Selling an investment property is very rarely an easy process; not only do you have to form appropriate price expectations based on current market conditions and various other complex factors, but you also have to align yourself with an agent and a strategy that is going to enable you to achieve your expectations. To this end, I've decided to share the following piece by Century 21 Australasia's Chairman and Owner, Charles Tarbey, which appeared in the November edition of Century 21 Wentworth's Property Investor.
Time to say 'goodbye' – ensuring the successful sale of your investment property
Whether selling an asset to make the most of changing market conditions, finance a new opportunity, or to ensure greater liquidity, by approaching the sale process in a strategic way, investors can give themselves the best chance of achieving a favourable selling price.
Selecting an agent
When you are thinking about selling, securing the best agent is an important consideration; agent choice is often the difference between a successful or mediocre result. To find an agent, the route many vendors will take is to call in three or four recommended agents and have them present their sales approach. While these pitches can certainly be impressive, I would be careful in making a decision based on this step alone; I have seen better agents not awarded work because their presentations were not as slick as those of their competitors. Thus, other selection methods must also come into play.
If you have a selling agent in mind, one of the tactics that I always recommend is to scour your local area and record any properties that they have listed. More importantly, if any of these properties have a sold sticker on them, I would knock on the front door, and if owner-occupied, make a few enquiries about how the process went. To me, this exercise is going to give you the best answer to go on.
Sellers should note that ultimately, the best way to select an agent is to look at results. Keep in mind that even if an agent has dozens of 'For Sale' signs up in an area, these really only indicate that the agent is active - which isn't necessarily the type of agent that you want to be looking for. Activity versus performance is a key consideration and you will usually find that activity-based agents are nowhere near as powerful as those who are performance-based.
To this end, when looking around your area, it is important to note that while an agent may have a large number of 'For Sale' signs, they may not necessarily be selling anything. In fact, I always say that a 'For Sale' sign is a sign of success, but after four weeks it becomes a sign of an agent's failure to get the job done. Yet these signs may give potential vendors the wrong impression about an agent's ability to get results, and before you know it - you're just another property with a sign out the front.
In addition, for those investors who employ a property manager, these professionals can provide a wealth of information when it comes to selling your property and choosing the best agent. Not only will your property manager be well positioned to recommend a sales agent operating in your area, they will also be aware of any necessary procedural or legal requirements, with regards to tenants, that could be relevant in the sale of your property.
Base pricing expectations on a number of different sources
When setting an appropriate price for your property, it is essential to listen to the feedback of your agent, which is based on their experience and knowledge of current market conditions. However, in order to be in the best position to arrive at an appropriate price guideline, this feedback must also be coupled with your own research.
Such an investigation can be easily conducted both online, through sources such as Residex and RP Data, and in the streets around your investment property by driving around, looking at properties that have sold signs on them, and ringing up the agents to find out how much they sold for.
When you lock these two forms of research together, have an open mind to selling and take the feedback that has been given to you, you are in a much better position to make the right decision regarding price.
Use ongoing feedback to determine if auction is the best course of action
While an auction may seem like the most appropriate way to sell your property at the beginning of the selling campaign, only time will tell whether it is in fact the best way to go. A good agent will give you continuous feedback regarding the number of enquiries received and responses given from prospective buyers, which should be the basis of your decision. For example, your agent may let you know that there haven't been any buyers through the property and that perhaps auction may not be the best option - and you will make your decision based on that.
Handling yourself at auction
As a vendor, if you really want an auction to work for you, it's important that you do not discuss price expectations with your agent and auctioneer; I would recommend that you try to refrain from disclosing what you would like to receive for the property for as long as possible. By giving the agent and/or auctioneer an amount, even just an idea, you are essentially setting them a target, which once met, could indicate a successful auction and see them less likely to push for further bids.
While many auctioneers and agents will want to talk to you about price, the best option is often to just let the auction run, and discuss what you're thinking based on events as they unfold.
In addition, over the course of the auction, take care not to be too quick to let the bidders know that the property is on the market once you have hit your target price. When you get close to that price, and if your agent is aware of this fact, they will likely suggest that you 'put it on the market'. However, if you call it, as opposed to simply continuing to take bids, then people will know it's for sale. You may in fact be able to achieve a higher price if bidders are simply allowed to keep bidding blindly.
Also note that if you do decide to call it on the market, it is usually best not to act until you are fairly close to the reserve price that your research indicates the property can reasonably expect to achieve. By holding out and fighting on, you should be able to improve your chances of reaching and exceeding such a reserve.
It is important for investors to understand that the successful divestment of a property can be just as crucial to an investment portfolio as an opportune acquisition. To this end, the decisions made by a vendor throughout the process of selling a property can have a significant impact on the result eventually achieved. By selecting your agent carefully, thoroughly conducting your own research and handling an auction to your advantage, investors should be able to position themselves to obtain the best results for their property portfolio.
For more information about the residential property market in your areas of interest, please feel free to stop by your local Century 21 Real Estate office for expert and clear advice.