a year earlier. That seems to have been a bit of ‘payback’ for a stronger month in July. Owner-occupiers are still driving activity, with investors more subdued (see the first chart).

Annual change in lending, $m (Source: RBNZ)

First home buyers are still recording the fastest growth in lending flows amongst owner-occupiers, but all others within that group are also just starting to show a tentative pick-up in the pace of growth (see the second chart). Generally speaking, the number of loans is still pretty flat, so the increases in the value of lending are being driven by larger average loans.

Annual change in lending, % in past 12 months compared to previous 12 months (Source: RBNZ)

In terms of the LVR speed limits, owner-occupier lending at <20% deposit is still running at 12-13% of activity, comfortably below the 20% speed limit (and even the self-imposed 15% that banks reportedly choose to adhere to). Yet with overall lending to owner-occupiers still growing, this suggests that most borrowers are able to find a sufficient deposit and the speed limit isn’t really a restraint at present. The story seems to be different for investors, however. Their overall borrowing activity is still pretty soft, and only about 1% of lending to investors is at less than a 30% deposit (see the third chart). This hints at a restraint from the speed limit, and hence could be a key group that would benefit from a potential loosening of the LVR rules in November (perhaps by raising their speed limit from 5% to 10%).

Proportion of lending at high LVRs (Source: RBNZ)

Overall, then, given that mortgage rates remain very low (and have even edged a bit lower over the past month or so), stable lending activity would be in line with expectations. Meanwhile, over the final week or two of August, the banks began to loosen their internal 7-8% serviceability tests, which will have given a little more impetus to borrowers – and there surely has to be a good chance that this will have continued in September (lending figures for this month due 24th October).

The key factor to keep in mind for 2020 is the looming, extra bank capital requirements and what that might mean for mortgage rates – potentially they may start to rise. As the fourth chart shows, the bulk of mortgages in NZ are on fixed rates, which will shelter borrowers for a period of time. But that clearly won’t be forever, and so market activity could well face some stronger headwinds later next year and into 2021.

Share of mortgages fixed and floating (Source: RBNZ)

Plenty of stats and numbers to cover this month as well as changes in bank serviceability criteria. And of course, what to make of the KiwiBuild reset.

The share of property purchases made by mortgaged investors has recently risen back to 26% nationally, the highest since just prior to the introduction of a 40% deposit for this group (LVR III in October 2016). Auckland has been a key part of the upturn from investors, even though this is where rental yields are lowest. Of course, when you consider that property values have fallen recently across Auckland (e.g. by about $36,500 from the peak in Auckland City central area), some investors are clearly sensing bargains.

CoreLogic Senior Property Economist Kelvin Davidson writes:

The key highlight from the latest CoreLogic Buyer Classification figures is the continued resurgence in market share for mortgaged multiple property owners (MPOs, or ‘investors’). Over July and August, they have accounted for 26% of residential property purchases across NZ, as shown in the first chart. This is the highest share since the third quarter of 2016 (28%), which was the zenith for investors before the Reserve Bank introduced the third round of LVRs and required a 40% deposit.

NZ % share of purchases (Source: CoreLogic)

The recent bounce-back for investors is evident around most of the main centres, including Hamilton, Tauranga, Christchurch and Dunedin (although first home buyers are still the big story in Wellington). But given that property prices are highest and gross rental yields are lowest in Auckland, the renaissance here is perhaps of most interest. As the second chart shows, mortgaged MPOs have increased their market share from 25% in the first six months of the year up to 28% now – and have again overtaken first home buyers (26%). It’s also still the MPO 2’s that are driving the upturn in Auckland, commonly known as ‘mum and dad’ investors (note that the third chart does not break down the data by mortgaged or cash).

Auckland % share of purchases (Source: CoreLogic)

 

Auckland % of purchases by multiple property owners by number of properties owned (Source: CoreLogic)

In addition, most parts of Auckland have contributed, including Manukau and Papakura (although Waitakere for example is still currently a pretty hot market for first home buyers). However, the biggest influence has come from the large Auckland City market, where the share for mortgaged investors has actually been rising since early last year (see the fourth chart), and has now hit 30%.

Auckland City (old territorial authority) % share of purchases (Source: CoreLogic)

At first glance, the rise in investor activity in Auckland may look surprising, given that gross rental yields across the super-city as a whole are pretty low (2.7% versus 3.3% nationally), and even lower in the Auckland City central area (2.2%). However, as we noted last month*, investor activity everywhere across the country will have received a boost from the scrapping of the capital gains tax proposals, and the low returns on offer from other assets (e.g. term deposits) may also be seeing some money re-diverted back towards property.

And then on top of that, an additional factor in Auckland specifically is that falling property values will also of course have grabbed the attention of some investors, looking to bag a potential bargain in a buyer’s market. In the Auckland City area, for example, average property values have dropped by 2.9% from their peak in June last year, equating to about $36,500. That’s likely to have been enough of a fall in price to make the economics stack up for some investors. Certainly, as we highlighted in our latest ‘Pain & Gain’ report**, apartments owned for less than three years in Auckland have recently been struggling when it comes to achieving resale profits, so this segment could be where some investors buying into the market in recent months have been sensing opportunities.

Bottom line, first home buyers have generally been the key group of interest for the past year or two. But this now seems to be changing slightly, and investors may well be the hot topic for 2020.

https://www.corelogic.co.nz/news/are-investors-starting-reassert-themselves-property-market
** https://www.corelogic.co.nz/news/pain-creeping-aucklands-property-resale-market

Although property sales volumes across Auckland as a whole have been low in recent years, some suburbs have been faster moving – these are mostly development areas (e.g. Hobsonville, Silverdale), and while the extra supply is raising turnover rates, it’s also dampening prices. Other parts of Auckland (e.g. Parnell, Orakei) have been much quieter, or in other words slow-movers. Generally, slow-moving areas have subdued price growth, but outside Auckland, Ngongotaha (Rotorua) and Wairoa break that rule of thumb. 


CoreLogic Senior Property Economist Kelvin Davidson writes:

An article that featured as part of last week’s Property Week on Oneroof covered the latest CoreLogic data on fast- and slow-moving suburbs across the country, highlighting areas that have had very short (and long) median selling periods over the past year: https://www.oneroof.co.nz/news/revealed-the-suburbs-where-homes-are-selling-the-fastest-36671

An additional measure that we regularly look at to judge the strength or weakness of a particular area is the turnover rate – i.e. total sales over the past year as a % of the total number of houses. So what’s this measure currently showing us*? Focusing in on the top 20 suburbs for turnover rate – i.e. the fast movers – four of the top five are in Auckland (see the first chart), with the other one being Pokeno (Waikato District). This is no surprise – given that these areas are seeing a lot of new development, you’d expect strong turnover rates as the new-builds are sold off.

Top 20 suburbs for turnover rate – sales past year as % of dwelling stock (Source: CoreLogic)

Similarly, there aren’t any real surprises amongst the rest of the top 20 either. For example, suburbs in Taupo, Tararua, Dunedin, and Invercargill all feature, and these are parts of the country that have been more buoyant in terms of demand and market activity lately, and especially for prices. Indeed, Pahiatua (Tararua), Strathern (Invercargill), South Dunedin, Mangakino (Taupo), and Georgetown (Inver.) have all seen double-digit growth in property values over the past year – see the second chart.

Annual % change in median value for top 20 fast-moving suburbs (Source: CoreLogic)

The second chart also highlights how a fast moving suburb doesn’t always have strong price growth. True, that does tend to be the rule of thumb. But in development areas in Kumeu, Hobsonville, Pokeno, Whenuapai, and Silverdale, the extra supply (which is boosting turnover rates) is actually weighing on property values.

Turning to the other end of the spectrum, Auckland features again, but this time for slow-moving suburbs. Sixteen of the 20 slowest moving suburbs over the past year are in Auckland, and include some of the pricier areas of the city, such as Parnell and Orakei (see the third chart). Given plenty of listings and choice for buyers, as well as affordability problems across many parts of Auckland, it stands to reason that sales activity and turnover rates have generally been low. Elsewhere, a couple of Rotorua suburbs have also been quiet, alongside Bromley (Christchurch) and Wairoa.

Bottom 20 suburbs for turnover rate – sales past year as % of dwelling stock (Source: CoreLogic)

However, just as a high turnover rate doesn’t necessarily mean strong price rises (e.g. Hobsonville, Silverdale), a low turnover rate is not always consistent with weak price growth. As the fourth chart shows, Ngongotaha (Rotorua) and Wairoa have had relatively low sales activity over the past year, but solid gains in median property values, especially in Wairoa (17.8%). In these cases, the lack of sales is reflecting restricted listings volumes and limited choice for buyers – in that environment, it’s not surprising that values are growing strongly.

Annual % change in median value for bottom 20 slow-moving suburbs (Source: CoreLogic)

* All suburbs shown here have at least 500 properties and at least 20 sales over the past year.