SANA FINANCE MONTHLY
Cash rate held at 0.1%
BENEFITS OF SELLING BY AUCTION
As we near the spring selling season, potential vendors are likely talking to real estate agents about the best way to sell their current property. Particularly in New South Wales and Victoria, it’s very common to sell your property through the auction process.
There are several benefits for vendors choosing to sell by auction.
If you’re hoping to sell your property for more than it might be worth, the only way you can do that is by having multiple bidders trying to buy it. If you have two or more interested parties, you have a chance that the sales price will keep being pushed higher. If you’re selling by private treaty with only one interested party, that’s unlikely to occur.
One of the main advantages of going to auction is that it naturally manufacturers a certain level of competition between would-be buyers. These buyers are forced to compete for a property on auction day, and this often leads to a very good result for the vendor, particularly if your property is in a sought-after location.
The Emotional Element
If you’re selling a property and the likely buyer is an owner-occupier, the auction process can heighten the emotional aspect of the purchase. When buyers form an emotional attachment to a property, this can then lead to higher sales price for a property on auction day. Generally speaking, most people don’t buy many homes over the course of their lifetime and being required to buy through auction is daunting for many potential buyers.
When selling your home by private treaty, you are negotiating with a buyer on both the sale price and the terms. When buying a home at auction, the terms of the sale are normally laid out in advance, including how long you have until settlement. Generally, when the hammer falls, the sale is unconditional, which means there are no sunset clauses or opportunities for a buyer to back out. This puts the seller in the driver’s seat and means they can lay out how they want the sales process to unfold.
A Quicker Sale
The auction process usually takes place over a number of weeks leading up to the auction day itself. Having this hard end date in place often leads to a faster sale. Purchasers know the property is going to be sold and are thus required to be organised and act quickly if they are interested in buying the property. Private treaty sales can become drawn-out processes with a lot of negotiation, and if there is only one interested buyer, this has the potential to continue for many months.
You Can Still Sell Beforehand
Even if you choose to sell through the auction process, that doesn’t mean you can’t accept an offer prior to auction day. If you have a keen buyer who is putting up a strong offer and it’s one that you’re happy with, you are still able to accept it. Knowing that the property is going to sell at auction can often motivate buyers to approach the vendor with attractive terms, in hopes of persuading the vendor to sell to them direct.
HOW TO FIND THE RIGHT SALES AGENT
While it might appear to be an easy job, being a sales agent is difficult. Being one of the top-performing agents requires a huge amount of drive and passion.
Choosing the right sales agent when you sell your property is a decision that will certainly make a difference to the final sales price.
Here are some of the most important things to look for when choosing a sales agent.
A Leading Agent
If you’re looking for someone to sell your property, you can do a lot worse than simply selecting the top-performing agent for your suburb. There’s likely a reason that they are the top-performing agent, and it’s probably safe to assume that they are good at their job.
The other major reason is that they very likely already have a sizable database of potential buyers who are actively seeking a property in that area. As any buyer would know, you register every time you go to a home open, and this becomes the sales agent’s list of potential customers. The bigger the list of customers, the greater the odds of selling your property quickly, and in many cases, you might be able to sell it off-market without any marketing costs at all.
For the most part, sales agents know the true value of a property far better than anyone else. They talk to hundreds, if not thousands, of people over the course of a week, and they are truly on the pulse of the market. They know what buyers are looking for and what is in demand right now.
Agents who specialise in a certain area are going to understand your property very well, and they will also likely know the best way to market that property. Each suburb is different and appeals to different buyers, so you want an agent who knows the ins and outs of your suburb. Similarly, it makes more sense to source an agent close to your property, as if they live too far away, this may impact the number of open homes and private inspections they’re able to host.
In some ways, being a selling agent is about sales more than property. A good sales agent is an expert at selling, marketing and negotiating. For this reason, passion is important! What you should try to be mindful of is balancing that passion with skills and industry knowledge.
Right Fit For Your Property
While we know that it’s important to find an area expert, it’s also important to have a sales agent who is looking to sell your property using the right sales method. These days, you can sell a property by private treaty, through auction, or even with new tools like Open Negotiation.
If selling by private treaty, you can look to run the process through any number of different techniques, such as an end date sale. It’s important that the sales agent you’re using has a track record of selling properties similar to your own, with the method you’re comfortable with.
INVESTMENT PROPERTY RED FLAGS
While we all know that property prices have risen steadily in Australia for many decades, there is a big difference between the top-performing properties and those that have struggled. While the suburb and area are important factors in property selection, many investors fail to identify some of the red flags that might weigh on a property’s potential for growth.
These are some of the most common red flags to look out for:
While most investors will pay close attention to the asking price of a potential property, many miss some of the hidden costs. While building and pest issues are usually addressed, there are other hidden expenses that it is important to look for. If you’re looking at buying an apartment or unit, the costs that come with a strata complex can be very high. In most cases, you will be required to pay strata fees, which are typically higher in newer buildings that offer facilities such as gyms and pools.
Similarly, strata companies generally put money towards things such as sinking funds or even have special levies in place to pay for large capital works. Older buildings can experience a range of expenses relating to maintenance, upgrades, or restoration. Be sure to get a copy of the minutes from the past few strata meetings to see what the board has in mind for expenses going forward before buying a strata-titled property.
Whereas if you own a house or even a block of land, councils can require ratepayers to contribute additional levies for projects in the area. This has the potential to hurt your investment as you not only have to pay the costs, but you’ll also have trouble selling the property until those expenses have been met.
While we all know that suburbs grow at different rates, it’s important to take into consideration things like public housing in the area. If there is a lot of public housing on a certain street, it’s likely that the entire block will be negatively impacted in terms of possible growth.
A Long Listing
If a property has been on the market for a long time, there is likely a reason for this. It could just be that the vendor has unrealistic expectations. However, in certain circumstances, there might be a more serious issue with the property.
This doesn’t necessarily rule the property out; however, if the vendor is unwilling to negotiate, you are well within your rights to walk away. On the other hand, it is important to remember, that just because a property is reasonably priced, doesn’t always mean it’s good value.
While sales agents might be good at selling properties, they are not always property experts. This is often the case when it comes to things like the development potential of property. These days, if you can subdivide a property, it will likely be marketed as having that potential.
A property with development potential will often be priced higher than a comparable property that can’t be subdivided. The issue with these properties is that not all sales agents are experts at property development. Just because an area has been rezoned to encourage development doesn’t necessarily mean that every property will be a viable one.
It is always best to do your own due diligence on a property before making an offer. Or, at the very least, include in your offer some key clauses that protect you.
4 THINGS TO CONSIDER BEFORE FIXING YOUR INTEREST RATE
As the Australian economy continues to recover and house prices remain strong, there is growing speculation that interest rates are also going to be rising soon.
We’ve already seen a number of the major banks increase rates on their fixed interest rate products, which implies that they believe rates are headed higher.
Does that mean you should now fix the interest rate on your mortgage?
Here are a few things you should consider before fixing your rate:
Are They Already Factored In?
Fixed-rate interest products are often priced in such a way that they have already factored in potential interest rate rises. That means if you’re going to take out a fixed-rate loan, those rates might be higher than the standard variable rate, as the belief is that rates will rise. While this might still be something you want, it might not end up saving you any money on your mortgage prepayments.
Will You Be Negatively Impacted?
The RBA has so far made it clear that rate rises will be slow and transparent. If the RBA does hike rates sooner rather than later, will these changes have any impact on you at all? With rates so low in the current environment, it’s easy to forget that it wasn’t all that long ago that we were paying 2-3 times what we are now in interest.
Will you want to Access Equity or Sell Your Property?
If you take out a fixed-rate loan, it’s not always easy to refinance. While it is possible, it normally attracts a break fee, which can be more than the money that you are potentially saving by fixing your rate. If you do want to access your equity and still fix your rate, it might be worth considering locking in only a portion of your home loan and also taking out a short-term loan. The same thing applies if you want to sell your property as there will likely be break fees that come with paying out your mortgage on a fixed-rate product.
Is a Rate Lock Worth It?
In an environment with interest rates moving, home loan products can change rapidly. When you take out a fixed-rate loan, the actual rate you get doesn’t get locked in until the settlement date, not on the date you apply for the loan. One way to avoid this issue is to pay a rate lock fee that will let you access the rate at application. The best person to speak to about this option is your mortgage broker.
5 NEGOTIATION TIPS WHEN BUYING A PROPERTY
Most people will only ever buy one or two homes over the course of their lives, which means you don’t always get much practice at the skills of negotiation. When you are buying a home, you will often find yourself dealing with a sales agent who is a professional negotiator.
Here are some ways you can improve your position when the time comes to negotiate.
Substantiate your Offer
Most sales agents and valuers will price a property based on the method known as comparable sales. What this means is that they will use similar types of properties that have sold recently as a gauge to value your property or the one you’re interested in buying. The good thing is that you can do this same research ahead of time to get a clear understanding of what a property is worth, and you can take this evidence to the sales agent when the time comes to make an offer or negotiate. Look at similar properties, in terms of age and land component in the same suburb, that have sold in the past six months. This will give you a good understanding of what the property is realistically worth and will help dramatically with your negotiation.
One of the most important aspects of buying a property is knowing not just what you can spend but how much you can borrow. Getting a pre-approval with the help of a mortgage broker will not only give you clarity around what that number is but can also be used as a negotiating tool. If you really want a property, but you have reached your ceiling, tell that to the sales agent. If they have no competing offers, they will likely communicate this to the vendor to broker a deal.
Understand the Seller’s Motivations
Arguably, the most important part of a negotiation is knowing why the vendor is selling. You should do everything you can to find out why they are selling, including questioning the sales agent. The more information you have, the stronger your position will be. If a vendor is unwilling to negotiate on price, perhaps you can get more favourable terms or vice versa. If a seller needs to sell quickly for personal reasons, a low offer with short settlement terms can be very appealing.
Use your Building and Pest Inspection Report
It’s important to understand that the offer you submit to a vendor is not finalised until the terms are also met. If you make an offer subject to a building and pest inspection and it comes back less than satisfactorily, that doesn’t mean you have to walk away. In fact, you’re well within your rights to go back and negotiate a lower purchase price, factoring in any repairs that are required and the inconvenience.
ADVANTAGES & DISADVANTAGES OF A SECURED CAR LOAN
There are many ways you can buy a car these days, including paying for it outright, taking out a personal loan, redrawing from your home loan or even paying for it on a credit card. However, the most common way to buy a car is by taking out a car loan that is secured against the car itself. A secured car loan operates like any other loan: you take out a loan and then pay it down over time, paying off both interest and the cost of the car itself. The loan is considered secured as it’s backed by the asset, which, in this case, is the car.
Advantages of a Secured Car Loan
Lower Interest Rates
The interest rate you pay on a loan is normally an indication of how much risk the lender is taking on by lending you money. When you secure a loan with an asset, the interest rate is often lower. For example, a home loan will have far lower interest rates than a personal loan. When you take out a car loan that is secured by the car itself, this represents less risk to the lender as they can repossess the car in the event of a default. That means the interest rate and ongoing payments will be far lower than if the loan was unsecured, which can save you thousands of dollars.
Because you’re securing your loan, you can potentially borrow a higher percentage of the car’s value than you might be able to otherwise. In some circumstances, you might even be able to borrow 100% of the car’s value, plus insurance and associated costs. That means you won’t need to put any money down to buy a car, which can be a huge plus for many people.
For the most part, secured car loans can be paid out at any time. That means if you want to pay off your car loan after getting a bonus from work, it will be easy to do. Not all car loans are that flexible, and it’s worth studying all the terms of the loan prior to taking out any loan.
Disadvantages of a Secured Car Loan
Lender Can Repossess Your Car
In the event you default, which means missing your repayments, the lender is well within their rights to repossess your car. The fact that the loan is secured by the car itself protects the lender from non-payment. While many lenders will work with you if you are unable to pay, it’s important to understand that if you ultimately fail to make your repayments, you will lose your car and your credit history will take a big hit.
Easier to Overspend
Virtually all dealers offer some form of car finance, and when you can buy a car with a secured car loan with no money down, it is easy to overspend. Just because you can access finance doesn’t mean you need to put yourself in a position where you will be stretched financially. It’s far more advisable to work with a finance broker and organise a secured car loan ahead of time, rather than getting finance through a dealer. You’ll likely get a better deal on finance, and you can be sure the broker has your best interests in mind.
This is general information only and is subject to change at any given time.
Your complete financial situation will need to be assessed before acceptance of any proposal or product.