Project Marketing Techniques

Interesting article about how project marketing companies use online techniques and database collection  strategies to gain sales in off-the-plan developments:  How a development can secure sales

Few Optimistic Words From Real Estate Lobby Group

From an REIQ media statement, issued last night:

"Queensland home buyers retreated from the property market in the June quarter as they waited for the return of stamp duty concessions but house prices held their ground, according to the latest Real Estate Institute of Queensland (REIQ) data.The REIQ June quarter median house price report, released today, shows house prices remaining steady in the face of lower sales activity across the State. REIQ CEO Anton Kardash said there was a noticeable slow-down in activity from May to June."

REIQ is the lobby group for Queensland real estate agents, and they are reporting a slow-down and lower sales activity.  That is, nothing is selling.  (The median house price data released by REIQ, which is for houses (not apartments) is not that useful, if there are few sales.  The price data reports only on what is selling today, and not whether values for any particular property have risen or fallen.)

Holiday Letting Agent Investigation

An interesting article in the AFR on 9 August (page 45) about StayMint (or Mint?) real estate letting agent, and how (it is alleged) they were renting out apartments on a short term basis, but not paying the owners for the rentals.  It seems that the government is investigating.  This is not a rare problem -- I have heard similar stories in the past about apartment buildings in Brisbane that are rented out on a short term basis, and holiday apartments on the Gold and Sunshine Coasts where the real estate agent or onsite agent pockets the money and tells the owner that the apartment is vacant.  This same business manages Skyline in Brisbane.

See "Stay Mint Faces Complaint"

"The Queensland Office of Fair Trading is investigating holiday letting company StayMint, a wholly-owned subsidiary of listed property group Ariadne, following complaints from owners of a Gold Coast apartment block about financial irregularities. Fair Trading officers raided the StayMint office at a Broadbeach apartment complex, Carmel by the Sea, last Thursday and seized financial documents.... The owners said they had discovered people had stayed in their apartment but the stay was not recorded in the monthly statement to the owner, and the rent not paid."

Ray White's view

This from a Ray White agent's newsletter, about the Brisbane inner-city apartment market:

"Large amounts of buyers enquiring on our properties. I have not seen this level of enquiry since the peaks of 2007. We are expecting price movement in the second half of 2012, on the back of large amounts of property selling."

I guess times must be good.  I have emailed a number of agents about apartments listed for sale in Brisbane, and many have not returned my emails.  I have inspected a few, and asked to put in an offer, but no reply.  I guess there are too many buyers out there, over-running the agents!  Or maybe, too many agents have quit the business during the past lean years?

Hilton Gold Coast - Huge Number of Crashed Contracts

A number of years ago, I "awarded" the Hilton Residents on the Gold Coast as one of the worst apartment investments in SE Queensland.  See prior posts.  A number of years ago, there were many press releases about how successful the development was, and how many sales were made off the plan to investors.  I could not figure out who was buying these apartments, or why, as this development was not in a prime location, and surrounded by vacant shops and topless bars.

Now it has come to light that many of the investors were from outside Australia, and more than 100 purchasers have failed to settle (or about 25% of buyers).  Values have dropped dramatically, with apartments sold off the plan for $1.4M now valued at about $800,000.  (This book would have been helpful to these buyers.)

A number of purchasers who did settle have not put their apartments into the onsite rental pool with Hilton, and offsite agents are making under the name "H Residences".  This shows that rental returns are likely to be poor.

Many apartments on the Gold and Sunshine Coasts have decreased in value since 2008.  I know of a recent Juniper beachfront apartment that was sold off the plan for over $1.4M, that remains unsold today at $800,000.

See also this article.

Domain or RealEstate.Com.Au ?

When looking for a property to buy or rent, it is worth looking at both Domain and REA.  Note that for REA, advertisements can only be placed by real estate agents.  If an individual landlord or seller wishes to advertise, then only Domain will accept the advertisement.  Accordingly, Domain will have different (and possibly more) listings than REA, and often at a better price or rent (because agents fees are not being paid.)

Decision Making Tips

When buying or selling an apartment, it often gets down to a negotiation on price, with the agent repeatedly ringing buyer and seller, trying to get an increase in the offer or decrease in price. It is not uncommon for the agent to bully, flatter and confuse both parties to get a deal done.  Research shows that in such circumstances, a person may get decision fatigue, and make a bad decision.  My practice is not to make a buying or selling decision after lunch, but to sleep on it, and decide in the morning, without influence from the agent.

The more decisions you make, the worse they get to a marked degree -- you are more likely to make crucial mistakes or, put off a decision and miss an opportunity. One solution is an unbending set of investing rules, which minimise the need to make decisions.  Making fewer decisions improves willpower so much that it should have a major effect on investing performance.

For the same reason, decisions made earlier in the day are much better than those made later.  Rather than implying that you should hurry decisions, however, this indicates that in investing, you should get better results from a systematic process of studying an investment until you have enough evidence, then actually making the decision the next morning. The "sleep on it" principle.

In today's market, there should be no rush for a buyer to close a deal.
See article in NY Times Magazine.

Real Estate Agent Blog

Here is an interesting blog designed for real estate agents, to help them obtain listings and sell property.  If you are selling or buying, it is good to read about what real estate agents are doing or should be doing.

Project Marketing Blog

A new blog has recently been launched by Colliers Real Estate dealing with project marketing.  That is, marketing a real estate project, such as an off-the-plan apartment building.  See Project Blog

Brisbane real estate transaction volumes below average

Off-the-plan commissions

I have recently come across off-the-plan developments in Brisbane where the agent is being paid a flat 7% or 8% commission.  These agents are mostly selling to foreign buyers.  On a $600,000 apartment, that means $48,000 goes to the agent.  In other words, you are paying at least 8% too much!

"Auctions A Bad Way to Sell"

Interesting report on Sunrise, that touches on real estate agents not reporting bad auction results.  See here.  Also discusses current uncertainty in property market.

No Views at Bella Vue - Contract Terminated

A recent Queensland Supreme Court decision worth noting:  Nifsan Developments v. Buskey.  Mr Buskey purchased a penthouse apartment off-the-plan from Nifsan in the Bella Vue complex at Emerald Lakes.  The contract price was over $1.5M.  Before signing the contract, the sales agent told them about the uninterrupted views that the apartment would have.  However, the developer was planning a building in front of the apartment that would block the views.  The court rescinded the contract, and Mr Buskey got his deposit back.

Interestingly, the developer had a policy of not telling its sales agents about relevant information.  The sales agent may be honest, but being kept in the dark by the developer.

Also, the evidence before the court was that the apartment was not worth $1.5M when the contract was signed, and was now worth about $800,000.

Extreme care must be taken when buying off the plan.  You may be paying way too much. What the sales agents tell you may not be true.

See full text of decision.

Bidding at Auction Via Skype

"In early October, a potential bidder for a two-bedroom unit at Cathedral Place in Brisbane's Fortitude Valley requested to use Skype from Sydney to see the auction room and observe the atmosphere. The bidder, who had previously inspected the property, ended up buying the apartment under the hammer for $437,000.

While it was a first for Ray White's New Farm office, other agents have been using the web-based PTY Property, which provides an online bidding service that has also racked up recent sales including one of more than $3 million."

See:  The Australian

I guess this is better than phone bidding -- at least you can try to see if there are any dummy bids and see how many people are actually at the auction.

Misleading Conduct By Real Estate Agent

What a surprise.  A real estate agent in Melbourne has been found to have been engaged in illegal misleading practices involving negotiations after an auction.  The real estate agent told the bidder that someone else had made an offer at a certain price, when in fact that was not the case.  See The Age.

I am aware of situations in Queensland were real estate agents working for well known agencies and who are selling apartments engage in similar misleading conduct, even producing fake contracts.

This decision also reminds me of a case from New Zealand where the real estate agent sold the house to a regular "client", who then on sold the house for a profit.  The agent was found not to be acting in the best interest of the seller, and the bird-dog relationship with the buyer was something material that should have been disclosed to the seller.  See decision and article.

Market Commentary from a leading Brisbane agent

"... Countering that has been the deteriorating level of urgency in buyers as plunging confidence in Australia's economic future bites ever deeply into their psyche. This erosion of confidence isn't just making it 'challenging' to get buyers to make offers on property, it is making it doubly difficult to get deals to hold together once agreed.

More broadly and in keeping with Darwin's theory of only the strongest ultimately surviving, current market conditions are systematically cleansing the industry of all but the very best property professionals across all property sectors from Commercial to Residential. Whilst we know we can expect such repositioning of markets every generation or so, it doesn't make the process of enduring them any more comfortable."

My comment: I have seen a number of residential real estate groups impload in Brisbane in recent times. Colliers closed down its Brisbane city residential resale group (but kept project marketing alive), Savills closed down its Brisbane residential group, ReMax city office with Chris Hinds reportedly went bust recently, Open House went bust last year and has been taken over, GoGecko is bankrupt, the list goes on.

Dumb Advertisement

An advertisement in this Saturday's Courier Mail by Ray White CBD for an apartment at 6 Parklands (Apt 6008): "CBD Parkland Living - Below Market Value. Auction." How can a well run and well promoted auction sell a property at below market value? The auction result is exactly market value on the day of the auction. Is Ray White CBD is saying that it does not do a good job promoting the auction so that few people will know about it, and therefore it will sell at auction below market value? Another example of dumbness.

Many Real Estate Agents do a bad job

Have a look at this article. It provides further evidence that many real estate agents provide poor service, do a bad job and are lazy. The commissions real estate agents receive are way too high for the work that they do. Many real estate agents actually hinder rather than help the sales process. Most properties sell themselves, and the agent does little to improve the sales price received. I love buying from lazy real estate agents -- I get a below market price!

On The House Down 9% on First Day

OntheHouse, which gives away data, listed on the ASX recently by its lawyer founder, and dropped 9% on the first day. I think it would be safer buying real estate than this startup company who has a business aimed at real estate agents. Especially when the number of real estate agents is dropping dramatically - a mass exodus of real estate agents according to the AFR.

Watch Out For Illegal Conduct of Developers!

A legal case from last year again shows that developers and real estate agents of off-the-plan projects lie to trick people into purchasing. One common trick is to misrepresent the number of apartments sold and the number remaining for sale. (See this prior post.) Another trick, as this case demonstrates, is to have contracts signed at a high price but have an under-the-table rebate -- so that subsequent purchasers don't know the true pricing. Another tactic is for the agent to say that the developer has "stuffed up the pricing" so get in quick today before the developer realises and increases the price.

The case is Stumer Investments Pty Ltd v. Azzura Holdings Pty Ltd [2010] QSC 352 (20 September 2010), involving the off-the-plan purchase of a Gold Coast apartment.

"... Ms Greenwood and Mr Gaffney contracted to purchase an apartment, lot 80, by a contract with the defendant dated 27 December 2006. Their contract specified a price of $508,400. However, on a separate page it contained a special condition, handwritten by Ms Greenwood, which was as follows:

"The settlement to be on forty-five (45) days, but if settlement occurs within thirty (30) days, there will be a rebate of one hundred thousand dollars ($100,000)."

Their evidence is that Mr Kemm asked them to contract in these terms, the mutual intention being that the price would be $408,400, because he thought it desirable that it be represented that this apartment had sold for $508,000, which Ms Greenwood said had become the list price by the time of their contract.

Whilst Mr Stumer knew that Ms Greenwood and Mr Gaffney were themselves buying an apartment, he was unaware of the price and of its significant discount upon the listed price. There is no specific complaint that the non-disclosure of her contract price was misleading and deceptive. However, that non-disclosure, in the circumstances of the long friendship between these individuals, does not enhance her credibility. More importantly, the fact that Ms Greenwood and Mr Gaffney were prepared to facilitate a misrepresentation of their contract price to other potential buyers is relevant to their credibility."

In this case, the real estate agent made misleading statements about the likely future value of the apartment. The contract was cancelled by the court.

Also, have a look at this prior post.