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

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.

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

Nothing quiet about Christmas in my life!!!

Firstly, I must apologize for going quiet for so long. I wish I could tell you that it was because I was flat out selling properties, but that's not the reason. As Christmas approaches and all 4 of my children are home from boarding school, I have let the demands of family life take over. This realization has inspired this blog.

There is a perception in the Real Estate industry world wide that the Christmas season is not a great time to buy or sell property as the market is quiet. I've thought about this idea over the last few days and realised that, as always your reality is created by the way you see the world and the thoughts you think. If you think your life is hard, it will be. If you think your are the luckiest person in the world, you guessed it, you will be.

So using this theory, surely, if we think the Christmas period is quiet, it will be. We allow all the other things to take priority in our lives, when, really during the rest of the year we have exactly the same amount on our plate, we just don't have the excuse to say, "Well, it's Christmas, the markets quiet anyway."

In fact, this time of the year may be the very best time to sell your property.

• Families from all over the world reunite over Christmas, so the buyer's pool is much bigger. 
• Zimbabwe is the most beautiful country in the world and even though someone may have moved away permanently, they will always have a yearning to return. If they have money, buying a property here is a good reason for them to eventually move back here.
• Many, many home owners go away for the holidays. If you happen to be staying at home, and make your house available for viewing, you will be in the pound seats, as the pool of houses during this period shrinks.

I advise all homeowners, seriously wanting to sell, to make their homes available during this holiday period. Let your agent know which days and times best suit you and don't be too rigid about this.

For buyers, you also need to have some flexibility in your viewing times, and give your agent lots of notice so that the agent can organize the viewing time that best suits all parties concerned.

I've changed my concept of the holiday period. It is busy, busy, busy! Busy with family and friends, busy with clients and busy closing sales! We all know Christmas is a busy time, it's just what we choose to be busy about! There is nothing quiet about Christmas in my house, so why should my business be quiet!

Stay safe and have a wonderful time with your family and friends this festive season!

Zimbabwe Central Bank Backtracks on Real Estate Currency Control Measure

I know this is a bit belated, but for all those out there who wanted to know what happened to the directive from the Reserve Bank who wanted to hold on to the lion's share of the proceeds from the sale of immoveable property, for up to 12 months, here is a good article... (By Gibbs Dube of VOA in Washington)

 

 20 September 2011

Zimbabwe Central Bank Backtracks on Real Estate Currency Control Measure

Reserve Bank Exchange Control Chief Morris Mpofu said the order was suspended so that the institution could address misconceptions about the policy, which banks and real estate agents vehemently opposed

Gibbs Dube | Washington

The Reserve Bank of Zimbabwe has backtracked on a recently announced currency control which obliged those selling immovable property to put all but the first US$50,000 revenue from the sale on deposit with the central bank for as long as one year. 

The central bank said it has decided to review the measure.

In a statement, Reserve Bank Exchange Control Chief Morris Mpofu said the order was suspended so that the institution could address misconceptions about the policy.

He did not spell out the supposed misconceptions. But the Bankers Association of Zimbabwe and the Real Estate Council of Zimbabwe had strongly objected.

The policy, intended to slow hard currency outflows, would have paid out money held in escrow in four payments over a year’s time, with interest of 10 percent.

Mpofu said the suspension of the order should not be misconstrued as opening the flood gates for currency outflows. The order was mainly aimed at foreign investors.

“Authorized dealers are further advised that in the normal course of (the) exchange control’s monitoring and surveillance activities, the on-site and off-site inspections shall continue to be conducted regularly,” Mpofu said.

Oswald Nyakunika, president of the Real Estate Council of Zimbabwe, commended the RBZ for suspending the policy which he said had unsettled the property market.

Economist James Wade said the RBZ had no choice as real estate agents and bankers viewed the move as a strategy to compel deposits which many doubted would be safely held, given the bank’s record of diverting the funds of depositors.

In 2008 the Reserve Bank was embarrassed by disclosures that it had diverted millions in funds placed on deposit by the Global Fund to Fight AIDS, Tuberculosis and Malaria, leading to the suspension of Zimbabwe grants made by the Fund.

Capital Gains Tax and Transfer Fees - Real Case

Last week I gave you advice on costs of buying and selling, so to start the week off, I thought I would give you an example of a recent email I received and the my response to it, as real life cases often have more impact on your understanding than a long list of do's and don't's!!! (Is there even such a word as don't's???) I have removed the name of my client for confidentiality reasons...

Anyway, have a read and if you have any questions or need advice, leave a comment and I will try and answer it for you...

She wrote:

"Hi there Nicky,

Hope you had a good weekend.  Was wondering if I could pick your brain a bit.  My dad has  been offered a house to buy but he's not sure if he trusts the guy very much.  He is saying that he has to pay capital gains tax but he is over 55 years old and has owned the property for about twenty years.  Also would you know who has to pay transfer fees and how much that would be on 130 thousand?  He says his brother in law is an estate agent but like I said he's not sure how trustworthy the whole thing is because of past experience with the same people.

If you have any info that I could give dad that would be awesome.  Thanks so much and have a good day"

I replied:

"On 14 Nov,2011, at 9:20 AM, Nicky Versfeld wrote:

Hi!

Hope you had a good weekend.

Firstly, if the guy is over 55 and the property is not his Principal Home, in other words he has been renting it out, then he will have to pay capital gains tax of 5% on the Purchase Price. If the property is owned by a company then he may have to pay capital gains tax. So your Dad needs to find out who is the legal owner of the property…ask to look at the title deeds. Then find out if he has been living there himself and if all the utility bills are in his name. If he owns it in his personal name, and has been living there then he won't have to pay capital gains tax.

The buyer pays the transfer fees and these are calculated on a sliding scale depending on the price, but usually they come to about 7% of the purchase price.

Where is the property and what does it have? I should be able to give you a guideline value.

My advice also is to pick your lawyer who will do the transfer as a precondition of the sale. I have lots of great lawyers who will be happy to do the transfer and I know they are reputable. Don't allow any money to be transferred to the seller until the title deeds are in your Dad's name and so even if the seller is a bit dodgey, you won't lose anything, just be a bit of a waste of time. You don't pay extra to use your own lawyers as the transfer fees are their charge.

Let me know if I can do anything else to help, and thanks for thinking of me to ask your questions!!!

Have a great week...

Nix                          

"

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Cost of selling your property held in a company or trust

If you read my previous blog about selling your property held in a personal name, then you would realize that there are 2 main areas of cost: The Estate Agent's fees (market appraisals and commission) and the Capital Gains Tax.

With the sale of a property held by a company or trust the Estate Agent's Fees still apply, but the Capital Gains Tax varies and there are accountants' fees and lawyers' fees involved.

Capital Gains Tax is payable on the sale of any shares in a company and the rate is 20%. Some creative accountants may find ways to lower this cost, but it is always best to budget on the most expensive outcome, and be pleasantly surprised in the end if the whole process costs you less. So many sellers have the misconception that there is no Capital Gains Tax due when a property held by a company is sold. They often have been incorrectly advised when they purchased the property and thought that the best, and cheapest way to sell their house in the future would be in a company. Please don't make this mistake!

Properties held by trusts do not incur Capital Gains Tax as in effect no sale has taken place. When you sell your property to the new buyers, you cede your rights to the trust and the Trustees and Beneficiaries change, but the owner of the property remains the same, i.e. The Trust still owns the property. As this transaction does not need to be approved by ZIMRA, the Deeds Office or the Registrar of Companies, it is exempt from Capital Gains Tax. Please note that this is the case at the time of writing, and anything can change in Zimbabwe at any time!!!

Finally, you will have to pay accountants' fees for the change of directors in the company and with a trust you will pay lawyers' fees for the cession documents. These charges vary depending on the lawyer and accountant. It is fairly acceptable to ask the buyer to meet these costs, as with these two types of sale the buyer does not pay transfer fees. However, there are some instances when the fees are split between the buyer and the seller. This is negotiated at the time of acceptance of an offer.

If you have any specific questions regarding the sale of your property, please leave a comment below and I will try and answer it.

Have a great day...