Property Hub - Investment Insights & Inspiration - Realty Talk - Every seller’s greatest fear

Episode Date: September 26, 2024

There is one thing every real estate agent learns very quickly when they begin their career and that is  - the greatest fear of every seller is the fear of underselling.  So some agents will tell you the best way to get the highest price when selling is to go to auction.   But, is that the case? AJ Chand, an experienced agent and a Director of Proptech Australia gives us his thoughts on that topic.  Then …. we switch the conversation to that other hot topic - affordability as Bushy is joined by Real Estate Institute of Australia President Leanne Pilkington. Subscribe for free to Realty Talk on the Property Hub channel, join our community and get more insights here: https://linktr.ee/propertyhubau Property Hub is a collaboration between Bushy Martin from KnowHow Property, Kevin Turner from Realty, Andrew Montesi from Apiro Marketing and Apiro Media, and Australia’s largest independent podcast network DM Media.See omnystudio.com/listener for privacy information.

Hi, I'm Devin Kerner. Welcome to this week's show. There's one thing that every real estate agent learns very quickly when they begin their career, and that is the greatest fear of every seller is the fear of underselling. So some agents will tell you that the best way to get the highest price when selling is to go to auction. But is that really the case? In certain markets, option might be good and i think that was pre-covid uh post-covid however as the market condition changes so does the so does the option environment that's aj chand an experienced agent and a director of prop tech australia hear more about what he has to say today as he catches up with bushy later in the show and then we switch the conversation to that other hot topic

affordability and bushy will catch up with real estate institute of australia president leanne pilkington before we start i want to thank our supporters and content partners realty.com.au bmt tax depreciation know how property finance and apiro marketing you'll find us on all podcast players as the property hub also on the southern cross australia network hot copper and all social media platforms property deductions can save you thousands of dollars each year to make sure you maximize deductions you need to work with the most experienced quantity surveyor in the country bmt tax depreciation is the leading specialist in the industry they've completed over 700 000 tax deduction schedules for residential investment

and commercial properties australia-wide bmt guarantee to find double your fee in the first full financial year deductions. Call BMT on 1300 728 726 today for an obligation free quote. Realty Talk and your host Bushy Martin. Now there's an old myth and almost an unwritten generally held belief that keeps getting perpetrated in property cycles and property circles that to get the best price for your property you need to sell at auction. But does this really hold true and is it really still the case? Well, to investigate this and uncover some alternative opportunities, we're joined by Dynamic PropTech entrepreneur, AJ Chand. The CEO of Rezo is also a director of the PropTech Association of Australia and a licensed real estate agent in New

South Wales. So welcome to Realty Talk, AJ. Thank you for having me, Bushy. Longtime listener. So grateful for the opportunity to join you today. No, I've been really looking forward to having a chat and spreading the word about some of the awesome work that you're doing in this space but i guess focusing on the on the subject of the minute does an auction actually guarantee that the vendor will get the best price aj uh simple answer no i think there is no guarantees when it comes to selling property first of all but definitely in this market the auction process does not guarantee the best price for the vendor simply because if you look at last month's numbers through CoreLogic, only 56% clearance rate,

which was 268 properties sold, and about similar amount of properties sold prior to auction. So out of 1,000 properties, that just paints a picture, Bushy, that in certain markets, auction might be good, and I think that was pre-COVID, post-COVID, there where we had historically low interest rates. There was a lot of buyer appetite for property sales,

and some and auctions were getting great results however as the market condition changes so does the so does the auction environment and and right now i think we our numbers are suggesting that it is not a great auction market so it does not guarantee the best price for the vendor no yeah very well so well let's walk through the the pros and cons of going to auction if you could then hijack yeah sure so like i said the pros in a in a market where the market is hot um and you have a lot of buyers and you have a lot of competitive tension for the property yes uh auction good way to go also um auctions are set date so you know it's easier to close for an agent it's easier to close and for the vendor it means that they know uh certainly at what date the the property will

closed so those are some of the pros and also the auction conditions which not so much great for the buyer however good for the vendor and the agent is that they're under auction conditions it makes it very difficult for the buyer to pull out after the sale so you see those are some of the pros however the cons are that it is more expensive to run an auction process and it's more prominent in this was in victoria than any other state and so the marketing is a lot more extensive so there's a lot more cost involved in in marketing and auction property and then you have auction years involved you have you have a lot more expenses up front from a vendor's perspective to to go to go to auction but then when you look at the auction clearance rates and then you're like all right

well there's a 56 chance that i will sell the property is it really worth going through that process and also it just puts everyone um it gives everyone a lot of attention right because some buyers actually would not participate in an auction process simply because they don't they have to have their finances sorted before they get there they would um they would have to have their pest and building done they would have to have their conveyance they have to have be ready to go to make to make an offer on a property and and get accepted i think that is a detriment for a lot of buyers a lot of buyers were like well you know they buy private 3d and they usually don't buy at auction so you're you're cutting out some of the buy pool as as as a result and

you're also now taking on the additional risk of marketing and spending a lot more on the marketing campaign for it not to sell at auction very well said i i often think that the big winners in auction are the selling agents in the auction years because it's a it's a great emotional opportunity for them to spend the the vendors money to promote the agency and and the the agents uh but not necessarily a great experience for either the buyer or the seller given the tension and the emotional roller coaster ride that they they go on it and the pressure that's associated with that event so uh given all that uh and given the work that you're doing with can technology actually deliver the best of both worlds for a vendor by actually offering the

competitive tension of an auction that you spoke about along with the privacy of a negotiation then yeah certainly and i think this was one of the biggest puzzles for us to solve um when it came to rezo we tried to create a win-win-win scenario for the vendor the agent and the buyer and i think the buyers often neglected as well when it comes to when it comes to developing technology that sort of bridges the gap um so rezo in essence is an offer management technology however it has a lot of smart algorithms built into it as to how it creates the competitive tension so what we do really is, just to give you a brief overview of what Rezo does, it integrates with the agent CRM and he pulls all the buyers for a certain property out and he invites them to a sale.

In doing so, we qualify them. We qualify them. We know what their financial status is. We know all of their settlement requirements. And once the qualifications are done, they are prompted to make an offer on the property. And now this all happens within five minutes of them getting that invite so they will make an offer on the property and then what happens with with that offer is submitted to the agent and also the vendor can track that through a live view that they can see what's happening what buyers are coming through what they're offering for the property and at the end of the selling process we have a very unique algorithm for ranking so what that does is that will prompt the the buyer or let them know where they sit within the sale process so they could be

ranked say number one or number two and that is without disclosing the price of wherever other buyers are so it will sort of prompt you to increase your offers and that often happens we usually we usually get three to five uh offer increases per buyer to to doing that and the whole idea is to keep the buyer in the loop create maximum transparency for all parties involved and to create trust in the process so a buyer can then increase their offer as they go and they can increase their rank or they might reduce in their rank and the agent would rank say every 24 hours a couple of days before closing the sale and all that means is that there's a lot of competitive tension between between the buyers because they can see where they're ranked and if

They really like the property. They put their best foot forward and they keep increasing the offer. And often we see the rank one person also increase the offer because they want to maintain position. And that wouldn't happen in an auction. You wouldn't go to 890 and outbid yourself

by another 100 grand to get to 990, for example. So the technology, first of all, creates a lot of transparency, which then gives trust in the process. and also it helps the agent because even in hot markets when you think about it, say you've got 100 buyers per property and you're trying to negotiate an offer for the vendor

and you're trying to get them to increase the offer three to five times. That is about 500 touch points over 100 buyers. That is pretty much impossible to do in most cases. But the technology can do that very effectively, very efficiently. It can communicate with everyone and and let them know how the sale process is going so the idea was to create a win-win-win

situation um for the vendor and by the buyer and and the agent as well and what this process really demonstrates is the trust in the process so even the buyers that don't win property with us and then miss out they had an equal opportunity to fight for that property which is what the aim is And they're still satisfied because they had a chance. And you would know, like, you know, we've bought property before and I've missed out on properties before for $5,000 or $6,000. And I did not even know about it until I saw the sale price that it went for when I looked at the data later on. And would I have gone extra $5,000 or $6,000? Yes.

Was I given the opportunity? No. It's simply because the agent was overrun with the amount of demand for that property. So we're trying to eliminate all those things. we're trying to make it more efficient we're trying to get more trust into the process and we're trying to create unique algorithms that bridges the gap between private treaty and auction and it's almost a subclass in itself now where agents are using the reso process to sell property which is predominantly a private treaty process however it has some of the better elements of

auctions built in through technology no i love it it's almost a technology version of the best offer approach where where there is there is the opportunity of second bias of the cherry one one quick uh question uh on the exercise it it sounds like at the moment reso is pretty much price focused and as you would know quite often properties are sold not just on price but it might be terms in terms of how quickly uh no finance etc how is that encompassed within the reso model yeah it's a good question so what actually happens the agent does not have to pick the number one rank um not or not always it did and the vendor doesn't have to pick number one rank uh usually we see um rank three or rank four if they're if that twenty or fifty thousand

dollars off the sale however they're a cash buyer which means there's a higher likelihood of the property sibling uh the agent or the vendor might opt to go for the third or the fourth buyer for for that matter um very and when we qualify the buyer we do ask them about those conditions and if it's a cash offer then we do put them um we let the agent know and the agent could potentially pick them over the number one rank which could be contingent to a long settlement or it could be contingent to finance getting approved so usually the agent or the vendor will see that as a risk and they will go with a different different buy in that case love it i love the openness and the transparency of what this creates and the opportunity for all parties really to know

exactly what's going on in the context of the process. So look, we've only really scratched the surface. We'll look to talk with you more about the opportunity moving forward because it's really opening our eyes and ears to a price optimising and deal optimising prop tech opportunity, AJ. And we love the way that you are disrupting industry and improving the property experience for the benefit of all so thanks for taking the time to share all of this with us on the show today thank you it's uh it's been great and i appreciate you spreading awareness for prop tech and power solving issues in the real estate space at know how property we're more than just the best residential and commercial loan arranger we craft a plan for your lifestyle and

future with our three-stage strategy we start with your lifestyle strategy whether it's fighting your dream home in the perfect location or adding to your residential or commercial portfolio, we listen to what you want and need to do. Next, we create a financial strategy. We dive deep to uncover what you can do, ensuring your finances are set up for success. Finally, we implement our validation strategy. We become your John West of property because it's the property we reject that make sure you get the best. Know How Property, smart, tailored strategies for your life and investments. Unlock bonus content now as a premium subscriber. Now this year was supposed to be the one in which the property sector finally experienced some relief from higher interest rates as property

prices and affordability were supposed to wheeze and housing supply and affordability were supposedly going to improve. But for the most part, it certainly hasn't worked out that way. So to discuss why and what can and should be done about it if anything and what this means to you we're joined by one of the real estate industry's most respected thought leaders Leanne Pilkington the CEO of boutique real estate group Langley Simmons who leverages her three decades of veteran expertise as the president of the Real Estate Institute of Australia so welcome back to Realty Talk Leanne. Hi good to see you again. Thank you now we're sort of getting straight into the subject to you. What impacts are inflation and interest rates having on the real estate industry as you

see it? Well, what's really interesting right now is the increasing number of people that are selling that have only been in their homes for between 12 and 36 months. We've seen previously the average time spent in a home has been getting longer and longer, sort of between, it moved from seven years to sort of 10 or 11 years. And now we're just starting to see people cannot cope with the interest rates and the cost of living and everything's getting too much and they're selling very quickly so it's quite quite concerning very interesting i wasn't aware of that so i appreciate you sharing it from your perspective what does a life a longer world mean for the property sector then if this continues yeah i don't know i mean it's going to because

a lot of those people those people are either trying to downsize or they're renting um right which is um which is not great for our home ownership rates over the you know medium term we are um as we're recording this right now we're seeing some of the big banks reducing their um interest rates um marginally they're also reducing their um um their the rates that they're paying people that have got money in the bank so that is usually an indication of where they see interest rates going next uh it's just a matter of when so i think we're all pretty confident that the next rate increase or the next rate movement will be down, but it's just a matter of when that's going to be. Yeah, absolutely agree. Now, within the context of this then,

how much longer do you think the current housing market can sort of defy the higher interest rate regime as well as the low listing supply that we're currently seeing in many parts of the country? Well, that's the challenge, right? If we've got lack of supply, that's what's putting pressure on prices because it's very unusual to see prices increasing in a high interest rate environment. It has happened before, but it's unusual. But whilst there's a lack of supply, people are going to be in competition with each other.

And we have to remember that only a third of people actually have a mortgage. A third of people own their homes outright. And we are seeing increased. As us old baby boomers get out of our houses, we can afford to buy something without a mortgage, typically. And so it's really making it very hard. It's a really unusual market. Totally is.

The old housing supply and affordability gets a fair bit of media and press, particularly in recent times. from where you're looking at it. What are the sort of sustainable solutions for bees, if there are any? Well, I think that's above my pay grade, to be honest. I think I'd be, I'd buy that crystal ball. Part of the problem is there's not one solution. There's a series of solutions.

We need to get more people into home ownership, whether that is rent vestas. It's not just all about first-time buyer-occupier, owner-occupiers. We need to be more flexible in our approach to that. We need the government to be setting and achieving realistic targets for housing. We need to understand that we can't set those big targets and not have any tradespeople on the ground to do the work. We need to have better relationships between councils.

I'm trying to redevelop my house, just subdividing a big block of land at the moment, and the hurdles and the costs involved, it's just nuts. It doesn't make any sense. So we need to have a look at all of the red tape. So there's a lot of things that need to be done, and I don't think there's an appetite for most of the stakeholders to actually do that, despite what we're hearing from government. Yeah, it's a good call. I think the challenge from where I look at them, we're probably the

similar vintage land and been involved in the industry for a similar length of time. The big thing that I'm seeing is that governments at most levels back in the 70s right up until almost the early 80s actually were hands-on with the supply of some housing that provided a safety net for those most most in need uh since the privatization uh generation where banks have become pretty uh where governments have become pretty teflon in pointing the finger at the private sector and then wondering why the private sector isn't building more when the private sector is funded on profitability that's our major driver if we don't make a profit we don't survive and therefore we can choose to we can choose to invest anywhere why are we investing in housing

when stamp duty is just so expensive. We're not paying stamp duty on share transactions. So why not spend, you know, $500,000 or $600,000 on a share transaction instead of on property? Yeah, it's an interesting exercise. I guess from where I sit, I think government needs to actually roll up the sleeves a little bit and not just throw money at stuff and then make it someone else's problem.

I think for the social housing arena in particular, They need to actually step onto the playing ground and soak up some of that so that the private sector is focused on providing houses for those who actually can afford to make that happen. Absolutely. I mean, we know that the social housing wait list is just blowing out. Last time I looked at the numbers, it was more than a decade long. I mean, that is just outrageous. Absolutely crazy. Now, I guess the other area that's copping a fair bit of flack

in recent times are the old Airbnb or short-term rentals. What's your read on the impact that they are having on housing affordability and availability? In some areas, it's really significant. The Real Estate Institute of Australia actually did a short-term report on short-term housing, or short-term accommodation. Happy to send it through to you if you haven't seen it. Yes.

But in some areas, it is really significant because people can get a much higher return, which, you know, as an investor, that's what you're trying to do is get that return. Some of those properties are lifestyle properties. So if you want to, you know, have a holiday house in Port Macquarie or Byron Bay or wherever, if it's on the short-term market,

then you can and your family can enjoy it at the same time. So it's a really fraught argument because on one hand, it's like, who are we to tell people what they can do with their home, their holiday home? But on the other hand, businesses in some of those areas can't even get employees to come and work there because there's nowhere for them to live. It's a bit of a conundrum. As you said earlier, there's no easy solutions here because there's so many dynamics. And also, there's not the appetite, as you say. The political will, I don't think, is there. none of those approaches are vote winning

so they're not likely to get the Guernsey and given the sort of election cycle we run through there's no incentive really to take a long-term potentially short-term unpopular approach to sort some of these things out but look again we've probably only just scratched the surface and we'd love to get you back to dig deeper into this and other subjects moving forward

but I just want to really thank you for giving us quite a balanced perspective on the state of real estate and the associated housing supply and affordability challenges. And we appreciate you taking the time to share all this with us on Australia's longest running and most popular property show. So thanks again. Hi, thanks for having me. Here's how Realty's discovery search works. Now think of AI as an assistant on your real estate journey. How AI works is by using algorithms and data the words that you use to describe the type of property you want by entering what you want the ai learns and makes predictions or decisions and then shows you the results so rather than searching by suburb and then property type and land size and so on simply

type in or say what you want the more you use realty's ai discovery search the more accurate it becomes. This is Realty Talk powered by realty.com.au. Join us for more property news each week with Realty Talk and Get Invested. You can do that by subscribing to the Property Hub on all podcast players. Join the conversation too on Facebook. Just search for the Property Hub Collective and please give us a like and make sure you follow. Thanks to our supporters and contentpartnersrealty.com.au, VMT Tax Depreciation, Know How Property Finance

and Apira Marketing. Until next week, all the best.