selling by a bad real estate agent

Shocked into Selling? Beware of the Advocate Agent!

Kevin Young Insights 0 Comments

“Buying property is not a risk free investment.”

Last year the RBA issued this statement. It has also been reinforced by the latest figures from Core Logic who record every property sale in Australia. It showed that 10% of properties sold are sold at a loss and the average length of ownership of these losses is six years. The average loss was $69,468.

Why do they buy and why do they sell?

To find the answers I went looking as if I was out to buy a property. I looked in magazines and online. The first thing I noticed was that the property offerings were mostly limited to one location. There was no widespread variety and no robust discussion on the merits of each property.

Next, I looked for the credibility behind the promotions and I was surprised to find that in most cases there was no person named who could be Googled to confirm their credibility.

All of these ads were by licensed real estate agents who, by law, have to get the highest price off the buyer. Surely in this age of consumerism this is an antiquated law and the various State authorities should stop protecting just pro-agent sellers!

So my research answered the questions of why do they buy? Because it’s not a well-informed market place, and they will buy whatever is advertised. The national consumer legislation is in conflict with State real estate legislation. The first empowers consumers and the second only sellers.

So next, why do the 10% of property owners sell and absorb the $69,000 loss?

Again is it because of the lack of a fully informed market? They have owned it for six years and there may be a loss, but the statistics show that those owning it for ten years or more make a profit. If these loss-making sellers knew that just another four years could take it into a profit,it would save them on average a $69,000 loss.

That is, they would save themselves a lot of money, not a loss, by hanging on for four more years.

A real Case study!

‘Poor Christine’ had an expensive house in Sydney and a $300,000 Club property also in Sydney. It had been a couple of years and a spruiker for agents worried Christine that her property was a “dud”. She became convinced that her property had gone down in value, and worse, that in the next twelve months properties would fall a further 60% in value. Poor Christine panicked and wanted to sell.

Far from a drop in value and far from being a “dud”, it was valued $18,000 higher than her purchase price! A valuation we had on this property in 2013 stated its value at $523,511 but Christine doesn’t own it anymore.

Even worse, recent 2015 property sales for comparable one bedroom units in this complex have sold for $615k and $670k! So it has moved on further in capital growth. Poor Christine has also missed out on profiting from the hefty rent increases. So much for the “advocate’s” comments which he promoted widely on his website and made such a fuss of in the media!!

So the moral of the story is, if you have owned it for a few years and are concerned about its value, don’t be. If you are being harassed by agents or self-proclaimed “consumer advocates” wanting to get a quick listing – don’t listen to them!

The official figures are “across all sales recording a gross profit where the average length of ownership was recorded at ten years”. An interesting statistic that came out of this was that “homes which sold for more than double their previous purchase price were owned for an average of 16.8 years”.

This used to be ten years.

Or is it still ten years for the capital cities but the national figure is watered down by regional and mining town’s limited growth?

Or, is it that we have been in a low inflation period where prices don’t rise as much – but equally we don’t need as much growth to pay for the same amount of goods and services?

Or is it a combination of all these factors?

So what does this mean?

Property is still safer than shares which have gone sideways since 2006 with many going into liquidation. Property is safer and surer, but it is a ‘get rich slow’ investment, so clearly – a long term investment.

Kevin Young

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