Chasing Rainbows

So, you have finally decided that now is the time to sell your house. Before you put your house on the market, please read this blog about the pitfalls of overpricing your home.

Most people want the best price for their homes. Ok, you’re right, everyone wants the best price for their homes! But research shows that if you overprice your house by just 10% it can sit on the market for as much as 6 months longer than a house that is priced right. Before you jump in there and say, “But, we’re not in a hurry to sell, and when we are, we can reduce the price”. There are more serious issues involved than your house just sitting there.

 

Firstly, estate agents don’t work as hard on overpriced houses as they know that their buyers will not be interested in looking at them, and if they do look and even put in an offer, the offer will be so low as to be insulting to the seller. In most cases, however, buyers do not make offers on overpriced houses.

Secondly, most buyers are educated about the value of property at the time that they are house hunting. In fact, I would go as far as to say, they are the experts on property value. They know what a property worth $300 000 should have, and if your home does not measure up on paper, they won’t even bother looking. You therefore lose the buyers before they have even seen your house.

Thirdly, overpricing helps the competition. What competition? Well, the other homeowners who are trying to sell their houses. If your house is overpriced, the buyers will snap up the cheaper houses thinking they are getting a bargain and you will be left high and dry, with no one to come and view your house, as all the buyers in that price range will have bought cheaper homes.

Another point to remember is, when you eventually do realize that you need to lower your price, the house will have become stale. The buyers will ask themselves what is wrong with the house if it has been on the market for this long and now the price has dropped. You will lose buyers again, as no one wants to buy a white elephant. Stale listings have a negative perception in buyers’ minds, even once the property is on the market for the correct value.

In my experience, I have found that most overpriced houses end up selling for less than the lowest price the seller was initially prepared to accept or even less than the Estate Agent valued it at.

Before you list your property do some research. Buyers are forced to do research in the course of their house hunting. Studies shows that buyers view between 10 and 15 properties in their price range before buying. Sellers should look at other properties on the market too. You should also seek professional help from Estate Agents. It is probably best to get 3 market appraisals.

 But beware the unscrupulous agent who overvalues your house to get the listing.

In the Real Estate Industry this is called “Buying a Listing”. Some agents believe that by giving you a high value for your house you will list it with them. But always keep in mind, the estate agents give you nothing more than a GUEstimate when they value your house. Estate agents don’t determine prices, buyers do, and as already discussed, they know the true value of a property. Just as you want the best price for your house, they want the best house for their buck!

Another point to consider about agents who “buy” listings is that most buyers know who these agents are. They rarely go to them to view houses. So be sure to choose a reputable agent who has a fair understanding of market trends and will give you the best advice.

 

Oh, but wait! What about those mythical buyers you have all heard of, who pay hundreds of thousands of dollars over the asking price or value of the property because they love it so much. Well, they are just that: mythical. You are as likely to see a unicorn in your back garden or find a pot of gold at the end of the rainbow, as you are to find a buyer uneducated enough to pay more than a property is worth.

So remember, more tends to result in less, and less can sometimes result in more. If you place your property on the market at the correct price, you are likely to end up with more money in your pocket, than if you list it at an inflated price.

And for those of you who are still not in a hurry to sell, then either delay putting your property on the market, or put it on the market at a realistic price and only accept offers at that price.

Until next time, be happy, stay safe and please don’t overprice your house!

 

NICKY

Goal setting and investment

Wow! Another week gone already…I have been reading a lot about success and property investment this week, and so I thought I would share some of the insights I have gained. You never know, they might just be the push you need to take control of your financial future.

First things first, if you are going to be successful, you have to set goals. How will you know if you have succeeded without goals? Goals achieved are the benchmark for how successful you are. “A goal is a dream with a deadline,” says Napoleon Hill. If your goal is to own your own home or a profitable property business, then if you don’t set a timeline for this, you are only a dreamer. Life passes dreamers by. The first thing you need to do, is decide on your dream, however frivolous it may seem to you, and then set a deadline to achieve it. This could be relatively short (say 6 months) or long term (10 years.)

This next part applies primarily to those people who would like to invest in property as a business, but the choices you make when buying a family home should also be based on these points.

Ok, so now you know you want to invest in property, ask yourself why you want this. There could be any number of reasons. Being rich, is not a good enough one, by the way, so get creative. It could be security in your old age, a family home for each of your kids, or more philanthropic, like helping the homeless with low cost housing. Knowing why you want something, makes it easier to stick to your goals when the going gets tough, which it will, I promise.

Now, the hard part starts; do some research, in fact do lots and lots of research. Find out which parts of the country or town are going to be most sought after in the near future. These suburbs or areas will have cheaper houses than the current favourites. For example all the areas just outside the “golden triangle” will become more popular as the population grows and when all the professionals in the diaspora return. There are not enough properties in the upmarket areas to service the growing needs of Zimbabweans. Greystone Park, Chisipite, Alex Park, and Mt Pleasant are all areas that have fantastic growth potential.

Find out which areas are good “water” areas, as some properties are priced below value as there is no borehole, but if you were to sink a borehole and get water the value of the property would increase immediately.

 Find out what the market is looking for. Do people want to live in cluster developments or large properties with their own gardens and extras, like a pool and a tennis court? I have found quite a shift recently towards cluster or closed community developments, probably because of the security which these types of property offer. Zimbabwe does not have enough cluster developments to meet demand, and this fuels the ever increasing prices of such developments.

Remember as a property investor it is your job to try and predict the future growth of the property market. We all know that property is a great investment and that in the long term prices will continue to go up. But the rate of this escalation is not so easy to predict, and different areas grow in value faster than others. Research is the only way to make an informed investment decision. Remember property investment should not be made with the heart, but clearly with the head and a little bit of gut instinct. And always buy with the profit already in the investment, in other words if you were to put the same property on the market the next day, without doing anything to it, you need to know that you will be able to sell it for more than you bought it for.

 Of course, the points above are not exhaustive, and I am sure you could all think of many other points to add, but I wanted to get your minds thinking about property investment in Zimbabwe and how to achieve your goals.

OUR NEWS…

Last Thursday we had the pleasure of attending Sabre Business World’s Seminar on the 25 Secrets of Business Success at the Meikles. It was a fantastic day and I think we all left feeling highly motivated and ready to take the Zimbabwean business world by storm.

Thank you to Sally and Brendan Palmer for this inspirational seminar. For more information about Sabre Business World, visit www.sabrebusinessworld.com

And always keep in mind :

“ People often say that motivation doesn’t last. Well neither does bathing…that’s why we recommend it daily.” Zig Ziglar

 Keep yourself motivated and keep improving yourself, and you will achieve everything you have ever dreamed you could have or be!

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STAY SAFE AND BE INSPIRED!

Rethinking the title of your property...

Back in the infamous Zim dollar days, everyone wanted to put their property into company names. This way, the buyers avoided transfer fees and the sellers avoided paying capital gains tax. There were other reasons too, but these are probably too shady for a reputable agent such as myself to know about...

It now seems that there are more disadvantages to owning a property in a company name than the financial advantages of transfer fee avoidance for your future, potential buyers. I have listed some of the points below, but by no means is the list comprehensive:

1. The myth of not having to pay capital gains tax on the sale of a property owned by a company OR TRUST needs to be debunked as soon as possible. The sale of shares of any description is liable for a 20% capital gains tax. You may be able to find a clever account to perform some creative accounting to avoid the tax, but somewhere down the line these loop holes will be closed and you will be liable for the tax.

2. If you are over 55 years old and the property you are selling is your principal primary residence (your home, in layman's terms!), then you may apply to ZIMRA for Capital Gains Tax exemption. If the property is in your name, then it is much easier to explain to ZIMRA that it is in deed your home and you are eligible for the exemption. If it is in a company name, then there will be all sorts of questions and at the end of the day, you may not get the exemption, as a company can't have a home, because although a company may be a legal entity: it does not need to sleep somewhere!!!!

3. If the owner of the house was to die, the family would not have to pay death duties on the principal primary residence (yes, the home), but only if the property is in the deceased person's name. If it is in a company name, the Master of the High Court will demand his pound of flesh, at the most vulnerable time in the grieving family's life. The last thing you need is trying to find money for the death duties on your home when you have lost a loved one.

4. There is the ever present fear of the 51% indigenisation bill. Personally, I don't see this reaching as far a shelf companies which own houses, but then I am the eternal optimist and this is Zimbabwe, so anything goes, and generally the more unexpected the more likely the event will occur. (What a conundrum that is!)

5. The last point, which comes to mind is the fact that most banks will not loan you money to buy a house in a company name, and so as a buyer you will still have to pay transfer fees to put the property in your name. This whole process thus defeats the reason for the company name and the proposed transfer fee avoidance.  Banks are also reluctant to lend you money against a property in a company name. This is because ownership of the company can be transferred without it affecting the change of ownership on the title deeds.

My advice therefore, is to put your own home in your personal name. If you buy and sell properties as investments then I don't think it matters which way you choose as you will be selling it on. But remember even if you put it in a company name, you will still have to pay tax on the sale of the shares.

The truth about commission paid to Estate Agents

Commission is the percentage charged by an estate agent or property negotiator to either sell your property or manage it, in the case of rentals.

An estate agent's job is really to introduce a buyer to your property, in the case of sales, who is willing to buy the property. By law, this is all that is required of an agent to be entitled to their commission. However, a good estate agent will ensure that both parties are happy with the deal and follow the sale right through to the eventual transfer of title to the new owner. Some agents want their commission as soon as an agreement is signed, or at the very latest when the purchase price has been paid.

In my experience, paying the commission on signing is foolish as the sale may still fall through, and most people don't have the money upfront without first being paid for their property. The second option which is paying the commission once the full purchase price is paid, is generally the preferred scenario for most agents. However, I feel this is ethically too soon to accept payment of the commission because the negotiators lose interest in the sale and won't check up on the transfer of title.

The best time to receive payment of commission is when title is transferred to the buyer. There is no law to enforce this, as commission is due on introduction, by law. But, a good estate agent should never be chasing their commissions, they should complete the sale to the very end, and when all parties are satisfied, then they should have their commission.

Now, there are two different types of mandates in Zimbabwe which you can give an agent. An open mandate allows more than one agent to sell your property. Whichever agent introduces the property to the buyer, that is the agent who is entitled to commission. Open mandates are quite tricky, as a non mandated agent may approach you to sell the house, and although you have not asked them to sell your property, you may think it is ok to let them. Your mandated agents can all demand commission if a non mandated agent sells your house. So a word of warning, only let those, who you have mandated, sell your property. You don't want to be paying double commissions or have to deal with quibbling agents.

The second type of mandate is a sole mandate. This means you have given one agent the mandate to sell your property. When that agent introduces the buyer, they are entitled to commission. When you decide to pay the commission as discussed above, is an issue you need to negotiate with your agent.

There is a big difference between a sole agency and sole selling rights. Sole selling rights are not very common in Zimbabwe. Sole selling rights entitles the agent to be the only person allowed to sell the property. This will also prevent the owner from selling the property himself. Basically, an agent with sole selling rights will be entitled to commission when the property is sold, regardless of whether that agent introduced the buyer. My advice is to avoid this type of mandate completely.

According to the estate agents' governing bodies the recommended commission structure is 5% plus 15% VAT on sales. 15% plus 15% VAT on residential rentals and 10% plus 15% VAT on Commercial and Industrial rentals.

You may charge 3% plus VAT on sales but nothing lower. You may charge as high a commission as you like, say 7,5%, but you must have a written acknowledgement from the seller stating they are aware that they are being charged above the recommended scale of fees.

Commission is costly, so make sure you have chosen a reputable agent who will put your interests above their own. Don't be bullied into paying commission early, but on the flip side, remember you are obliged to pay commission if your agent has introduced a buyer. If both sides are honourable, the business transactions will go smoothly.

Visit my website www.pageproperties.co.zw  or leave a comment here and I will be sure to reply to you!

Our Fiduciary Duty to YOU the public...

Our what? Exactly! Who even understands big words like that? Not many, but it is my job to understand, and explain it to you so that you know what is expected of someone who presents themselves to you as an Estate Agent.

Estate Agents in Zimbabwe are controlled by a very strict set of conduct rules that most of the public are completely unaware of.

When one becomes registered as an Estate Agent in Zimbabwe, they have had to have had at least 3 years practical experience in the industry and pass a rigorous set of exams. The most important of which is Estate Agency Practice. This covers all the legal aspects of property sales and rentals, as well as an Estate Agent's Duty to the Public.

I have listed below, in English, not legalese, what you not only can expect, but must demand from your Estate Agent:

1. An agent must put the interests of his client above his own at all times, and must treat the business dealings of his clients as well as he would treat his own, if not better. This means that you can and should demand confidentiality at all times from your agent. He should never try to purchase or lease your property himself, without having first made it very clear to you of his personal interest.

Any Estate Agent is obliged to offer you advice and professional knowledge about the industry, regardless of whether you employ his services. (Much like a doctor is obliged to save lives even if they are not his patients!)

2. Agents should not defame other agents, or treat them in a manner that is inconsistent with fairness, courtesy and professionalism.

3.  Agents should not tout, i.e. should not try to canvass for business by door to door calling. They should not approach you if your house is on the market and ask to sell it. So many people don't realize this and an agent will call them and say, "I have a buyer for your house, please can I bring them around?" If the property is with another agent then you should tell the caller, that they must go through your appointed agent. Sellers can get themselves into all sorts of trouble when allowing a non mandated agent to sell their property as they will be liable for the mandated agent's commission, even if that agent did not sell the property.

4. Agents should not pose as buyers to illicit information from sellers or other agents.

5. Money held in an agent's trust account does not belong to the agent, and under NO circumstances is that agent allowed to use the money for the running of his business or personal expenses, (not even bank charges!) The agent should not move any money in the trust account out of the account without the written permission of the owner of that money. The number of cases that exist of agents "borrowing" money from the trust account and never repaying it, is quite frightening.

The deposit paid for a rental property belongs to the tenant until the end of the lease, and at such time the money will either be returned to the tenant or used to repair the property and pay outstanding bills.

At any stage that you have money in an Estate Agent's trust account, you can and probably should ask to see a statement. All rental properties should have a monthly statement of their account forwarded to the owner and tenant, if the tenant requests it.

If at any stage, you feel an agent is not fulfilling these obligations, you can report them to the Estate Agents Council, and the matter will be taken up by them. If you have been unfortunate enough to lose money from an Estate Agent's Trust Account, the Estate Agents Council has a Compensation Fund, which all agents have to pay money to each year, so that the public can be reimbursed for their losses. Bet you didn't know that...I am letting out all the secrets today, aren't I?

But remember, you have the right to expect the best from the person you are entrusting with your most valuable possessions, so don't settle for less...

Visit my website for more on property www.pageproperties.co.zw