An interesting and unprecedented cocktail of occurrences have landed upon us. I will expand on a few points to help give some things to think about, especially if you are considering or need to sell in the near future. Keep in mind, I'm not a real estate agent.
Interest Rate rises
Have already commenced and further rises are expected throughout the year. This has an impact on borrowing power by potential buyers. Which means they will be limited in what they can offer when looking to buy your property compared to their borrowing power a few months ago. This has a natural impact on prices and whilst you may want a certain price, the market as always has the final say.
FOMO is reducing
With low rates in 2021 and coming out of the pandemic, buyers had a "fear of missing out" and were paying well above market prices for just about any property resulting in the massive price spikes of 2021. FOMO reduced earlier this year as buyers sentiment shifted to "fear of overpaying". This caution came as rumours increased of interest rate rises. So whilst prices are still expected to increase in some markets, there will be other markets where normality has already set in. If you didn't sell in 2021, you may have missed your opportunity. It's not all bad as a presale renovation will still help you maximise your sale price.
Building Industry
Resources are in short supply in the building industry and many builders are finding it tough to complete the work they have on. This means that if you are preparing your property for sale with a presale renovation (or even just renovating to keep) finding builders or tradies won't be easy. In addition, materials such as framing timber have increased in price with many supply chain issues and shortages causing bottlenecks. So even if your builder could start tomorrow, the materials they might need could still be some weeks away or cost more than originally expected.
Agents Salary
Agents had a great 2021. In many cases they only had to list a property and show it a few times before it was sold for a cracking figure. Many of them, may have made financial decisions based on these commission figures which are not sustainable. So as markets move back to normal, agents now realise they have to list more properties to try and match their 2021 salaries. In some cases, their commission rates may increase to try and cover the gap.
Agents price adjusting
Whilst agents will present to you their approach, fees and marketing plans to gain your confidence to sign up with them, their sales price achievements in the 2021 market is not the most accurate data point. Just about everything sold quickly at high prices. Whilst they agree with your current price expectations to get the listing, within 2 weeks of open for inspections, they will provide feedback from buyers that will be used to adjust your price expectation. There are a few other things to keep in mind when interviewing agents, though that's for a separate article.
What does all this mean for you
Rate rises will put pressure on buyers so it is even more important to ensure your property is prepared in the right way prior to contacting an agent. That way, you will have the best possible chance to avoid low offers.
The planning for your presale renovation should start ASAP. It will take some time to line everyone up with builders, tradies and material supply issues. Agents will be keen to list your property "as is" since they may not want to wait the 4-8 week preparation time. If achieving the best possible price is important to you, then this presale renovation step should be a non negotiable.
So there are a few things to keep in mind if you are considering selling your property in the near future. As I always maintain, a presale renovation is the most effective way to maximise your sale price. Finding the resources to do the work will no doubt be a challenge so make sure you give yourself (or me) plenty of time to work on the planning phase and find the right resources.
If you would like further info or to discuss preparing your property for sale, get in touch so I can help put you on the right path.
Although the guidance of 4 real estate agents was to sell "as is", see how the 10 week presale renovation of a house untouched for 30 years achieved $250k over the reserve in 2019.
Comments