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We’ve found a property in Snells Beach (1 hour north of Auckland and on the East coast) that we thought was quite interesting. It’s a bare section of approximately 1 acre in size sitting on top of a hill in a series of four sections altogether. The land is orientated to the east and is around 400m to the beach. The beach itself is quite sheltered and not considered a surf beach which is quite good for our young children. The land itself isn’t great and seems to retain water which may be a cost concern getting out of the ground during the build phase.
Bayleys Real Estate have the listing although I must say the marketing was poor and the website price was different to what was expected. Communications need much improvement. We asked a friend of a friend who works as an agent there to represent us as potential buyers although it must be said he wasn’t the listing agent at Bayleys.
Snells Beach itself is mainly retirement focused so the prices are quite reasonable but not what one would call an up and coming area with good investment returns.
We did most of the initial due diligence and organised an offer to the vendor via our friend. The section of interest was the highest up the hill with the other three sections positioned lower down the gently sloping hillside and none having been built on yet. As the sections were fairly narrow I was slightly concerned about the potential views being lost due to building obstructions depending on what the new owners wanted to build. The offer document was prepared by the agent and although I asked for a simple and straightforward document with plenty of due diligence clauses to provide escape from I was instead presented with a confusing and convoluted document that not even my agent understood. The following are some areas that ultimately made us not continue with the offer on the property in question:
Now with the help of New Zealand Projects these clauses were brought to my attention and raised sufficient concern for me to ask further questions. The agent friend decided this was getting all too difficult and lost interest and asked me to deal direct with the listing agent at Bayleys instead. Remember he works there too.
I couldn’t get to grips with this as my friend is an agent and could have split a sales commission with the listing agent that would have paid him five figures. Bearing in mind that vendors agents charge a lot of money to sell a property (Bayleys charge 4.0% on the first $500k and 2.5% on the remainder) it is invariably the purchaser that ultimately pays for the purchase because it is taken out of the settlement fee before the purchaser receives the balance. My question is do we need better representation for buyers or do we need better qualified Real Estate agents?
The search continues.
I think the hardest part of buying any property is the amount of time it takes finding the right property or piece of land to build on. My family and I have spent what must be over 120 hours so far driving around new locations viewing new properties and land. The problem with looking at new areas is change, although necessary in some cases, generally people get settled in an area and stay put because they know everything about that area and moving out of your comfort zone can be uncomfortable for most. We’ve had to consider changing schools, kindergardens and even supermarkets. How far will our consumer brand loyalty stretch, I mean moving Supermarkets, is “that really an issue?” If you ask my wife it is very important.
Anyway back on track, the search has been full of frustration with overpriced and underwhelming properties. At the time of writing this we are barely out of the global recession and property vendors would prefer to hold on and set unrealistic expectations of what their property is really worth, perhaps clinging onto the good days when a rising market had a marauding mass of buyers clambering over each other like the once a year sale at the better known department stores after Christmas.
Our deliberations and lack of opportunity at our chosen price point has necessitated a rethink and an adventure into uncharted territory. We’ve decided to build our own home meaning we can build what we want as long as it fits within our budget and time frames. There are plenty of options out there and various building companies offer similar products just at different price points. And it is comparing apples with apples that is sometimes the hard part, do we really get the same quality home for half the price from a different builder or is the risk just increasing?
In the case of looking for development land we know in some cases that the vendor is paying rates and monthly mortgage payments and receiving no rental benefit because it is simply a piece of land that isn’t big enough for the local farmers to graze sheep on and pay you a small fee. Hanging on for a price they may never achieve just prolongs the disappointment and reducing profit. I remember Warren Buffet quoting “if you sell in a down market then you can also buy in a down market” meaning that potentially the profits will be the same? Of course there are considerations on where you sell and where you buy, what you buy compared with what you sold but this is mostly correct.
So our endless search continues…..
Finally, the land settles. The Real Estate agents and the Lawyers take their money directly out of the sales fee before you even see it which saves you having to write a cheque out. Depending on which side of the fence you sit this may be a good thing as you can put all those sleepless nights and what seems endless negotiations behind you. What’s really depressing and makes you reach for the first stiff drink that you can find is the moment that the new bank balance [that looks like your hard work has actually paid off] suddenly gets blown to smithereens by the bank clearing out the mortgage and every other loan you ever took out by leveraging against your property in the first place.
If there’s a delay between the property settling and the lawyers telling your bank, you could withdraw all your money and book a flight to Mexico and sip margaritas on the beach watching the sun go down for the foreseeable future while the purchaser tries to find you (of course we don’t condone this behaviour but it’s something that lawyers can mess up on and as a seller leave you high and dry). Unfortunately, we were too slow and had to deal with a slightly less than depressing bank balance instead.
On a brighter note we can finally move on “literally” to pastures new. Reflect on what was but not too long because regardless if you had a good or bad experience with that property I bet you learnt something new, even if it was “not to make the same mistake again”.
Some points worth considering when selecting your vendors [Selling] agent:
Brand Selection
Agent selection:
Last but not least ask yourself why you bought this property, where did you see the advert and who might buy it now? Write down a typical profile of your buyer (age group, budget etc) and put yourself in their shoes i.e. if your home is by a marina why not advertise in a yachting magazine or on the local yacht club notice board etc.
It’s often said that selling a property can be a stressful experience, well in New Zealand this can be true. Although the New Zelaand Real Estate industry is regulated it is actually self regulated by its own founding companies. Well this was certainly true up until late 2009 when the governement installed a new body known as the REAA – Real Estate Agents Authority. Only time will tell whether this has any effect on making the industry more responsible for its actions but all I can tell you is “your selling experience is only as good as the agent you list with” and their motivation to sell your property.
In New Zealand vendors agents rule covering 99.9% of the market, the other 0.1 percent being mostly companies or individuals who call themselves buyers agents but are actually working under vendors agent companies. What worries me is rightly or wronly these vendors agents often haven’t a clue about marketing and more importantly haven’t a clue about civil or structural engineering.
The number of times I’ve wandered curiously into a open home on any one of my various journeys around the world only to be told that this property is structurally sound and upon further interogation of the sellers agent told that they’ve no actual facts to support this worries me considerably. Afterall, we’re not exactly buying a rubbish book that promised so much and delivered so little that we discarded on the plane like yesterdays newspaper. This is perhaps one of our biggest investments that we could lose dearly on.
So back on track to the selling experience, we tried various agencies only for us to be continually told to invest several thousand dollars in their marketing so that they once sold can charge us around 4% commission. How many industries do you as the owner pay someone else to market your product only for them to charge you a commission when they sell it? Am I missing the point here? Anyway, we confided in an agent who we thought was fairly switched on, presentable and fairly well spoken. During a site visit with a client of mine who was potentially interested in a trade (my property for his) she learned that I had approached my new neighbour but was unsuccessful in meeting him as I rarely visited the Bay of Islands anymore and he was often travelling. So when I left for my 3 hour drive back to Auckland (after buying the agent a coffee) she approached my neighbour and asked if he would put in an offer, and guess what, he did want to albeit way below registered valuation…………….
For the purposes of this story I shall identify myself as “Dan” a degree educated, English speaking, late thirties European male who has earned every single penny (or cent) in my professional life i.e. I haven’t had any donations from my family to assist climbing the property ladder. I am married with a young family and own my own technology consultancy that operates in the Auckland region.
The journey starts here, selling a large piece of waterfront land in the Bay of Islands that I bought in 2002. We intended on building a family home on this piece of land but circumstances led us to residing two hours south closer to Auckland.
Having a mortgage on this piece of land and renting closer to Auckland meant that even though we enjoyed a salary in the top five percent of New Zealanders even we had to curtail my life long dream of designing and building my own home until we sold the land. Like many governments around the world the New Zealand tax system has a strong affect when trying to “reap your rewards” on your investment in education and working hard for a living. So here we are, looking to sell our dream land in order to design and build closer to the more expensive and less lifestyle orientated Auckland surrounds.
