Cut-Price Property Management: Dirty Deeds, Done Dirt Cheap

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Urban high streets across Melbourne are populated by what now appear to be our most essential businesses: nail salons, coffee shops, property development display suites and supermarkets.

Between the gel pedicures and the Aesop-filled real estate display suites, there’s another trend that’s emerging more brazenly than ever before: dirt cheap property management. Whether pasted on empty apartment windows, dropped into our letterboxes, bombarding us from billboards or as part of our Facebook feed, it’s not unusual to see property management fees advertised for as little as 3.3%.

If you work in the real estate industry, you’ll probably be disgusted by such a low fee. But if you’re not (and let’s face it, most of the community are not), you won’t intuit much from the advertised fee – you won’t know if it’s high or low, and what value you get for your hard-earned. This deficit in communicating value is a failing of the real estate industry in Australia: they’ve not convincingly told the story of property management, and how it is an expert profession.

As a country, we’ve become intensely price-driven across many industries. Having been drip-fed an insulin-sweet feed of cheap clothes and cheap supermarket shopping, our national lizard consciousness now equates cheapness with value. At the same time, most of us inherently seem to understand that we pay a cost for our cheapness: it’s the obsolescence built into our technology, the fashion tops that look rubbish after three washes, the throw-away culture we’ve engendered. As wages stagnate, the cost of essential services like gas and electricity rise and the median price of housing soars, we look for ways to cut costs in other parts of our lives. It’s an uncomfortable tightwalk we balance upon as our economy shifts.

There are, however, some categories of expertise you don’t want to go cheap on. It’s pretty clear that a bargain basement overseas medical procedure is unlikely to be equal to its more expensive local delivery. Cheapness in professional services is something most of us are wary of, too: we want to know our lawyer, accountant and conveyancer are expert in their field. It’s only the few who are entirely price-driven that pretend all doctors are the same, all lawyers are the same and all accountants are the same – regardless of their level of expertise and accountability.

So why do we not feel similarly about our real estate professionals? Being responsible for the care of our real estate assets is clearly an important role – so why do we think that a cheap property manager will be a good property manager? Aren’t we worried that a business who wins custom courtesy of their cheapness might not be the most legitimate and experienced business? It’s disappointing that the race to the bottom when it comes to real estate fees is often fuelled by real estate businesses themselves.

If you’re an investor attracted by ultra-cheap property management fees, here’s a few reasons to think twice before handing over your precious real estate.

  • If you’re not paying much money, YOU ARE THE MONEY.

A real estate agency’s value is based on the only true asset that business has: this is their rent roll. Whilst the public often think sales is where the money is made, property management is where an agency builds its saleable value. There’s no consistency in sales – having six months of outstanding results is no predictor of the next year being a corker. Sales are just the cream on top of property management earnings.

Cheap property management fees are a sure sign of a Principal wanting to build their asset before selling it on. In short: they’re cutting fees to bulk out their property management asset in an effort to raise its value before flipping it. Their focus isn’t about quality service, supporting their property managers to do a great job for landlords or only managing properties in a geographic area that makes sense: it’s just about numbers.

The result for you as a landlord? Prepare to be sold on to another real estate agency, and soon! You’re a number, not a member.

  • Which way do you want your property management service?

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You can only ever pick two. (I take every opportunity I can to wheel out this clever venn diagram.) Cheapness and speed don’t equal excellence – and when you’re gambling with literally hundreds of thousands of dollars of real estate, do you really want your property managed by an agency who put such little value in their services that they slash their own wages? Probs not.

  • The Golden Ratio

There’s a maximum amount of properties that any single manager should be responsible for. It’s approximately 150. In real terms, that’s a minimum of 300 relationships for a competent single individual to manage between landlords and tenants. Do you know how many properties the cut-rate, beleaguered property manager might be handling? Anywhere from 200 to 300 properties. We’re talking about 600 relationships. You don’t have to be a property expert to know that these figures don’t spell quality management. Far better to trust your asset to an experienced property manager handling an appropriate amount of properties. You want them to know you, remember you, call you and know about your weird air conditioner.

There are a bevvy of reasons not to go cheap on yourself when it comes to important services like property management – but these three spine-chillers should do for now. 3.3% management fees? No thanks!

Iolanthe Gabrie is Director of social media agency Ruby Slipper

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False Economy: Why Abolishing Stamp Duty for First Home Buyers is a Fail

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Stamp duty taxes in Victoria are legitimately bonkers. They’re at genuine You’re in a cult call your Dad’levels of crazy. An archaic tax which was never meant to actively disadvantage property purchasers at the extortionate rate it does today, the State Government of Victoria’s coffers are filled courtesy of our love of real estate. And whilst it makes sense to update this rough tax lever from days of yore, there’s no political will from either side of the fence to amend the percentage of stamp duty taxes we pay – our economy relies too heavily upon it.

At a ridiculously huge 5% of the value of a property, Victorian Stamp Duty taxes equate to approximately $30,000 on a $600,000 mortgage. $30,000 ain’t small potatoes in anyone’s language. That amount of cold hard cash could pay for a hipster wedding, replete with taco-truck and Snapchat-station. It could furnish a home with a mixture of IKEA and one carefully chosen couch from West Elm. It could pay off a portion of your HECs debt. First home buyers have a lot of things they could spend their $30,000 stamp duty fees on, which is why Dan Andrews’ announcement that the State of Victoria will abolish these taxes for newbie home buyers purchasing properties up to $600,000 has been such a hit.

The bad news is, abolishing stamp duty fees for first home buyers only makes it harder for them to buy property. I’ve got a lot of time for Dan Andrews (I even call him Dan, which means we’re bonfide mates). I’m a pinko-lefty, and I’ve been impressed as he has developed into a great communicator and a good Premier. And I understand why he’s made the move to abolish stamp duty fees: it buys him more political capital in the leadup to an election, and it’s hard to argue with the benefit of abolishing such a tax for a group doing it tough.

But it’s false economy, because stamp duty isn’t the barrier to first home ownership. 

Wider economic issues which can only be fixed at a Federal level are those which are disadvantaging first home buyers. And whilst Dan’s olive-leaf offering to first home buyers makes everyone feel kinda good, it’s a butterflies-in-the-tummy moment with a high price to pay. It’s the tax-policy version of diuretic romantic movie The Notebook: it makes you feel something in the moment, but you know it’s not good for you in the long-run.

Abolishing stamp duty taxes will fuel demand in a property market which is already fiercely competitive and difficult for first home buyers. It gives a false sense of richesse, intimating that newbie property owners have another $30,000 or so in their back pockets to spend. And whilst $30,000 is nothing to sneeze at if you’ve got it in the palm of your hand – in the life of a 30-year mortgage, it makes little difference to your purchasing capacity.

The barriers to property ownership for first home buyers are:

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  • Deposit

Accruing a 10 – 20% deposit on a property is a Herculean task. It can feel particularly Sisyphean (see, arts graduates go everywhere) as prices soar ever-higher around you, whilst you continue to sock away $500 bucks a month for your deposit. This is obviously depressing for first home buyers, and a true disadvantage for those who can’t move in with the parentals to save for a deposit. With Melbourne rents being what they are, saving for a deposit is a true barrier to lending.

Rather than offering a nominal $30,000 reduction in stamp duty (which isn’t giving you cash, it’s just a commitment not to charge you anything), why couldn’t the State Government enter into  guarantor scheme with lenders, allowing purchasers to fast-track their deposit on HECs-like repayment loans? That’s would be a genuine hand-up. (Which would probably also inflate property prices if our interest rates remain at such lows – but it’s true action rather than a gesture.)

  • The Cash Rate

The national cash rate is too low. Whilst banking institutions are slowly raising rates independently and limiting some kinds of lending, the Reserve Bank of Australia have left the cash rate too low, for too long. People are able to borrow huge amounts of money for very little. Those who have equity – i.e. those already in the market and Baby Boomers in particular – are taking advantage of these conditions. This bombastic pairing of great equity earned from 20 years in the property market with ultra-low interest rates explain why first home owners represent such a small percentage of those purchasing real estate in Australia. They can’t compete. And all that cheap lending is no good for our nation more generally – where can we go next time there’s an economic crisis? Rates must go up, to both slow the pace of property transactions and to safeguard our economy for the bumps that are bound to come in the future. It’s actually making interest rates more expensive that will even the playing field for first home owners – not the omission of $30,000 from their mortgage.

  • Negative Gearing

The big one. Negative gearing actively disadvantages first home buyers in a wholesale manner that no stamp duty amnesty can ever address. Australians look to property as a safe way of building wealth and security for the future. They know superannuation won’t really help them – because whilst there are multi-millionaires with lush super balances – your average Mum and Dad will need to invest in order to retire with any modicum of comfort. So – property and negative gearing has been our national panacea. Those who have property assets have seen them grow – exponentially – over the past two decades. One couldn’t save at the rate a property in an in-demand local is growing at the moment. These property owners are now unlocking that equity to buy up big – benefiting from tax benefits which make it easier for them to own and maintain multiple properties than it is for a newbie  buyer to stake their claim on a Title.

Without changes to our negative gearing tax laws, we are impoverishing younger generations. At the very least, we’re creating a future where individual wealth will be dynastic in nature, with Mummy and Daddy allowing their children the chance at home ownership. If you come from disadvantage, it’s game over. Now, I’m not necessarily saying that we destroy the whole kit and caboodle – but that negative gearing should be amended or abridged to limit the kind of property an investor can negatively gear, the value of the property an investor can negatively gear and the amount of property an investor can negatively gear. 

Realtalk: abolishing stamp duty for first home buyers is an appealing gesture. But it’s an impotent action which only compounds demand in a market starved of supply. It diminishes the ability of first home buyers to purchase property. It’s a sugar-high with one bad hombre of a comedown. It compounds the effect that the true barriers to first home ownership present – and if the Federal Government don’t take action by working with lending institutions on equitable deposit terms, by amending negative gearing taxation laws and by working with the RBA to lift the national cash rate – future generations will be locked out of the property market.

PS for First Home Buyers: If the ship’s going down, make sure you spend your $30,000 with gusto and enjoy a frickin’ deluxe taco-truck wedding with a meme-inspired pinata. Treat yo’self, because it doesn’t look like the ruling elite ever will. #BAM

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Gratitude and the Estate Agent

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I love coffee cards. I only drink decaf, but that doesn’t stop me from punching my way through a coffee card in the space of a fortnight, before being rewarded for my good custom by my local provedore of (de)caffeinated beverages with a freebie.

I feel treatedacknowledged and delighted by this gesture. In all, I’ve probably spent about $35.00 with a coffee shop over the space of a couple of weeks, who then reward me with a coffee worth 10% of the value of my investment in their business. That’s just good business – and increasingly, we expect our loyalty to be rewarded – even with the most basic of purchases.

Can you imagine if an estate agency spent 10% of the value of a vendor’s investment on treating their vendor and buyer? It’s likely you can’t.

And that’s because the real estate industry has a problem with saying thankyou.

The bad old days of cleanskin wines and Donna Hay cookbooks are gone. The real estate industry is being forced to give more than ever before, whilst ostensibly working for the same (or a reduced) commission. Frankly, I don’t know how they’ve gotten away with displaying insubstantial gratitude to the people who pay their bills for so long. Are you a real estate stalwart grumbling with disagreement? You’re likely part of the problem.

Free-market economics are improving standards across the real estate community, with savvy agents looking to innovate across the entirety of their businesses. Creating an edge is where it’s at, and that point of difference simply can’t be achieved with the lacklustre delivery of shiny, branded Christmas cards with a printed ‘signature’, templated dross-filled newsletters focused on your business rather than your community, or a cheese knife and woodblock set handed across the front desk by a harried Sales Secretary at settlement time.

So what’s the edge? And how can you get it?

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The edge is called delight. Delight is the emotional state that creates goodwill between parties. Goodwill brings with it referrals, repeat business and cold business – all drawn magnetically to you as a sales agent or a company because of your reputation. Delight costs, of course. It costs in personalised, thoughtful gifting. In genuinely giving back to your community in terms of quality messaging on bespoke social media. It costs in time, as well – in lounge-room sitting or calling that landlord client to check-in on how his experience with your property manager is faring. Delight is the only currency that matters in an age when fewer agents are doing more business thanks to ‘marketing units’, more powerful databases and the collapse of smaller agencies into monied mega-brands.

So let’s get grateful. To both our vendors and our buyers – who have both paid a healthy portion of your monthly bill courtesy of their invoice. It’s easy to become numb to 5-figure commission checks when you’re within industry, splitting them up into their 40 – 60% splits before they’ve even hit the trust account. But each commission is big bucks to your vendor, and it needs to be appropriately acknowledged.

Word to the wise (and not the wise-assed): this isn’t an opportunity for Principals to pass the buck on gifting. This gesture of gratitude must be a percentage that comes off the whole fee. Not just the amount of commission apportioned to the sales agent – that’s lazy, and greedy. Imagine the sense of delight you could offer your vendors and buyers by setting aside just $3000 of a $30,000 fee and investing in gratitude. BBQs and dinner-tables around your community will soon be buzzing with talk of your decidedly un-realestate-y generosity. This delight could be a big spend all at once, a fair splitting of the resources between the vendor and the buyer. It could be a portioned upfront spend on the two parties, with an additional amount put into a collective ‘delight’ kitty, used for the benevolent scattering of goodwill to deserving clients in the form of coffee cards for newbies to the neighbourhood, magazine subscriptions, tickets to the theatre or weekends away.

The edge is delight, surprise and gratitude. It’s time to give back and to say thankyou. And it feels good.

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Photography: Breeana Dunbar

Location: Aquabelle Apartments, Mornington Peninsula

Iolanthe Gabrie is the Director of Ruby Slipper, Melbourne’s best social media agency. Learn more here.

 

Christmas Parties: The Estate Agent Guide

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You can tell Christmas is coming in three key ways when you’re an estate agent.

One is when your clients decide to wait ’til next year to sell their home,  feeling they’ve missed the boat in terms of an auction campaign or harnessing the ‘spring buzz’. The second way you can sense Christmas is nigh is the sight of Mr Kipling mince pies at Woolies. And the last is the arrival of the annual Christmas party invitation – which is something either met with great excitement, or gnawing dread. In today’s Hometruths Melbourne blog, we offer a Christmas Party guide for principals and estate agents – a thorough what-to-do and what-not-to-do guide that will make for happier celebrations of the year that was. More Nutbush, less Krampus.

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Are you a Principal? Congratulations on making it through another year. It’s tough out there for a boss, #amirite? You’ve probably contended with an array of events in 2016 including but not limited to: legal skirmishes, staff turnover that made you panic, tax bills that result in emergency accountant visits and enforced attendance at your local real estate institute for CPD points. It’s hard to tell which of these is the worst, innit? In any case – you’re on the home stretch and it’s time to reward your team for the many wins you’ve enjoyed. Here’s how to do it:

  • Forget about mini-buses. Anywhere.

It’s true that a winery day out sounds initially appealing, especially if you rather enjoy the odd tipple. But being stuck on a bus hours outside of your capital city with Jerry the BDM vomiting pulled pork burgers and pilsner out the mini-bus window is a much less happy reality. Don’t make the Christmas party into something which must be borne through gritted teeth rather than enjoyed. Appreciate that not everyone in your team enjoys drinking, and take that into account when planning a stress-free and enjoyable day out together.

  • Don’t conflate team-building with celebration and reward.

You have 11 months of the year to do team-building. Christmas parties are not about that: they’re a reward that shows your appreciation as a business owner without making anyone feel put upon or pressured into an activity they don’t enjoy. Less abseiling and trust exercises, more ‘here’s a personal gift from me to you, what would you like for your entrée?’

  • Partners matter. Include them.

Estate agents often work six days a week. In order for an agent to succeed and make you money, they need the complicit support of their partner. The real estate widow is carrying the domestic workload and executing the emotional labour of a couple by themselves. They are as much a part of your success as your employee. Make sure they know they’re appreciated and included in Christmas celebrations and rewards. Let’s face it: a Christmas lunch or dinner with your team alone makes for pretty dull conversation. Throw partners into the mix, and you’ll have a diversity of relaxed conversation that’s (hopefully!) about anything other than the office. Don’t be cheap about this – scale your celebrations to a level that partners can be acknowledged and rewarded within.

  • Don’t be offended by difference.

Maybe you’re going ahead with a Christmas party at a winery. Or you’re taking the team out for a day of paintballing. Be open to the reality that not everyone in your business will want to participate. Not everyone drinks, travels in mini-buses well, or enjoys toting paintball guns in the bush. If you have a team member that would prefer to sit this event out, don’t make a big deal of it. Their fun isn’t your fun. That’s OK. Reward them privately in a way that they will appreciate, and your tolerance and thoughtfulness won’t go unnoticed.

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Are you an estate agent? Well done to you too, on making it (nearly) all the way to 2017! It’s time to enjoy and pat yourselves on the back for having being faced with alarming circumstances during 2016 including but not limited to: changes to quoting laws, dogs constantly jumping on you during listing presentations, forgetting open A-Frames on street corners, dealing with irate, threatening buyers during boardroom auctions and trying to meet your monthly KPIs. Holiday season is here, and our recommendations on best enjoying your team Christmas celebrations include:

  • Keep it nice. 

During your Christmas office party, you may very well enjoy a snifter or two of your favorite tipple. Sante! Relax and mellow out. But don’t let that sweet devil’s liquor loosen your tongue or allow you to behave in a randy, inappropriate fashion. You’re still in a professional setting, so calling people racist nicknames, bottom-pinching, or indulging in a disco-bikkie or two in the bathrooms really isn’t on. It’s easy to ruin a reputation. And it’s easy to bully other people when you’re in a position of power. Neither action is very spirit of the season, really.

  • Give your boss a gift.

Appreciation, innit. Goes a long way.

  • Make an effort.

Some of us like Christmas parties more than others. If there’s an activity that makes you really uncomfortable and you don’t want to participate, speak frankly to your boss about this. If they’re not a d*ck, they’ll respect your considered response. But if you’re just generally a Christmas party hater, take off your Grinch hat. Make it a more enjoyable a day by offering to organise games or a focus for the party. Maybe not Cards Against Humanity, but something that will elicit a giggle from everyone. Or indulge in a new outfit for the day, and think of ways to engage with your colleagues outside of your daily roles. Chat to Jacinta’s husband about his favorite books. Find out if Gregg is still collecting 1970’s football cards. There’s more to your colleagues than meets the eye, I’ll bet.

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Photography: Breeana Dunbar.

Don’t Be a D*ck: The Landlord Guide

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Following on from our rather popular ‘Don’t Be a D*ck’ guides for estate agents and homebuyers comes Hometruths Melbourne’s essential ‘Don’t Be a D*ck’ guide for landlords. Good landlords: may we know them, may we be them, may we become them. Being a landlord is an important social role, and one that many take with all due seriousness. Unfortunately, some landlords make life difficult for everyone involved – for their tenants, their managing agents and for themselves – due to either sheer bloody-mindedness, a lack of understanding of the landlord-tenant relationship or because they’re just d*cks. We hope today’s handy guide goes some way to remedying the situation for the latter.

1. Don’t be the cheapskate who self-manages their investment property.

Don’t be that guy. Often a  close relation to the vendors who put ‘For Sale By Owner NO AGENTS’ handwritten signs  against their front windows or in micro-font in the local paper, the self-managing landlord is motivated principally by cheapness fuelled by ignorance. ‘Why should I spend $100 bucks a month on an agent?’ he thinks. ‘What me worry?’ When your investment property burns down due to an ill-maintained hot water system or a crew of whimsical bikies take over the residence using the corner spa as a giant meth-cooking boiler, you’ll be worrying alright.

Unlike the relatively short term relationship between a vendor and a buyer, the relationship between a landlord and a tenant is an ongoing affair which may last many years. Like any relationship, it will have its ups and downs. It requires good professional boundaries based on a robust knowledge of tenancy legislation in your respective state, an understanding of bonds and notices and of the responsibilities and rights of both landlords and tenants. Even in the best of landlord-tenant relationships, matters can become fraught. Whether that’s because of rent late-paid regularly, maintenance issues, wear and tear or body corporate issues – a managing agent is the essential fair sounding board between you and your tenant – emotionless and encouraging resolution at all times. Resolution supported by the hard word of the law, that is. If you don’t know where to lodge a bond (or you wonder what a bond even IS), can’t properly create condition watertight reports, if you don’t know how to correctly vet potential tenants or understand the parameters of legislation around rental arrears, eviction and representation of matters at VCAT – you cannot risk self-managing. The systems and accountability mechanisms a professional property manager has at their disposal shores up your financial position, while leaving you to get on with your daily tasks – not trying to remedy complex tenancy matters you are not expert in. Word to the wise: leave it to the professionals.

2. Don’t get Uncle Don to perform maintenance on your property.

And don’t pretend to be Uncle Don either, ya cheeky bugger. Some landlords are controlling and suspicious when it comes to maintenance, occasionally doubting the veracity of the request for maintenance. If they learn there’s a gas heater on the blink or the oven’s not working, they will attempt to perform maintenance on the cheap by doing it themselves. This is dangerous and irresponsible. Deaths have been caused by faulty appliances. It’s a serious matter. Don’t believe me? Read this article and feel the fear of God. Unless you are a registered, insured tradesperson, don’t put your tenant’s welfare at peril for the benefit of a financial saving. Your property manager has an array of trusted, insured professional trades at their disposal for urgent and non-urgent repairs. Take your property manager’s advice when it comes to maintenance, and don’t be the d*ck that haggles over service callout fees (“What do you mean it’s $220 for a callout? I’ll just get Uncle Don to go ’round.”). Being a landlord has responsibilities which are expensive – maintenance done properly and in a timely fashion is one of them.

3. It’s your investment property, but it’s not your home.

Flying in from interstate on a stopover? Ringing your property manager incessantly once you land to get through your property ‘for a quick look’ on short notice? ‘They won’t mind, will they? It’ll only take a minute’. Erm, actually the tenant probably will mind. Your tenant has the right to quiet enjoyment of their home. They pay for the privilege. Your property manager can inform you about annual access to your investment property for routine inspections, but make sure to begin any conversation about inspecting your investment long before you fly into town. Your tenants will likely want to present their home in the best possible light, and be aware of strangers entering their private space.

4. Don’t be a hateful bigot.

Thinking of asking your property manager to turn down the applications of people based on their race, gender, sexuality, marital status or disability? You don’t deserve to be a landlord, you unutterable bastard. Nick off.

5. Don’t choose a property manager based on cheap fees, or ‘free management’ periods.

Property management businesses who urge you to join them by offering heavily discounted fees or ‘free management’ periods are focused on building up their estate agency’s largest asset: that being their rent roll. These are worth a motza to the agency. What they’re not focused on however, is the service they offer you as a landlord or the health and workload capacity of their property managers. You’re just a number to fatten a rent-roll for these behemoth discounting real estate businesses, rather than a client to be cared for. By all means, if you’re being prospected by an on-the-ball property manager who knows you and your property inside-out, consider leaving your lacklustre current agent for them. But don’t be wooed by a cheap fee which will only save you shekels and likely disturb your tenant-landlord relationship. Your role as a landlord is more than a simple return on investment and screwing down every service provider to save you dollars – you’re housing humans. And if you’re irresistibly drawn to cheapness remember: thing that are free aren’t of value. That goes for property management services and anything else of import in life. Property investment and being a landlord is a long-game, in which you should try your very darndest to not be a d*ck.

6. Realise that selling your leased property is an inconvenience to tenants.

Sometimes ya just gotta sell a property. I get it. Whilst having a tenant in-situ during a sales period isn’t ideal (in many cases it dissuades owner-occupier purchasers who need to wait for your tenant’s lease to expire), it isn’t uncommon. It is an inconvenience to your tenants, however. Think carefully about your motivation: are you really ready to meet the market, or are you livin’ on a prayer Jon Bon Jovi style when it comes to your asking price? If you’re being wooed onto the market on the never-never, don’t put your tenants through the hell of a sales campaign – months of open for inspections with no result due to your own price expectations being out of the ballpark. If you are ready to sell, proceed with the selling process in tandem with your property manager and sales agent, respectfully and transparently. It is a good idea to offer fair compensation to tenants during sale period – a sum that will be paid to them (or taken off their rent) at the end of a set time contingent on the property being opened at agreed times and in a condition which is appropriate. This is both an incentive to the tenant, and an act of good faith. By the way, this doesn’t mean throwing them $20 a week for three months worth of opens. Don’t be a d*ck. 

Purple People Eater: Why Purplebricks Will Improve the Real Estate Industry

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Purplebricks is not going to revolutionise the Australian real estate experience. But it may very well improve it, and for the better.

For those not of the industry, a potted history of Purplebricks:  a UK-based technology business, Purplebricks offers fixed-price property marketing which purports to upend every market it enters. They’re best thought of as a technology and data company, in much the same way as Uber and AirBnB are: they don’t actually own assets such as physical agencies – they own technology and systems. They’ve got money to spend on PR and (because they’re clever and know which way their bread is buttered, unlike many of the old guard of our existing property industry), they’re engaging in both a traditional and digital media assault. Which is frankly what you have to do if you’re wanting a startup to do well.

Many agents have been proverbially sh*tting purple bricks at the thought of their industry being disrupted. If you’ve been getting your knickers in a knot about the entrance of Purplebricks into the Australian real estate market, it’s more a revelation of your potential professional weaknesses than of their ability to destroy your livelihood. Here’s why:

  • If you lose a listing to Purplebricks, you probably deserve to. Ouch. Right? Purplebricks listings are much like the infamous ‘chicken raffle’ listing, where four agents are called in to complete appraisals within a week. These listings are really a race to the bottom, where a decision by a vendor is based primarily upon agent cost because nobody did their bloody job and prospected them properly. Agents who have ongoing relationships with potential vendors based on true prospecting – which is offering information over a long period of time, paired with personal service and a sense of intelligent delight –  will not lose listings to Purplebricks. That’s because their offering isn’t based on a fixed price. It’s based on expertise, accountability, an actual relationship and (most importantly) – reciprocity. Purplebricks will undoubtedly appeal to some vendors – those who haven’t been prospected, those who are very price driven, and those who think they are the expert. The first of these – the vendor who hasn’t been prospected – is really a problem of agent neglect which can be turned around by action. The second two – vendors maniacal with greed or narcissistic in the extreme – are best avoided anyway. It’s these latter potential clients that Purplebricks will benefit from, and probably not to your detriment.
  • The UK real estate market is not the Australian real estate market. The UK has a ‘chain’ real estate system, which diminishes urgency and expectations for buyers and vendors. It’s best understood (in a nutshell, and very simplistically) as a chain of property settlements which must occur simultaneously. Every sale is conditional and held together by a chain of purchasers agreeing to go ahead with their transaction. If one buyer can’t settle for whatever reason, the whole chain of transactions fails. It’s unthinkable in comparison to the Australian real estate transaction process. Our own market has no such weakness: if you don’t perform on an unconditional contract, you’re toast. Australian expectations of real estate sales transactions are substantially higher than they are in the UK. Price quoting on property and expectations of price based on the quote also differ – in the UK, the asking price for the property is the asking price expected. Buyers know to offer below immediately. Our own market is the polar opposite – with buyers recognising that the asking price is often below vendor expectations. An Australian vendor left to their own devices to quote on property price a la Purplebricks will be completely stuffed, resulting in failed campaigns at a much higher rate than traditional agent-led campaigns. Moreover, capital cities in Australia have auction-centric markets. As any agent worth their business card knows, a successful auction campaign relies on conditioning and education of both the vendor and the buyer. It’s not a matter of whacking a price on the thing, uploading it to your favorite real estate portal and cracking open a tinnie. Purplebricks’ model appears to favour the private sale market which is more natural to the UK – it will probably work well in some more suburban areas of Australia which have limited capital growth and poor agent activity.
  • Fixed-price real estate marketing isn’t a new thing. Purplebricks has marketing and technology, and they’re utilising it at far more sophisticated levels than many of the dodgy fixed-price ‘Sell My Whatever’ brands of the past. But their model is essentially the same. Their offering will appeal to some of the market, certainly – variants on this offering always have. The best way to future-proof yourself against potential disruptors wearing different guises? Be a better agent. Use technology to your advantage. Prospect properly. Pay attention to details. Make people feel special. It’s a service industry, which is something the real estate community itself sometimes forgets. Our trade is our capacity to serve our community and negotiate relentlessly for our vendors.
  • Horses for courses. Not every vendor is driven by value. Some are driven by prestige: they want to list with the best agent who has the best marketing. They want the soft gloss, four page brochure. They want the VR floorplan. They want everything that opens and shuts, and they want their friends to see it. These people will not be attracted to PurplebricksOther vendors will kill you for a dollar and want to haggle down the price of a Happy Meal. This may be partly your failure for neglecting to show them why you deserve to be paid for your time and effort. But it might be because they frickin’ hate real estate agents. Or that they’re just really cheap, too. And that’s okay. Horse for courses. Purplebricks isn’t for everyone any more than you are.
  • Negotiators R Us. Purplebricks flat-price philosophy works when you don’t truly understand the ugliness of human nature. That vendors and buyers are greedy, vulnerable, scared and largely unable to negotiate effectively. They’re strung out and emotional: they’re three year olds at dinnertime, waving around a contract of sale. That’s why there’s estate agents to coach them through this risky, emotionally fraught process. Vendors don’t believe they’re unreasonable with their price expectations. The fact they’ve rewired the garage and put in new carpet has to add $12,526.00 exactly to the price they’ll get for the home, right? They don’t understand the dangers of pricing a property inappropriately, and the risk that overexposure in the market has upon a property’s eventual value. Purplebricks aren’t an estate agency: they’re a technology business offering systems and access to task-oriented agents. They’re not you, agent.

If anything, Purplebricks will improve the state of the Australian real estate market by encouraging existing agents to finesse their offering to the public. To go about things in a different way, using technology and old school service. It will make stragglers practising in markets too long neglected  by lazy, backwards Principals shape up or ship out. The only people who have anything to fear from Purplebricks are agents who are lacking in skills, ideas or talent. So don’t worry about the disruptors: just get on the with the job.

* I did contact three Purplebricks estate agents in Melbourne to learn more about their model. All three told me they were under strict instructions not to speak to the media about their experience as Purplebricks agents.

Don’t Be a D*ck: The Homebuyer Guide

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Homebuyers, I know you’re scared. You’re scared that the home of your dreams is going to slip through your fingers. You’re scared that the estate agent is trying to rip you off. You’re scared that you’re always going to be living with your folks in a quiet court in Boronia. And being scared makes us all into d*cks. But in the second of Hometruths Melbourne’s Don’t Be a D*ck Guides to Real Estate (read the first instalment here), we highlight ways you’re unconsciously being a tool during your journey for property – and how this toolery is actually preventing you from achieving the holy grail of property ownership.

1. No-one owes you a property, so stop acting as if they do.

Property prices in highly desirable areas with limited property supply – typified by their proximity to the city, to amenities and to employment –  are not going to become more affordable. The reality of our economy is that Baby Boomers are moving closer to the city. Baby Boomers are asset rich, thanks to both their time in the market AND the era they were born into. Their good fortune (and decision to invest in property) is broadly a trick of fate, and not a personal insult. As opined on in our Negative Hearing blog, some home buyers foster unrealistic ideas about the economy they exist in, and what they should be able to buy. They refuse to look the difficult reality of our economy squarely in the eye and adjust their expectations.

Australia’s capital cities are quickly mirroring their European counterparts, with the soon-to-be norm being lifelong tenancies rather than home ownership. Melbourne is growing by 1760 people per week, consistently. They’re all competing for a limited amount of affordable property. Interest rates are at all-time lows. Sitting on your hands and waiting for a ‘bubble’ to burst before purchasing is ultimately self-harming, pricing you out of your preferred inner-urban location. Property in the inner-city is expensive. I know it is. It’s galling to see a two-bedroom shitbox in Brunswick go for a cool million. It can make you feel helpless and uncared for by the community in which you live. So mourn it, gnash your teeth and rage to your peers.

And then make sure you get over it and make a decision to do the best with what you have, where you can.

2. Shit properties are the shit.

Just like everyone should have that one shit boyfriend/girlfriend to teach them the value of a quality relationship – everyone should have one shit property in their purchasing history. It builds character. And more importantly, it gives you the opportunity to spend time in the market watching your asset grow.

Are you turning your nose up at old school one bedrooms on the edge of growth suburbs, because they’re too far from your ideal, or because they’re a bit manky? Think carefully – these outer fringe growth corridors are ripe with the relatively-kinda-affordable properties that you need to buy to hop on the asset elevator. If you are on a strapped budget, avoid brand new off-the-plan apartments. They might appear convenient and glossy, but they come at a substantial premium for size and have stamp duty plus a margin built into their prices. Choose the ugly duckling, which will grow in value at a rate you can’t possibly hope to save yourself. If you’re lucky enough to be able to do so, buy an ugly property now, and in a decade you’ll be glad you did – congratulating your former self whilst quaffing single blend coffee in your renovated residence. Or continue dissing properties that don’t have all the bells and whistles while waiting for prices to come down. Whatever.

3. There’s no conspiracy to screw you over.

Estate agents are hard workin’ schmucks in shiny suits with leased European cars. (I say this with love – I’m married to one.) They’re not Bilderberg Group evil geniuses. They’re not making voodoo dolls of potential buyers and working out the most audacious lies to tell them. Bottom line: if you have enough money you’ll buy the property. If you don’t, you won’t. There’s nothing else to the story, not really.

What agents are doing is working very hard to help their vendor come to terms with the reality of the market they’re selling within. This is called conditioning. There’s nothing evil about this either – it’s just a process which helping sellers look more dispassionately at their asset so they can make a decision to sell when an appropriate offer presents itself. It involves the feedback of recent sales results, and comments direct from buyers too. And whilst you bitch to your mates that property sales results are offensively high (‘That guy paid waaaay too much for the property. What a rip off!’), the likelihood is that the vendor probably wanted 10 – 20% more for their property than it eventually transacted for. It’s only through the hard graft of education that the estate agent has eventually brought buyer and vendor together.

Remember that the estate agent works for and is paid by the vendor – not the buyer. This doesn’t mean that agents work against you or are hating on you. More often than not, buyers are working against the agent by not showing their true interest in a property, before becoming angry when it’s sold ‘under their noses’. As if, by showing their interest and enthusiasm for a property, something terrible will happen. If you’re finding your hand staid by agent paranoia or lack of knowledge of the property market and its machinations, I suggest you engage the services of a buyer’s advocate to help you acquire a property. Buyer advocates work for and are paid by their buying clients – and they can be just the ticket to help you get over your toolery in the kindest possible way.

4. Hand over your frickin’ details.

Enough with the playing hard-to-get with phone numbers and email addresses at open for inspections. If you don’t hand over your contact details to the agent or you make a song-and-dance about the process you are a tool. You’re disrespecting the owners of the property AND the property professional standing the open. It’s someone’s home and a space that needs to be secured – it’s not a free-for-all for nosey parkers. And whilst I am all for nosey-parkering, nothing is for free: your details are the passcard to the inspection. If you’re buying  or selling property (or even if you’re not – at least, you’re not now) – these details will allow the agent to invite you to similar upcoming opens, and to build a hopefully mutually useful relationship. Sure, their weekly emails are often boring and won’t regularly be tailored to your exact needs. It is what it is. It’s a social contract. Don’t be an open for inspection tool. (And don’t badmouth the property whilst you’re there loudly, either. There’s a special place in hell for those people.)