With clearance rates currently being reported at around 50% each week and properties taking longer to sell how do you position your property to sell in the current market in a reasonable timeframe? First of all we need to debunk a myth.
MYTH: The true clearance rate is not around 50% It’s actually more around 33%, each week hundreds of results are not reported and I’m willing to bet that 99% of those unreported results we’re passed in because every agent including me that achieves a sale in the current market would want to report it. NOTE: I have been reviewing the auction results for the last few weeks and they have been consistent at around only a 1/3 selling before or on the day of auction when you take into account the hundreds of not reported results.
So now we have worked out that approximately only 1/3 of properties are selling in the first 30 days and the rest aren’t, how do we make sure that we are in the 1/3 that do or if we have already been to auction and have passed in how do we now get our property on track to sell? Let’s review the most important thing in a tougher market, the “ASK PRICE.”
- It’s the most critical thing in a declining market because it’s now a buyers market and the buyers are shopping around for the best value for their budget.
- Banks have recently reduced the buyers borrowing capacity across the board due to the royal commission into the banks lending practises. When the royal commission is done no doubt the banks will have new regulations put on them to ensure proper lending policies are in place moving forward so another real estate bubble like seen won’t be created.
- Vendors unfortunately need to accept that due to the current and future lending conditions that buyers can’t borrow as much. The market has now adjusted so vendors asking price/expectations need to adjust in line with the new market price.
- In my opinion prices have already dropped at least 10% in Metropolitan Melbourne. This is what I’m seeing in the area where I work and most vendors are still struggling to comprehend selling for 10% less than a year ago although they’d be happy to sell for 10% more. I’m thinking that it may or may not drop by another 10% in the next 12 months so I’m advising my clients to just move fast and adjust to the current markets price and sell.
- It’s unlikely that prices will rise in the short term back up by 10% to meet the vendors asking price and if prices continue to fall then they may be faced with bigger price reductions then the up to 10% they face now.
QUESTION: If a buyer initially had a budget of around $1.5M to spend when they first did their pre-approval say 6 months ago but just before purchasing go and get an updated pre-approval from the bank and the bank now advises them that things have changed and they can only borrow $1.35M what happens?
ANSWER: The buyer starts looking at $1.35M properties and if they see something they like they buy it and if they don’t they wait patiently for something to come up at that price. Eventually what happens though because most buyers are in the same boat a motivated vendor at $1.5M accepts that the market has adjusted and drops their price by 10% and sells their property.
FLOW ON EFFECT: The market now sets the market and agents start using that sale to advise current vendors who haven’t sold as yet that a similar property just sold for $1.35M and moving forward when an agent appraises a potential new listing they use that comparable sale to price the new listing and all of a sudden vendors start meeting the market and selling but the ones who don’t get left behind and don’t sell.
RECOMMENDATION: Get your property re-appraised immediately and make sure your price is inline with the current market so you can sell it within a reasonable timeframe. Remember that if vendors adjust and buyers buy the markets clearance rates improve and confidence grows. If you’re a buyer after selling then you “buy and sell in the same market” so if you have had to accept less then so will the vendor on the other side. Buyers will buy if they see value for money!
If you’d like an updated appraisal on your property by all means feel free to check out my website and contact me to arrange a no obligation appointment.