Are you Selling your Apartment Below Market Value (without knowing)?
Apartment Specialists Podcast No: 5
In this podcast, we'll be talking about traders and why selling your apartment to a trader has its disadvantages. Learn more from this podcast.
Good morning, Andrew Murray from Apartment Specialists. In this article I am going to talk about traders. Why? Because you are selling your apartment below the market's worth if you are selling to a trader. There are approximately 1600 apartments sold per year in the CBD, and for 10% of those transactions traders are involved. Now that's heaps of apartments being undersold. Don't get me wrong, traders do have their place. They're great if there's a situation where the owner needs to sell in days because they have a financial issue or can't pay the body corporate fees, or if they need an unconditional offer very quickly. Sometimes things happen in an owner's life which means they have a need to sell very fast.
But in this case, a real estate agent should not be selling the apartment. What are you paying us for? What? For the agent to just call somebody on the phone and sell it? If anybody finds themself in this situation, feel free to send me an email at [email protected], or, give me a call on 021 424 892, and I'll put you in touch with a trader directly and you can deal with them. Because it's not my job to sell this. It's not good for my statistics, it's also not good for my reputation. The percentage of apartments that get undersold to traders is surprisingly a lot higher than you might think.
How are these traders finding out about your apartment? How do they get their deals? How are they repeatedly buying apartments below market value, renovating them and making them a profit, making enough where they can be in the Deloitte's Fast 50 and be one of the top companies in New Zealand.
This is because they get approximately 70% of their deals through real estate agents. Real estate agents get paid to undersell the property. And yes, it's true that in some cases there may be a situation where this is necessary, but in many cases I bet you there's not a reason, and there's definitely not a reason in my opinion. In clauses I have seen, there are completely different reasons I've seen implied for these traders buying the properties. One which is used commonly, and is disclosed to the owner, is that this purchaser is suspected to be in trade, and is actually selling these apartments overseas in a similar-type fashion, or by any other means. That wording is not exact, but it's along those lines, and so the owner then thinks, "Okay, so the purchaser's going to buy this apartment and then go and sell it to an overseas buyer in a seminar and rip off someone like what was done with Blue Chip and the other different institutions that sold like that."
But it's not happening at the moment. That hasn't been done since 2004, 2005, 2006, 2007. Yet, this enables an owner to accept underselling their apartment, when in reality, it's going straight to the trader, and within a couple of weeks, it's advertised on Trademe, and dealing with the same retail buyers. This just shouldn't be happening. That's why if there's anybody that needs to get in touch with a trader, you can get their number off me and you can deal with them directly. I don't get paid for this; I don't have anything to do with it. So how can you know that you're not dealing with a trader?
There are many people who could buy your apartment, you can put any name or nominee and they could nominate it to a trader. And then, because it has to be declared, they've asked the purchaser's name which means the agent will have to say, "Okay, I think they're a trader." However, if the agent doesn't ask them this question, then they think they don't have to declare it. That form is forcing them to ask the question, so you'll know if you're dealing with a trader. It's so important when you're comparing the housing industry to the apartment industry, it's so hard for you to know values in the apartment market, we can provide you with a free valuation.
Here's an example. In my work, I go and look for a building that's under value. I look at the sales in the building, how the apartments are being sold, the methods of sales and the building's history. I research what they've been selling for or how the previous people in my industry have been selling them and not achieving the values that they should be achieving.
Then I'll go in and sell them for what they are actually worth. And this is the research a trader does. They go and look for these buildings, they see the prices they are selling for and go, "Okay, I know that I can present an offer that will look very good to an owner because they will compare it to the previous sales in the building, when really I know it's worth more in this market because the market's moved so much." That's why a form like that is very important, and it also means who you choose as an agent is very important, but that's your own individual choice.
Obviously, that's a normal part of what we do because my aim is to get the highest prices for the vendor, and the highest prices bring your business. It's pretty simple. That's the same in any industry, if you do a great job, you get more business. That's why a lot of my business comes through body corporates, through referrals, through building managers, etc, because what I do is good for the building. Your first step is to get that form signed, so the agent has to ask the question and then declare it, because otherwise they will just not ask the question. Secondly, learn the most up to date sales prices, and get the methods of sale. Then again, that's a slightly flawed process to see the values. Ask for some sales statistics in the most similar building, a comparable building to yours.
If you do that, that means you'll get a higher price because that's what I do. I will go look at a building and say, "Okay, the sales numbers are here, and this building is very similar, in a similar kind of area, has the same category of buyers that they're looking for, with the same kind of demographic that would purchase it, yet the sales values are lower, so I'm going to go in there and raise these values."
I hope this has been helpful, and do download that report because there's nine other reasons, one I will also be covering is about transparency when talking to an agent about how they are selling your property.
Is the agent letting other agents from other competing agencies try to sell your property as well? If they are, are they offering them a fair commission? They may say, "Yes, I let every single agent through", but if your agent is only going to offer them or share 10%, 20%, 30% of the commission, why would that other agent from a competing agency waste their time? At the end of the day, they're doing what we're all doing. It's a job and they're there to make money. I hope this has been helpful.