April 16, 2014

Professional agents reduce the risk

real-estate-agents

Anyone selling a property wants the best price the market will deliver and buyers want the reassurance that the sale price is appropriate.

This is why most people use a licensed real estate agent when buying and selling. Agents are trained to arrive at a market sale price for a successful transaction.

Achieving the best market price is not easy without expert assistance. Private sellers, for example, tend to over-estimate selling prices and most private sales fail without significant price adjustments.

This can result in a final sale price that is actually less than the price which was achievable had the property been marketed correctly.

While sellers want to receive the highest price, buyers are keen to pay the least amount and this creates an understandable conflict between the two that an agent will negotiate to the point of agreement. It can be very hard for a private seller to play this role without an intermediary, keeping in mind that selling price is not the only area of conflict between sellers and buyers.

A real estate transaction can be a legal minefield and this is why state laws require licensed real estate agents to comply fully with the agent’s contractual obligations to the owner of the property.

Agents also have a legal obligation to represent a property correctly and fairly to a buyer.

This legal framework is important because real estate transactions are open to challenges unless proper process is followed.

Take for example the sale of strata title properties which account for a quarter of all property sales. Every time a strata property is sold the buyer must be provided with a package of general and specific information related to that and failure to comply with this risks heavy penalties and may invalidate a contract.

The process of buying and selling strata title properties, in particular, can be so complicated that REIWA has developed specific training courses with detailed checklists for its members.

Another area of potential buyer-seller conflict is information about services and rights of access on properties, including sewers, drains and reservations by public utilities.

If you are a buyer you should know about these matters. If you are the owner there is a responsibility to convey such information, but with private sales these matters are often overlooked and can result in legal dispute.

These and other influences on real estate transactions are covered in the standard legal documents accessible by agents.

If a problem occurs a seller or buyer can seek assistance from REIWA and the state government. However, if you are involved in a private sale and something goes wrong the best you can do is meet in court which can be expensive and time consuming.

This article was originally published on reiwa.com.

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Dry summers influence buyers

Holiday homes can be purchased in many possible locations.

As we come to the end of one of the driest summers on record, it’s another reminder that those of us who live in this hot, Mediterranean climate need to be smarter and more efficient in our use of water.

Metropolitan dams are at just 30 per cent capacity and sprinkler restrictions look like they’re here to stay.

Irrespective of possible water restrictions, people need to be water-wise for the long term and we can see how this now impacts on the housing market and through consumer choices.

Smaller residential blocks of land are more common and properties with reticulated gardens more popular.

Busy lifestyles, smaller families and the increased cost of land are the primary reasons for shrinking block sizes with automated watering systems, but there is also a growing appreciation of the value of a water-wise home and of our greater environmental responsibilities

Each time the State Government brings in water restrictions, REIWA agents notice some increased interest in households converting to native gardens, reducing lawn areas, fitting rain water tanks or switching to reduced-flow shower heads.

This is understandable, but before you attempt a similar project aimed at being water conscious, keep in mind what such a change in your garden, in particular, might mean for your home’s resale value.

Most homebuyers are fairly conservative in their housing preferences. So, if you’re thinking of planning a more water-wise garden whilst being anxious to maintain the resale value of your property, keep in mind these few suggestions.

Think about keeping some lawn area in both your front and backyard. Australians love lawns and various types thrive in our warm conditions. Some are drought tolerant. A small lawn no bigger than a blanket will add some appeal and soften the harshness of brick walls and concrete driveways.

Large areas of uninterrupted paving can be counter-productive if you are trying to minimize on lawns and garden for the sake of water. During our hot summers, paving will heat significantly unless you have shade.

Designing a garden to make the best use of its position with the path of the sun is important if you have the opportunity. A well designed home and garden can ensure that there is at least one part of the outdoor living area shaded from our harsh afternoon summer sun. This will reduce evaporation in a section of your property and help keep the house cool.

As water restrictions become more common and as water costs increase, properties with water-wise gardens and shade features will become more desirable.

More homes are also making good use of rainwater tanks for garden use or to plumb into the laundry and toilets to bypass scheme water altogether.

This article was originally published on reiwa.com.

Image by Jörn Guy Süß via Flickr.

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Understanding covenants and easements

Perth suburb

It’s always advisable to carefully check the title of a property you are thinking of buying to avoid any last minute surprises that may interfere with the sale.

In Western Australia, Landgate is the state government department which has responsibility for keeping the records of who owns each piece of land. The document on which ownership is recorded is called the Certificate of Title.

The Certificate of Title will record the present owner, note if the property is currently mortgaged and what rights other people and the wider community may have on the property and which might affect the buyers use and enjoyment of the land.

Before entering into a contract for the sale of land or strata title it’s wise to have a good look at the Certificate of Title.

The selling agent is required to conduct a search and should therefore be able to show you a copy.

Sometimes there are restrictions on the title that may affect its transfer when property is being sold. This might occur when another person or organisation has a financial claim or interest over the property in addition to the mortgage. Such a caveat effectively prevents the registration of any transfer of ownership until the caveat is formally withdrawn.

Restrictions on the land are called ‘covenants’ or ‘easements’ and can be placed to ensure that it is not used in certain ways or that buildings conform to certain requirements.

This is often done on land within a sub-division to try and ensure that the buildings are of a uniformly high standard.

Other covenants may prevent views from being blocked or natural light being impeded.

Generally, to remove a covenant an application must be made to the person who imposed it and this may be complicated. Anyone seeking to remove a covenant should therefore seek expert legal advice.

An easement is the legal term for a right, which someone other than the owner, has over the use of the land for a specific purpose.  For example, the neighbours may have a right-of-way to enable access to their property or the Water Corporation may have the power to obtain an easement to use part of the land for sewerage or water pipes.

Covenants and easements are reasonably common and in most cases will not affect the value or saleability of the property. However, before buying you should ask the selling agent if they exist, request copies and read and understand them before making a commitment to buy. You may also wish to seek further legal advice.

Generally, a bit of common sense should address your concerns and after taking the information into consideration you will be in a better position to make an informed decision on a purchase.

This article was originally posted on reiwa.com.

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Safety and security in rented homes

Smoke Alarm

One of the things that tenants look for in a quality rental home is the level of safety and security it provides. People with young children, the elderly and women, in particular, are especially safety conscious and this is understandable.

Some of the safety measures you might expect in a rental property are mandatory while others are not necessarily. It comes down to definitions and practicalities.

One of the mandatory safety measures is smoke alarms.

These are required in all dwellings and must be hard-wired to the mains electrical system. They cannot be battery operated unless the installation of a hard-wired system isn’t possible.

Where that occurs, lithium battery operated smoke alarms are acceptable. The number of required smoke alarms is determined by the positioning of bedrooms and how many stories the dwelling is. If in doubt about any of this, raise the issue with your property manager.

In July 2015 another mandatory measure will be deadbolts on all external, ground floor doors. Deadbolts are generally those which are key-locked from the outside but latch-locked from the inside. This is the preferred model of the Department of Commerce because in the case of fire or smoke inside the house they are easier to open in an emergency or in darkness.

Until July next year owners are permitted to use other forms of appropriate door locks.

Another mandatory form of security starting mid-next year is porch lights that must be present at the main entry door and operational from inside the dwelling.

When it comes to windows the law provides that they must have reasonable locks or latches that cannot be opened from the outside. This is not prescriptive but comes down to common sense.

If there is a spa or swimming pool in the rental then safety barriers are very important. The type of barrier will depend on when the pool or spa first received local council approval.

Where a safety barrier is considered to not be operating properly the property manager should be contacted immediately. If an owner does not respond to any concerns raised by the tenants in relation to pool and spa safety, tenants should contact their local government authority right away.

The reality is that most owners want to ensure that their properties have good safety and security not simply to comply with the law but to attract and maintain good tenants.

It’s important therefore that prospective tenants find a dwelling that suits their needs  before signing the lease.

Safety and security is in the best interests of both owners and tenants, so existing tenants who feel their current security measures are inadequate may find that their owner is agreeable to modifications if approached in the right manner.

This article was originally published on reiwa.com.

Image by Katy Warner via Flickr

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Strategic buying in a fast market

Residential-house-with-driveway

Currently in Perth there is strong demand for homes under $450,000. There is also an undersupply of stock across the board with about 3,000 properties fewer than normal. Consequently, there is quick turnover with well priced, well located property and the number of days on market can be as low as two or three weeks. In many areas homebuyers need to act quickly to secure a property but there is no need for panic.

The real estate market regularly swings between seller and buyer markets in response to  economic and population conditions. A more relaxed market will likely return in the near future, particularly given the number of apartments and townhouses currently under construction and due for release this year.

Curiously enough, a seller’s market can actually work in favour of buyers if they are organised and mentally ready to secure a quick deal. When properties are selling quickly many people who have held back from marketing their homes can be motivated into acting.

Even though the stock of properties available for sale is lower than usual there is greater turnover. This in turn presents opportunities for buyers who are fully prepared.

A seller’s market can also work to the advantage of a buyer who has an existing property to sell. Normally this situation is not very attractive to sellers as they’d rather not wait for you to sell your home before buying theirs. Yet in a fast market a seller can consider that scenario with greater confidence even if other unconditional offers are on the table.

Being fully prepared to buy a property is the key to succeeding in a seller’s market. This means organising your finances and, most importantly, knowing exactly what it is that you want to buy.

Timing is critical for a buyer in a seller’s market. Once you have determined your budget, type of property and preferred locations you should work to a plan. Confine your home-open inspections only to properties that meet your specific requirements.  It can also help to talk to some agents about properties that may not yet have come onto market but which might interest you.

You might also consider hiring a buyers’ agent to help you with your search, especially if you don’t have a lot of time for home-hunting or lack confidence in a competitive market.

When you do find the right property it’s important to convey to the seller that you are a committed buyer. A low offer is less likely to be considered, so be prepared to make a reasonable offer with a little ‘wiggle room.’

Finally, a bigger deposit will convey to the seller that you are genuine and have confidence in securing the finance to seal the deal.

This article was originally published on reiwa.com.

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Market snapshot for November: Perth median reaches new record, rents slide

Perth city. Image by Andru1308
Current data from the Real Estate Institute of Western Australia (REIWA) show that sales turnover lifted during both October and November pushing Perth’s median house price to a new record.
The data show sales had returned to normal levels and indicate that for the three months to November Perth’s median house price climbed to around $530,000 – $535,000, up from the previous peak of $525,000 on the June quarter.
The main reason for the big rise in sales was that Perth was coming out of a big slump in turnover in the September quarter and had returned to more normal conditions.
The quarterly median for the three months to November was up by almost 4 per cent and due mainly to the composition of sales during this period after strong first home buyer activity pulled the median house price down to $510,000 in the September quarter.
While first home buyer activity is still very evident, there was a solid increase in sales within a 10km radius of the CBD and a softening of activity in outer areas, particularly along the coastal sub-regions north and south of the city.
This shift in sales composition towards more expensive properties selling pulled the median upwards.
The data also show that in some of the coastal sub regions, such as parts of Wanneroo, Joondalup and in Rockingham there was a weakening in sales activity that had emerged through the month of November.
While this retraction is sales is only modest at around 2 to 3 per cent on the previous month, it is accompanied by a drop in listings also in these areas which suggests that the fall in sales activity has nothing to do with oversupply.
It is more likely that first home activity in areas away from the coastal strip has been the focus of buyers in more recent times.
The number of properties on the market continues to recover from below average levels over the last year to now reach its highest point for the year. REIWA data currently showing 8,656 dwellings and 1,199 land lots for sale.
The rental market continued to turn in favour of tenants, with the number of available rentals growing and median rents coming down once again.
The median rent in the metropolitan area has dropped by just over 2 per cent over the last three months to $460 across the board. This now breaks down to typical rents for houses coming in at around $470 per week and for units and apartments at around $450 per week.
Current REIWA data show rental listings lifted by 2 per this week alone, to 4,419 properties on the market while the vacancy remains above average at around 3.2 per cent.
This article was originally published on reiwa.com.
Image by Andru1308 cua Flickr
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Multiple offers and the 48 hour clause

What happens when there are multiple offers on a property?

Two of the more common questions REIWA agents get asked in relation to the buying and selling process are: what happens when there are multiple offers on a property and what is the 48 hour clause?

Let’s look at these separately.

First, when a seller finds themselves in the envious position of having more than one offer on their property for sale, there is no right or wrong procedure in terms of how they might respond to that.

There is no law around this and it’s up to the seller in consultation with their agent as to how to move forward.

In this context it is important to remember that it is always a seller’s right to assume that any offer received from a buyer is their best offer.

If the seller has several offers to consider then they will probably ask the agent to inform the potential buyers that there are multiple offers and that the buyers subsequently have until a specified time to reconsider and then present their best offer.

Alternatively, the seller might decide only to negotiate with one of the offers. That may not necessarily be the highest price as the decision by the seller might also be based upon the least complicated offer. For example, a higher offer that relies on the sale of another property may not interest a buyer who is keen to sell quickly.

The ‘48 hour clause’, now more properly known as the ‘Two Business Day Condition’ is a separate issue that buyers might come across.

This clause is normally inserted when the buyer wants to make an offer that is conditional upon the sale of the buyer’s existing property, but the seller wants to continue marketing their property in the hope of receiving an unconditional offer on better terms.

This clause gives the seller the right to continue advertising their property and to negotiate with a possible second buyer.

The second offer might be for a lesser amount but may provide greater certainty for the seller.

If the seller receives an alternative offer that they wish to accept, then they must serve a notice upon the first buyer.

From receipt of that notice the initial buyer then has two business days to secure an alternative source of finance or obtain a contract for the sale of their existing property.

If the first buyer does not waive the condition of selling their own home by the termination of two business days then the contract comes to an end and they get their deposit back.

The seller is then able to enter into the other contract with the alternative buyer.

REIWA provides a standard ‘Two Business Day’ clause for its members to use, however, buyers and sellers are strongly encouraged to fully understand its terms and conditions before agreeing to it.

This article was originally published on reiwa.com.

Image by Tsahi Levent-Levi via Flickr.

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The benefits of buyers agents

Buying a home can be confusing.

Around most of Western Australia the property market is stable with modest price growth, good turnover and low levels of listings.

Interest rates are low and most rental markets are turning in favour of tenants. Of course there are regional exceptions and all this can be a bit confusing to buyers and investors who might be trying to decide where and when is a good time and place to purchase?

In this situation you might like to turn to a buyer’s agent.

Just as you would expect a selling agent to represent your interests when selling, a buyer’s agent will act with the same level of professionalism in helping the buyer achieve their goals.

There are several characteristics that you should look for when selecting a buyers’ agent but the three key areas include communication, expertise and negotiation skills.

First up, a good buyers’ agent should be an excellent communicator. They should take the time to fully understand your needs and budget when selecting an investment or your next home and prepare a brief relative to these requirements.

This means that the buyers’ agent has a good working knowledge of your expectations and should be able to deliver. Conversely, if your expectations are unrealistic, a good buyers’ agent should be able to explain this effectively and politely to set you on the right path.

They should also possess the expertise and knowledge required to conduct specific research that may affect the purchase of the property and any other relevant items that are important to you the buyer. For example, development potential, re-zoning and major planning projects in the property’s locality that may impact on value over time.

If schools are important they should know which schools are available to your needs.

Demonstrated negotiation ability is extremely important. The buyers’ agent should be able to negotiate the deal on your behalf with the seller, including the contract and settlement terms, as well as ensuring you are paying a fair price for the purchase.

Buyers’ agents, as with any professional, will charge a fee for their service which may be fixed or a percentage of the purchase price of the property. In either case you should ensure this is discussed and agreed at the start of the process.

Remember, sales agents can offer great value and information when purchasing a property but of course they are engaged by the seller and are legally obliged to work in the sellers’ best interest.

Whereas a buyer’s agent is working for you, the buyer, and can save you lots of time while helping you get you the kind of property you really want. It’s a particularly handy service for busy people.

To find your nearest buyer’s agency please contact REIWA.

This article was originally published on reiwa.com.

Image by Edu Martínez Piracés via Flickr.

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How do you judge the value of a property?

Property valuations are one ways to judge the value of a property.

When it comes to judging a property to get a reasonable indication of its value and probable sale price there are three options you might consider.

First, a real estate agent can give an appraisal which is largely an educated guess based on their current sales experience and local knowledge. This is informal but usually pretty helpful as an indication.

Second, an owner or buyer can hire a professional valuer to produce a more formal and authoritative report. These reports are based on sales information held at Landgate and from information obtained from real estate agents on recent sales not yet reflected in the government data. Usually these are the reports which banks and legal bodies will accept as valid for lending and legal purposes.

A professional valuation removes any perception that there might be a bias on the part of real estate agent appraising a property and is regarded as more independent.

Thirdly is the option to pay for a property report from one of the many private companies which are not valuers. However, people thinking of doing this should be aware there can be limitations to this.

Most of the companies which provide this service are based on the east coast of Australia and have few or no staff here. This means that the reports are largely put together based on Landgate data showing the last sale price and then calibrated to place the property in the context of the current market.

While that might sound quite reasonable, such reports can only be based on the unimproved value of the property since its last transaction.

For example, if a property was purchased in 2005 and the owner demolished the old house and built a bigger one in its place, then this would not be known by a property group based in Sydney or Melbourne. They would only know of the 2005 sale price, even though the site now has a completely different value. It’s a similar situation if an owner puts in a pool, adds a second story or patio or maybe constructs a lock-up garage.

These things are not readily detectable through an arms-length report based on data rather than being produced by actually sighting the property and being familiar with its history.

If you solicit a property report from a company that deals in real estate data, make sure it can measure the current improved value of the property and not rely simply on historical sales information.

Better still, engage a local valuer if you need a formal, legal valuation or contact a REIWA agent for an appraisal if that’s all you require. Either way, it pays to use the local services of those who know your neighbourhood.

This article was originally published on reiwa.com.

Image by Neelaka via Flickr.

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What are the rules around stigmatised homes?

Stigmatised property are sometimes revealed by an internet search.

It sometimes happens that a property on the market for sale or rent has been the site of a murder or gruesome death.

For example, a few years ago the sale of a house in Sydney that had been the scene of a grisly murder by Seth Gonzales became the subject of national attention and court proceedings when the buyers learnt to their horror that their new home was the scene of a gruesome murder.

In this situation and similar cases, what are the obligations of the sales representative or property manager in advising the potential buyers or tenants about the history of the property?

Such properties are known as ‘stigmatised houses’, and agents are obliged to be transparent with potential clients. If an agent knows that a house has been stigmatised then it is incumbent on them to advise the client, prior to a sale or leasing contract.

The stigmatisation does not need to be noted in the marketing for the property but raised with clients if a deal is to be struck.

There is an obligation to make reasonable enquiries.

However, where an agent has been informed by the seller, or should know of that material fact, and he or she feels that knowledge of the stigmatisation is reasonably likely to affect the decision of the client, then this information must be disclosed at the right time during the transaction.

Some people for religious, superstitious or cultural reasons take these matters very seriously and want to make an informed decision about their purchase on this basis. As a buyer or renter you are entitled to ask.

It is important to note that there are no specific government guidelines, rules or laws on this issue and agents are acting on a case-by-case basis using their own judgement.

What about future transactions?

As time passes certain stigmas can fade but agents are still required to use their judgment. If nanna died of natural causes in the back bedroom ten years ago, there’s probably no need to disclose this.

The general feeling is that stigmatisation probably applies to more recent events.

Indeed, many homes older than 50 years have probably been witness to familial deaths in the days before nursing homes and our quality medical system.

Searching for property addresses on the internet and social media generally now makes it virtually impossible for people not to know about dramatic events that stigmatise particular homes and agents who value their reputation are hardly going to risk that by being circumspect.

Interestingly, the evidence suggests that stigmatised homes that are marketed with disclosure will sell or rent with no obvious variation to the market rate.

While some people will expressly avoid a stigmatised home many other people are not bothered.

This article was originally posted on reiwa.com.

Image by Curvee Corner Wine Blog via Flickr.

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