In most countries there tends to be one predominant sales method that both buyers and sellers become familiar with. Not so here in New Zealand unfortunately, so it’s important that you fully understand the different sales methods you are likely to encounter and how to respond to them.
How a property is marketed is determined by the seller in consultation with their real estate agent. Different methods become popular at different times depending on the state of the market and whether it favours the buyer or the seller.
In a sellers’ market, house prices rise rapidly and there appears to be more buyers than sellers.
Other characteristics of a sellers’ market are high employment, low interest rates and an increasing population. In these conditions, houses sell very quickly as buyers clamour to buy available homes in order to board the capital gains gravy train.
Real estate agents chase listings relentlessly, often at the expense of providing buyers with the best service. They know that buyers are two-a-penny. In this environment, marketing without a price, auctions and tenders are often prevalent.
In a hot market it is often difficult for the agent to offer the seller, or vendor as they are called, a reliable estimate of what their home will sell for. Why would they limit the potential for a sky-high price by putting an asking price on a property? Who knows what some desperate buyer might pay?
Better still, why not create a sense of winning and losing by putting all of those desperate buyers into a room and get them to compete against one another in an auction (and you thought the ancient Romans gave the Christians a tough time in the Coliseum). Auctions are also a ruthlessly efficient way to sell large numbers of properties in a short period of time – and there’s none of that time consuming to-ing and fro-ing rigmarole; going back and forth between buyer and seller with pesky offers and counter offers.
But even the most bullish markets are cyclical. Eventually conditions will change and begin to favour the buyer. Houses take longer to sell and require more effort from the agent. Fewer properties are sold under the hammer at auctions and, if a property is advertised without a price, many would-be buyers don’t even bother to view the open home or make any further enquiries. Welcome back to the world of the asking price.
This is an extract from The Streetwise Home Buyer. The full chapter covers much more and you can download it below for free.
- Private Treaty
- Making an Offer
- Pre-settlement Inspection