03 Nov Use your mouse to find a house + Women better at property than men + Preventing property identity fraud
Highlights from this week:
- 5 reasons why women are better at property investment than men
- A website that values property
- Property ID fraud is on the rise – how to protect your property
- The impact a ‘strategist can have on your portfolio growth
- Developments that are impacting the Brisbane market and why
Transcripts:
The property insights site – Enzo Raimondo
Kevin: You cannot beat getting out and pounding the pavements, as they say, when it comes to getting to know a neighborhood before you invest your hard-earned cash in a property. Each area, of course, is totally different, looks different, even at different times of the day and night.
Now, View is a website that’s been designed to be the property insight site, and they can help you get a better understanding about an area before you buy. Enzo Raimondo, the man behind the site, joins me now.
Enzo, thanks very much for your time.
Enzo: Thank you, Kevin.
Kevin: What information is available now to help someone understand an area before they buy, Enzo?
Enzo: There is so much information available, Kevin, at the moment. On View.com.au, we have as much information as you could possibly want on any particular property in any street or suburb of any city in Australia.
We have how many times it sold, what it sold for. We have neighborhood information. We go right down to what they call an SA1. It’s an ABS measure of about 800 people living in a part of a suburb, and we actually have the demographics of what their interests are, whether they own a home, and how many kids they have,
We call it “meet the neighbors.” You can actually work out what type of people live in that area. We show a map with schools, shops, restaurants, etc., and then median prices for houses and units in the area and all the surrounding properties on the street you’re looking at, so lots of information.
Kevin: The site is called View.com.au, and as Enzo said, a lot of tremendous information in there if you just want to get a bit of a handle on what the area is like. I’d suggest you certainly do that before you get out of the car and walk around.
I always recommend to people, if they’re looking at a property, Enzo, they should look at it at different times of the day, the night, even on weekends because it does change area to area, doesn’t it?
Enzo: Absolutely. You want to make sure you have a look at the house or the street you want to live in at all of those times to make sure that it’s where you want to live and the people who live there are neighborly and it’s a nice atmosphere.
Kevin: Enzo, I know you’ve been in the industry for many, many years and worked at a number of the institutes around Australia. Where have you seen buyers go wrong with the selection of an area? Where do they fall down and make mistakes?
Enzo: I think it gets down to not necessarily area, but possibly they may let their heart make the decisions instead of their head. Some people might fall in love with a property and pay over market rate for it and struggle to see capital growth.
My advice is always do some research, work out what prices are doing in the area, and you can fall in love with a property, but just don’t over-commit yourself and make sure that you’re paying not as much as what the vendor might want, which may be a bit optimistic.
Kevin: I guess when you’re buying an investment property, it very much is all about the head decision, but when you’re buying a family home, it’s a bit of a combination of both – the head and the heart, isn’t it?
Enzo: Exactly. It should be in balance and not necessarily with the heart because it might be a bit painful later on when you’re trying to find the mortgage payments.
Kevin: That’s very true. Just help me a little bit there with some of those important considerations of buyer needs to make. Let’s say for someone who is buying into a property for the family, the family is going to grow up. What are some of the considerations you think they should bear in mind, Enzo?
Enzo: That age-old saying of “Location, location, location” is still very relevant today. If you’re a family and you’re looking to send your children to a particular school, obviously, look at the schools in the area, look at the amenities in the area. If you have young kids and they want to kick a ball, you want some parks around the area that they can play in and be safe in. I’d look at all those things: location, amenities, schools, transport.
I remember moving from Adelaide to Melbourne. I wanted to send my kids to a particular school, so we looked in that particular area and it happened to have the transport, the tram to the school so that I didn’t have to drop the kids off. It’s very important when you’re relocating to make sure that the kids are able to get from home to school and back again very easily.
If you need to go to work and you want to catch public transport, I’ve always been fortunate enough to live 10 or 12 km from the CBD and I just can’t imagine living 30 or 50 km from the CBD and having to drive or catch a train or something to work, because I think it’s valuable time spent on a train. But unfortunately, it depends on your budget.
Look at those things. You might want to live further out from the city for the lifestyle; it just means that you’ll have a bit more traveling time. If that’s what you prefer, that’s good, but make sure you have a fast transport route to your place of work if you work in the city, etc.
Kevin: Always good advice, and if you want to get a good handle on an area we mention, again, View.com.au. Go in and have a look at the area that you’re looking at buying a property, and you’ll get some great information there.
Enzo Raimondo has been my guest. Enzo, thank you so much for your time.
Enzo: Thank you, Kevin.
Brisbane growth areas – Brett Warren
Kevin: My next guest is Brett Warren from Metropole Property Strategists in Brisbane. Brett recently caught up with Rachel Crowley from the Brisbane Airport Corporation.
Brett, thanks for your time. Tell me what you learned when you spoke to Rachel.
Brett: Thanks, Kevin. Good to be with you. It was an interesting discussion. A couple of months ago, I saw an article that mentioned that Eagle Farm/Pinkenba precinct was going to be the fastest growing precinct outside of the CBD in the next 15 years. I obviously knew the second airport was getting in there, but I was really surprised with the amount of work that’s actually going on out there.
Kevin: What sort of work is there? What do you think it means for Brisbane’s development?
Brett: Firstly, with a second runway, there are some big things happening there. I think there are four Chinese airlines from all over China that have actually signed up to get on the runway and actually bring more people into Brisbane.
As you know, migration and things like that bring a lot of students to the area, and with Brisbane and particularly Queensland being very tourist-orientated, that’ll bring a lot of the working class from China into those precincts from over there, as well.
Kevin: Was Rachel able to give you an idea about the timeframe for the new runway?
Brett: I think it’s another two or three years away. It’s still looking like a bit of a sandpit at the moment; there’s still a little bit of a way to go. But interestingly enough, there have already been a few flights from China that are starting to test it out. It’s pretty early days, but it’s been fairly positive so far.
Kevin: What other industry, apart from the airport or the airlines, are we going to be seeing out in that area?
Brett: There are another two hotels that are going up there at the moment. Ibis is opening shortly. There’s another kind of DFO type of shopping precinct that’s going on out there, and probably the most interesting thing is the precinct for the auto mall, which is a number of cars that have signed up out there to get out there and sell cars, obviously. Mark Skaife designed a 2.8 km test track, and you can actually drive your car around there rather than driving on the road. I called it a racetrack, which she wasn’t too happy about.
Kevin: has that been built already, or is it in planning?
Brett: I think if you were out there at the moment – I was actually out there today – they’re actually clearing that area at that moment. It’s right in that central location, so very early days out there yet.
Kevin: What other shopping facilities are we seeing? As you head towards the airport, there’s a lot of shopping already there. What further development are they planning?
Brett: Obviously, you have your 24-hour Woolworths and things like that. I think it was called Bargain in a Box or something. It’s a similar kind of proposition to the DFO, where there’s a lot of that retail shopping, cheap labels and things like that where people can flock to.
Kevin: Of course, Hendra is very close to that area. Hendra and Ascot are both good suburbs with high medians. What’s the word about the suburbs a little further out? You mentioned Pinkenba as a classic example. These are the suburbs that are still very affordable. What are they predicting in terms of price growth?
Brett: That’s going to significantly help as well. Obviously, the Hendras and the Ascots being halfway between the airport and the CBD are probably going to get the bulk of that growth. But again, it’s another major employment hub. I think in that 10- or 15-year period, jobs are going to grow from about 22,000 to about 50,000.
It’s another key employment hub. People’s incomes will be significantly better, and they’ll want to live close to work. So those areas are definitely ones to watch as well.
Kevin: Brett, as well as looking at the airport, I understand you’ve also been looking at the RBH area around the hospital there. What’s happening there? What have you found out?
Brett: Yes, absolutely. Obviously, the Showgrounds development has well and truly kicked off now, but if you look going past the hospital now, you’ll see a bit of a hole in the ground.
But a lot of our hospitals are not merely hospitals anymore. They’re really expanding and becoming quite large employment hubs with research capacities, age care facilities, and those types of things. So, it’s not just about the hospital anymore.
I think nearly two thirds of our jobs in the next ten years are going to be in healthcare, age care, hospital care, things like that. So, those four or five big hospitals around the CBD are becoming vitally important as employment hubs.
Kevin: What about Herston, close in to the hospital there? What’s that like as a suburb in terms of investment potential?
Brett: Yes, absolutely. Herston continually flies under the radar. It’s a small boutique suburb, excellent walkability. You obviously have the hospital there, you have nice green space as well, and being so close to the CBD, the busway gets you in there, but it’s quite easy to walk in there, as well. I think it’s one that gets under the radar a lot of the times.
Kevin: We’ve seen a lot of unit development around there, particularly around the Showgrounds. Is there more slated for that area?
Brett: Depending on which area you’re in, one side of the Showgrounds there, there’s that has obviously a fair bit going on. But if you’re looking to buy in those areas, you should really stick to those true residential pockets. There will be further development there, but they’re not going to be the 300 or 400 apartments and things like that; it’ll just be the small scale. And land is still quite valuable there, so I’d be sticking to those areas if I could.
Kevin: Brett, thank you very much for your time.
Brett: Yes, Kevin, it’s been great, too. Thanks very much.
Preventing property ID fraud – Lee Baillie
Kevin: In the past we’ve talked a fair bit about online security as the Internet opens up more and more possibility for us to do just this. I guess, like me, you’re probably a little bit concerned about how much information is going onto the Internet and how secure it really is. In the past, we’ve spoken to PEXA about online transactions and so on, but I’m interested now to talk to my next guest, Lee Bailie. Lee is the General Manager for Product and Innovation at InfoTrack, and they have a product called IDfy.
Is that what it’s called Lee?
Lee: Yes, that’s it, Kevin. IDfy is how we pronounce that.
Kevin: Tell me a little bit about the product, and then I want to ask you more about security. How does IDfy work?
Lee: IDfy is a product we’ve enabled and we’ve built within InfoTrack to perform a verification of identity for any clients who are in the process of buying or selling property. What IDfy essentially enables the person using it – so the agent or the conveyancer or the lawyer involved – is to sit down in front of their clients and using a single app, be able to actually take a picture of that client, take a picture of their documents, verify their documents, and then actually save that in a secure environment where we can actually store that within InfoTrack for up to nine years as part of the cloud service we have, but also receive a summary document that goes to the party involved that says when the verification was completed, the identification that was completed, who was there, the time and date, and where it was actually located.
Kevin: So, where do you see this thing used?
Lee: From our point of view, this should be used when a real estate agent is potentially listing a property. There has been a number of cases – and you may be aware of some – where properties have been sold without actually the owner’s consent, whether that’s a distressed tenant who might be thinking “I’m going to try and get away with this,” or a Nigerian scam whereby they’ve actually tried to sell a property from overseas.
The best course of action an agent can take is to ensure they are speaking with who they think they’re speaking to, and they actually do that by way of verification.
Kevin: Just help me understand a little bit here, Lee, the actual sequence. An agent goes in. I’m an agent, and I go through the process of taking a photograph, uploading all this material. Does that thing cross-check somewhere, or is that the first entry point into being identified?
Lee: No, at the moment, that doesn’t cross-check against something like a DVS system (data verification service), but it is something we are looking into at InfoTrack at the moment. What it essentially requires still is the person present – so, if that was the real estate agent – to ask the vendor or the person about to list the property to show them something such as their driver’s license and their passport.
What the real estate agent would do at that stage would be sat down with Kevin Turner, as an example, and would check the drivers license says Kevin Turner and it has the address marked, take a picture of that, and would then ask for the passport and check that the passport says Kevin Turner as well, take a picture of that, and then they actually move on to sign off so that both parties agree that what they’ve actually been presented and taken pictures of is correct. And then that is the document that is completed and therefore completes the verification of identity.
Kevin: Okay, but it doesn’t necessarily verify that that person actually owns that property does it, Lee?
Lee: No. What we’ve actually built in within the system is a title search ordering functionality. So, in the same platform, you can actually order a title search, and in doing so, you can actually reconcile that against the title that you’re looking at and check that Kevin is actually at the top of that title. So, we tried to enable that.
The take up of that, it’s a little bit slower in people actually ordering the full title because that obviously comes at a cost when actually completing that. But the reality is at some point during the process, the agent and certainly the conveyancer or the lawyer would order a title to that property and check the relevant details against that title.
Kevin: Who do you say as the driving force behind making sure this is all implemented? Is it the real estate agent? Is it the lawyer? And where does the consumer come into this?
Lee: That’s a really good question, Kevin, and probably one of the toughest for us to move forward to at the moment. The Office of Fair Trading has some guidelines around it, but simply put, that’s what they are at the moment. ARNEC – which is the body that works with PEXA and the real estate bodies across the country – has some very clear guidelines if a transaction was to settle on PEXA, but the reality outside of that, it’s going to be self driven.
In some surveys that we’ve recently done earlier this year through InfoTrack, we found out that approximately 48% of real estate agents are concerned about fraudulent activity in the property space but yet less than 2% actually use VOI verification apps and probably approximately 35% to 38% have in-house processes that they actually do themselves, and that could be anything from getting a scanned copy of the drivers license or getting a scanned copy of a recent utility bill, but to that degree, it still doesn’t verify the identity of the person involved.
Kevin: Being in the industry myself, I can tell you that I joined almost 50% of agents who are concerned about security, but probably like them, I’m among the 2%. Well, no, it was only 2% I think who were actually doing something there. But I would guess that the majority of the others don’t know what to do, Lee, because there aren’t too many opportunities or ways that this is being promoted.
Lee: No, absolutely, Kevin. I think that’s the part of the role that we’re trying to play. In Queensland, we’re actually doing some work with REIQ, and we’ve created a subset of IDfy that is called AgentID specifically for that reason, to actually give some guidelines and some clarity to the agents in Queensland about how they can use the app to ensure they’re protecting both themselves and the consumer.
In the UK, they’re concerned that fraudulent activity is growing at 300% per annum, and they starting to see more and more of that. In a recent case here in ACT in Australia, we saw a couple on honeymoon – I think it was – had their property sold by a scam that was being completed outside of the country.
So, I think the guidelines that we need to start to work with, particularly the real estate environment and also a greater aspect to the legal environment, we need to start to educate the consumer of what they should look for when they are choosing a real estate agent or a conveyancer or a lawyer to go through the property transaction process.
Kevin: Okay. So, IDfy is really only operating in Queensland through the REIQ at this point in time. What’s been the uptake like, and what sort of feedback are you getting from agents and consumers?
Lee: Sorry, just to be clear, Kevin, IDfy is across the country. AgentID is the app that we’ve actually built with REIQ.
Kevin: My apologies.
Lee: I’m being very honest. From a real estate agent point of view, it’s still quite slow, but I’m here in Sydney today, and I’ve just walked out of a seminar. That was one of the areas we spoke about, and there was a lot of interest in people understanding it.
To your earlier point, I think people just don’t know what is out there at moment and they’re not sure what their obligations are. So, I think working with some of the professional bodies, such as REI Queensland, REI across the countries, that is going to be the way that we can help educate the real estate agent to actually move towards this.
I think from a national point of view, those conveyancers and lawyers who are operating on the PEXA platform or intend to operate on the PEXA platform probably are quite aware of the ARNEC requirements, and in the ARNEC requirements, it stipulates there must be verification of identity of the clients involved in the transaction. But to that degree, fewer than 20% of transactions are currently occurring on PEXA.
Kevin: It’s fairly obvious to me that there has to be some kind of legislation or driving force behind this, because I think if you just left it up to agents, with respect, it’s probably never going to happen. It almost needs to be “This is a requirement of your listing your property that you become properly identified.” It’s good protection for everyone.
Can I ask you, Lee, just before I let you go, just in terms of security generally, how are we in Australia? How secure is the information we’re putting on the Internet now? Should we be concerned about that?
Lee: I think from a general view, we probably have to be more aware of what we do put on the Internet in a very simplistic term. Someone said to me many, many moons ago, it’s like a postcard. It’s out there, everyone will get to see it, unlike a sealed letter.
I think from our point of view, we’ve taken this very seriously. We’ve worked in the legal space and the corporate space for many years, and so with that in mind, we’ve actually built our cyber security to a level certainly of that of the major banks in the country but also getting very close to that of military-grade security.
We encrypt everything that goes into our cloud-based services, and we ensure throughout that we have very clear audit trials and everything that goes through our platform. We can actually audit by way of date, time, we can see he’s actually logged in and looked at a certain piece of information. We actually hold that information for up to nine years for the clients we are working with, and that certainly is what is intended with the VOI and IDfy.
But I do know that there is a growing concern of “Okay, what is actually happening with that information?” And for that purpose, the clients we’re working with being the real estate agents and the lawyers, we’re not expecting them to have that level of security, and therefore we provide that on their behalf through the platforms and through the products we’re offering.
Kevin: We certainly need to be very concerned about this, and I applaud what you and your company are doing, Lee. Lee Bailie has been my guest. The company is called InfoTrack, InfoTrack.com, where you can get a lot more information.
Lee, thank you so much for your time, and all power to you, mate.
Lee: Thanks, Kevin. Thanks a lot for having me.
5 ways women are better property investors than men – Susan Farquhar
Kevin: Gone are the days where property investment is dominated by men. Nearly half – that’s 47% – of Australians who own investment property are women. That’s according to an analysis of data from the Australian Taxation Office by the Property Council of Australia. Why is that so, and are women better investors than men? To answer that question, Susan Farquhar joins me, managing director of Calla Property.
Susan, thank you so much for your time.
Susan: It’s a pleasure, Kevin. Thanks for having me.
Kevin: It must be delightful for you to see women becoming more dominant as property investors. What’s behind this, do you think? Why are they?
Susan: I think that there is a lot more information out there for women about “a man who is no longer a solid financial plan.” Like you said, gone are the days where men dominate this sphere, and gone are the days where men and women just got married and shared all of the finances and reaped the rewards of that.
For today’s working woman, there’s a lot of information about saving for their own retirement. The government is not really going to do that for us anymore. They have to contend with the 15.3% wage gap. They have to work 12 years longer to have the same superannuation as their male counterparts. So, there is a whole lot of information about why it’s pressing to start to look for their future security through investment.
Kevin: A couple of interesting stats there, which we should really pick up on. A main concern, I guess, for women is security in retirement, and you said there that the man is no longer the plan. It’s staggering that women have to work, because of that wage differential, an extra 12 years longer than men to have the same amount of superannuation. Is that changing? Is that gap closing at all?
Susan: I remember when I was at university and I studied this – so that was in 1992 – the wage gap then was 12%, so it would suggest that it’s actually getting larger. And I think part of that, too, is that women are earning a lot more than they used to and are in better full-time jobs for longer – I’m talking about a generation or two ago – but men also are earning significantly more. If you look at the bonus structures with CEOs at banks and other big companies, they’re massive incomes, and I think that contributes quite a bit to the wage gap.
Kevin: Do you think, for that reason, women are probably a little bit more cautious given that their funds are probably a little bit more precious, Susan?
Susan: Absolutely. I think that men tend to be over-confident and they chase returns despite the evidence. They’re much more likely to invest in areas that don’t have a diversified economy, like mining towns, whereas women are looking for a long-term plan with their ultimate goal to have future security in retirement. Men tend to look at more wanting to supplement their incomes and to retire early.
Kevin: What you’re saying there, really, is that men are risk-takers or more that mentality than women. Do women do their homework more painstakingly than men?
Susan: Yes, they absolutely do. They do a lot more research. They want to be fairly conversant in the language of investment before they seek advice, but they tend to also seek advice. And I think another one of the big differentiators is that women start to do their research and do their homework and realize that it’s good to have a broad-base understanding, but at the end of the day, they’re not the experts, so they’ll seek expert advice.
Men, I have found, when they look at expert advice, they’re actually looking for confirmation of an inherent bias that they already have. Sometimes they’ll speak to someone at a barbecue or in the office and someone will say to them, “Don’t invest in XYZ.”
So, when they seek advice, they’re looking for that to be confirmed as opposed to going, “Maybe I should have a look at the source of that information and listen to what the expert has to say about that,” and then actually judge whether the expert was able to overcome that objection with proper statistics and research.
I think really, where there’s a big difference in women’s success with investment is that they’re looking for that long-term plan but they also listen to the experts and rely on research and data as opposed to hearsay.
Kevin: Given that you’re sitting down talking to investors all the time, both male and female, you must see this bias coming through. You talked there about men wanting the next hotspot whereas the conversation you have with a female investor is probably totally different. They’re asking you different sorts of questions, Susan, are they?
Susan: Yes, exactly. Where I usually start the conversation with my clients is not so much “Where do you want to invest?” but “How much do you have to invest?” Because what we’re really trying to do is match property with their investment goals, and that really starts with what their budget is. Then we look at their appetite for risk and a few other variables like that.
A man will often come with, as I said, these preconceived ideas of “We shouldn’t invest in an apartment in Brisbane,” or “You shouldn’t invest in Perth,” or whatever they’ve already heard, whereas a woman is more likely to say, “This is what I’m looking to achieve,” and that is invariably retirement security: “I have $100,000 saved up, I have a pre-approval of $650,000. Where do I go from here? What’s your recommendation?”
Kevin: I saw some research recently that said that women were able to get into the market quicker and borrow more. Why is that?
Susan: The reason they’ve been able to borrow more is because the lending environment has changed. In the last 12 months, we’ve seen a huge crackdown from APRA and ASIC on investors, so they’re not as willing to lend 90% LVR. They’re not wanting to lend interest-only.
If I look at the group of women who I spoke to 12 months ago who very much typify the research that I’m talking about, the men who are still “um-ing” and “ah-ing” and thinking that they can do their own research and understand what all of the data means have been left behind because the lending criteria has changed, whereas the women who came to me with the research that they knew and then are very willing to hand over their decision to me based on the research that we conduct here at Calla Property, they’ve just gone ahead and done it. They’re already in the market. They’re already investing well.
The lending criteria was looser and there weren’t as many issues with valuations because that was the lay of the land. When everything tightens up, it makes everything so much harder for an investor.
Kevin: Are you saying more women are inquiring through your company, more single women?
Susan: Out of the single groups, there are definitely a lot more women than there are men. A lot of women in my company are between the ages of 35 to 40, and a lot of them come to me and say, “Look, I’m 35, 40, or 45. I didn’t get married. I don’t have kids. I’m now really worried about how I’m going to retire. What can you do for me?”
It’s really heartening to see that with not a massive amount of earnings and not a massive amount of savings, we can get them into the property market and start helping with that financial security.
Of the younger women who are in relationships, they often come to me separately first and say, “I’m in a new relationship and this is all looking good, but I really want to have this locked away for myself.”
Kevin: We’re out of time, unfortunately, Susan. But thank you so much for your time. Susan Farquhar, managing director of Calla Property. That is CallaProperty.com.au. Susan, thank you so much for your time.
Susan: Thanks a lot, Kevin. Bye.
Get a ‘strategist’ on your side – Bryce Holdaway
Kevin: Let’s look at the difference between buyer’s agencies and strategists. EmpowerWealth.com.au, they are buyer’s agents. Bryce Holdaway is with Empower Wealth and joins me.
Good day, Bryce. How are you doing?
Bryce: Hi, Kevin. I’m good. How are you?
Kevin: Yes, good, mate. Nice to be talking again. The difference between a buyer’s agent and a strategist: is there a difference, and if so, what is it?
Bryce: Yes, I think there is a bit of a difference. I guess the best way to illustrate it is through an analogy. If you think about someone who’s about to build a house and they have a block of land, they have a couple of choices. They could go and find an award-winning builder to build them a house and they just say, “Hey, there’s a block, go and build it.” That builder would build it with wonderful craftsmanship, and at the end of the process, hand them the keys over, and they’d be really happy with the house.
But what they may not have taken into account is the northerly aspect of the property, the floorplan flowing correctly, taking into account that they have young children now but they may need to separate some living areas as the kids get older.
Effectively, you would rely on an architect to help you do that. You’d go consult the architect and the project manager and say, “These are my goals, this is what I need, and then moving forward, this is how I need it to happen.”
I think that’s the best way to describe the difference between a buyer’s agent and a strategist. The buyer’s agent is the builder, so the buyer’s agent will go out into the field, find a really great property and do all the things you’ve asked him to do, but you really want a strategist to actually take a step back from the event of buying and look at the process involved.
Buying real estate in my view is the fourth step in a five-step process, and if you’re just going straight to step four, that’s effectively what a buyer’s agent does. But if you’re a strategist, you’re going to clarify beforehand, you’re going to evaluate exactly what you need, you’re going to put a plan in place, then you’re going to implement through the buyer’s agent, and the last thing you do is manage it and fine tune it and tweak it.
So, I think there is a difference, and I think if you can get a buyer’s agent who has a strategic mind to take a step back and see the bigger picture, particularly if you’re buying for an investment purpose but also for owner-occupier, that’s the type of buyer’s agent you really want to be involved with.
Kevin: When someone goes to talk to a buyer’s agent or a strategist, what sort of things should they have clear in their own mind before they go in?
Bryce: What they’re going to compromise on, because they will compromise on something. Unless you’re blessed with a lotto win or a big inheritance, most people are fixed on price, so therefore there are a couple of other variables, like location, size of land, and the quality of the dwelling.
Knowing in advance what you are prepared to compromise on is going to help you. I always say there are no “ten out of ten” properties but there are heaps of great “eight out of tens” and “eight and a half out of tens.”
If you know that you want shiny taps and brand-new carpet, and you’re fixed on the location and the price, you’re actually going to have to just compromise on the size of the land. You may want a house, but you might not be able to afford it and you have to do a townhouse, or even further, you buy an apartment.
If there are two people involved – husband and wife, partner, boyfriend and girlfriend, whatever it is – if they have an honest chat in advance about the big C-word – “compromise” – then I think that’ll set them up for a better experience.
Kevin: Is part of that compromise process the fact that we want more than we can afford? We go in with a shopping list which is almost like a wish list, but it’s maybe one that we simply can’t afford. Is that where the compromise comes in?
Bryce: Yes. It’s human nature, isn’t it? We all want a little bit more than what we have. You’re absolutely spot on. It’s amazing how if you have $600,000 to spend, your taste is something that’s $650,000. If you have $1.3 million to spend, all of a sudden, human nature says your taste is at $1.4 million. It’s the nature of the beast.
You just have to understand that if you want to renovate or detonate, then you can get a bigger sized land because you’re prepared to do the work, and that’s where your compromise might be. But for other people, they absolutely have to be in this location because of that school zone or because “My sister is across the road,” or whatever it will be.
So if you’re fixed on price and location, ultimately, you’re going to live in an older house on a bigger block or you’re going to live in a shiny house with a smaller block. That’s ultimately what it comes down to.
Kevin: Bryce, we know exactly how selling agents work, and they work off a commission base. How do buyer’s agents work? How do you earn your money?
Bryce: It’s kind of a mirror reflection. A lot of buyer’s agents do a percentage of purchase price. So, if you have a budget of $800,000, they may quote you 2% or 2.5% of the purchase price, plus GST, and that’s how they get paid.
I tend to go down the fixed fee path myself and at Empower, because if you’re on the seller’s side and you think your house is worth $700,000 and the real estate agent gets you $770,000, you’re happy to pay him a bit more because they got you an extra $70,000, so they’re actually worth paying a little bit more.
But on the buyer’s side, I don’t think it quite works, because if I have a budget of $700,000 and then I suggest that something is worth $770,000 and I encourage my client to pay that, they’re wondering, “Is this a good deal, or is this just because he’s going to get paid a little bit more?”
So, for me, personally, I prefer to go with a fixed fee quoted up front, but it’s a bit of both. It’s either fixed fee or a percentage of purchase price for most buyer’s agents.
Kevin: Great talking to you. Bryce Holdaway from EmpowerWealth.com.au, and also co-host on Property Couch. We’re out of time, but maybe next time we talk, we’ll have a chat about the podcast as well. Good talking to you, mate. Thank you.
Bryce: Thanks for having me on. See you, Kevin.
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