It’s just that time of year again when the old financial year goes out and the new one comes in. It is also the time of year when the evenings are dark, we sit hugging our fires and it’s not much fun working outside unless you are lucky with a sunny day. But the darkest nights are now over and we can now look forward to the promise of spring and longer days.
You may wonder what this has to do with real estate… well, a lot actually. This is what has been happening over the past five years here in the rural areas. Yes, we know Perth went off a couple of years ago and so have the coastal towns, however not so in Nannup. The dark days have been long and harsh here in the bush, both for sellers and local real estate agents, but this year has seen some sustained improvement in sales and buyer interest hopefully setting us all toward brighter days.
As in most areas since the Global Financial Crisis, Nannup has had to take a pretty big hit on prices with many properties now selling at 20% to 30% less then prices achieved during the boom years. However this does not affect sellers who are now coming back into the market to buy another property. Everyone is finally realising that prices are not going up any time soon and they may as well get used to it. This seems to have brought in a stronger, more stable market where buyers do have a lot of choice and properties are available in their price range. No one is in an extreme hurry to buy, but once they find the right property at the right price they are happy to go ahead with the purchase.
However, before we get there … some very tough negotiating has to happen. Sellers, having reduced and reduced their properties over time, cannot understand why they now need to meet an Offer that is still well below the now several times reduced asking price. They can be disappointed or even offended at the price on the Offer. Haven’t they suffered enough they ask themselves. Haven’t we done the right thing and come down to meet the market? Why are we being targeted for further pain? Buyers, who are very market savvy, see a property price come down and down until it finally comes down within their range, still view the property as expensive although just possibly within their grasp. Other things complicate matters too, banks are tough on lending still, a fairly substantial deposit is now required, they may have to pay extra mortgage insurance if they cannot get the property within the correct price range and to top it all, if the price is too high, the finance approval and therefore whole purchase may fall down on bank valuation.
What this all means is that there is still a large gap between Seller and Buyer expectation. If the gap is too large then the property just sits on the market and basically nothing happens. As the gap between expectations reduces the property starts getting more visits and an Offer may come in and this is were an agent uses their skill and knowledge to guide the two parties to a point where they agree on price. Both parties at this stage feel they have had to give in a little too much but although not ecstatic they have through a process of negotiation reached at least a satisfactory decision. Once the sale is made and the stress of negotiating leaves them all parties end up feeling happy with their decision whether to buy or sell and for the Sellers they can move on and get on with their plans and for the Buyers they can get excited about their new home or block and their move.
If the negotiation fails then it is a lesson learned, not only for the Buyer and Seller, but also for the agent. Either the Seller cannot meet market expectation, or the Buyer cannot see the value in the purchase, or the agent is not skilled enough to bring the two together and everyone departs the negotiation having learned something. One important fact to remember in this is that no one can put an exact price on a property. A Seller cannot expect to sell for what it is going to cost to move somewhere else or to be mortgage free or any other reason bar the price the market will pay. The Buyer even in a buyer’s market will end up the loser coming in too low on a property they want to purchase because this gets the Sellers back up and negotiations tend to stall. The MARKET PRICE is defined as ‘The price a willing seller and a willing buyer are willing to trade at in an open market’