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In a buyers market don’t be pushed around, you hold the purse strings so set out your stall and play the game accordingly. If you find yourself in unfamiliar territory seek professional unbiased help – and not the Real Estate agent who is involved in this deal because they want to sell you the property and have different motivations.

Remember, a bill of a few hundred dollars covering professional fees may save you making a big costly mistake. 

Some points worth considering when buying property or land to develop:

1.  It’s good practice to make an offer for a property or land subject to due-diligence
2. Include good due-diligence clauses in the offer documentation with enough time to enact them. Consider visiting the council planner to see if any infrastructure is planned near your property that may affect its future value etc.
3. You could consider making a written offer with good due-diligence clauses in order to get the vendor to accept your offer price if nothing else. We often do this before doing any costly due-diligence so that:

• We don’t incur unnecessary due-diligence fees only to find our offer price is too low and won’t ever be accepted.
• We start to understand your vendors and your vendors agent (if applicable).
• We are giving ourselves time to make an informed decision.

 Good Luck.

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:

• Finance: It is hard to obtain finance from lending institutions on an unclear title.
• Risk: It is not right to say the property is at the sole risk of the purchaser from the date of this agreement. 
• Ongoing Costs: As a condition of subdivision the council have requested that approximately half of the allotted site is planted in bush. During this process the developer gifts the covenanted bush to the new land owner for one dollar. The purchaser can’t decline this. However, there are costs relating to the planting, maintenance and management of these to be planted areas that the developer can decide not to comply with if the purchase has taken place for the allotted section meaning that the new owner has now got to pick up this cost even though it was the responsibility of the applicant (who is not the purchaser). Non compliance is very attractive to developers when trying to reduce costs and improve profit and less so to the new owner.
• As the developer has made no provision to connect water or sewerage to the sections in question all new dwellings need to be designed incorporating self sufficient water collection and on site sewerage systems. If the council decide further down the road to implement a water and sewerage system to other parts of the development the council could make it compulsory to hook up to their utilities and make us pay for the connection fees. This in effect means you could end up paying quite a premium for the properties services estimated to be around $30,000 for no increase in value to the property. 
• The biggest concern of all was that there were self imposed covenanted areas around the sections that at this point in time denote non-building zones. The developer reserves the right to remove these building restrictions at any time in the future meaning that your property has suddenly become part of a far larger estate and less exclusive and also less valuable. 

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.

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…..

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”.

The Offer

The offer, ah yes the offer, not exactly fantastic but one must remember the Real Estate market is a fickle beast and if you sell at the bottom of the market you can also buy at the bottom of the market so everything usually levels out somewhere along the line.

If we don’t hear that old cliche “cash is king” again I don’t think too many will mind. At the end of the day you can almost forget about registered valuations and personal feelings about what your property is worth; it’s all about what the buyer is prepared to pay and if there aren’t many buyers around then prepare to take a hit or withdraw from the market gracefully and wait for better market times – if you can that is.

The agent was hungry due to the lack of sales recently and we received countless emails legitimising the offer price. One must bear in mind that even though Real Estate agents legally represent you the vendor they are also looking out for their commission. If you don’t accept the buyers offer they don’t get paid!. So who is really representing who?

Anyway, after many sleepless nights and rounds of negotiations we finally accepted an offer which was neither attractive nor inviting but hey without that elusive crystal ball we don’t know what the future holds in the waterfront market in the Bay of Islands and with cash in hand we can hopefully buy well in the current slightly depressed market.

Factors that helped to form our decision:

1. Non New Zealand residents can’t buy waterfront property over a certain size meaning that we were reduced to selling to our domestic customers.
2. The Bay of Islands property market has been on the decline since 2007.
3. In order to maximise the value of a large waterfront section a substantial 1M plus property would be required to be developed.
4. There are few rental options on bare land to help minimise mortgage costs.
5. Council rates are proportional to land value so high value land attracts a premium annual overhead.
6. Subdivision is expensive and if completed puts this property in the larger pool of smaller sections that are also selling much cheaper in the Bay of Islands.
7. Our lawn mowing costs were several thousand dollars a year.

Brand Selection

1. Who are you selling to? If international does the agent company have a good international brand and marketing presence?
2. Has the brand had bad media publicity that may put potential buyers off?
3. Is there a satellite office near your property? If not, agents may not give your property as much attention as a local office may?
4. Is the office located in a good high foot traffic area?
5. What commissions does the agency charge if successful selling your property? Negotiate when listing because it’s too late to negotiate a fee when they have a buyer.

Agent selection:

1. Meet your agent in person, do you like them and are they personable? If they’re not then they will put buyers off.
2. Are they presentable but still approachable in their manner. Good agents don’t overdress and make their clients uncomfortable.
3. Are they articulate in their communications? Email them to see how well they come across.
4. Ask someone to call the office and your agent in particular asking about properties that your property would fall in, i.e. area and number of bedrooms etc. Do they mention your property?
5. Never accept a marketing proposal without hard evidence that it gets results. This is the sure fire way to lose money. Ask them how much margin they make on a media booking.
6. Challenge your agent to see how hard they are going to work for you i.e. are they going to put adverts up in the local yacht club, golf course etc at no cost to you?
7. Never get pushed into an exclusive listing especially if your property is market priced and highly sought after. This will only limit your property exposure and have less agents working for you. Choose two or three agents from different companies to start with and see who is working hardest, you can always cancel their listing.

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.