"Must be sold this week" ad

[fudosan]

Be careful when reading ads. That's my conclusion after reading many commercial property ads. Take this CBD retail property I saw yesterday in NZ Herald. On the surface, it looks attractive at 10% cap rate. Because I inspected this property about 6 months ago, I know the actual story is quite different.

1. "new 2 year lease"
The property was on the market for lease but no taker. Owner (developer) promised to lease back for 2 years at a rent to give 10% cap rate. But that was advertised several months ago. For that location (very little foot traffic), I think the rent in the 2-year lease is way too high. Anyone buying this investment will be faced with a probable 50% drop in rent at best, or ZERO tenant at worst, when the lease expires.

2."must be sold this week"
The same ad appeared last week already so logically you can't use the same phrase this week.

[Wayne]

would this not be false advertising? I actually never notice emotive stuff like that in the same way I don't see adds on TV - mental block.

[spurner]

I like the "Vendor wants this property SOLD" headlines. Well duh, what else would they have told the agent when they listed it for sale?

Or the "motivated vendor" I recently dealt with who was slow to get back to me, and didn't even counter-sign the offer.

I put an offer on a property 4 days ago for what the place was worth. The vendor took 2 days to get back to me, didn't counter-sign, and then INCREASED his BEO price by $50,000.

I think "Believe half of what you see and none of what you read" sums up property advertising and vendors at the moment.

[mattnz]

Yeah I had one where they advertised it as "vendor must sell urgently, make an offer", and when ordered by price appears around the $600k mark.

When I called the agent he says, everyone I have shown it to has made low offers and I won't show you through it unless you are a serious buyer for high $600ks as the vendor won't accept less than $680k.

What does an agent expect when they market it like this??

[Davo36]

I've seen heaps of this over the last year or so. Getting a bit sick and tired of it to be honest.

The real estate agents are advertising this way for 2 reasons that I can think of: 1) They want the phone to ring as they are selling bugger all, so making it sound like the vendor needs to sell helps in this regard and 2) It helps to condition the vendor because they a) talk to the vendor prior to placing the ad saying things like "We should put that you are prepared to meet the market, because you are prepared to meet the market aren't you?" and then b) when interested parties do make offers they can say to the vendor, well you have said you're going to meet the market, well here it is! And so on.

But in most cases this is not working as the vendors are holding their properties tightly. Can't say I blame them, where else are you going to put your money?

David

[fudosan]

Now that only the very serious investors are left in the commercial property market, there is no place for false advertising. It won't work. Appealing to buyer's emotion works only when the market is booming.

[tpr2]

The best one I remember was on a penthouse I was looking to buy around three years ago.

The owner was in strife and so the advertisement had 600k as the listing price, this wasn't offers around or anything like that, it actually stated that the price was 600k.

I went in and offered my usual cheeky starting offer of $450k and was told very disgustedly that this was ridiculous and the owner would not accept anything under 800k because he had a valuation of 1million dollars.

When I inquired as to why they had listed the property at $600k then his comment was that they wanted to get people through the property and excited, show them the val and then get offers around the 800 mark.

I suggested politely that this would probably not be a great tactic but now that I knew there was a valuation of 1 million and that the owner was willing to take 800k I would happily increase my offer to $500k.

needless to say it's lucky I don't understand french because I'm sure that was what the agent was speaking while he told me he wouldn't take the offer to the vendor.

I replied in plain English that if he didn't I would call his boss and get him to take the written offer to the vendor.

Of course the vendor didn't accept but many months later he sold it for about $650k to an investor from london.

[spurner]

Right on Davo. I think the vendors go to the agent and say "I want $1m for my $800k property", and the agents readily agree as they want the advertising money and exposure for their agency. They know if they refuse, another agency will take them up on their offer.

If not that then it must be the classic "buying the listing" strategy from the REA's, for the same reasons as above.

Either way, they'll use the offers around market value to try and condition the vendor down. Sometimes I think we as prospective purchasers are being "used" by the REA's to help them condition the vendor down, or at least give them ammunition they can use to talk to the vendor about what the "market is telling them".

All old tricks, but it is frustrating at times.

[fudosan]

Either way, they'll use the offers around market value to try and condition the vendor down. Sometimes I think we as prospective purchasers are being "used" by the REA's to help them condition the vendor down, or at least give them ammunition they can use to talk to the vendor about what the "market is telling them".

All old tricks, but it is frustrating at times.

I regularly talk to agents and follow up on properties I want to buy every few months. Many vendors are still expecting the market to recover soon so they can sell at low cap rate. The current market is a test of our patience, and we just need to keep looking.

[Davo36]

Yeah, it's interesting time alright. Commercial properties are actually becoming more valuable right now since the OCR is being lowered so quickly.

I'm sure those with cash will be looking to get a property now that the bank returns are rubbish. I know I wish (in hindsight) I had kept the ones I had. I thought at the time I got good prices for them and in time I'd be able to buy better ones with the money. Can't seem to buy anything right now.

There's an opportunity to buy at say an 8% yield and borrow at say 6% (which is unbelievably cheap for commercial money) giving a nice 2% gap. The thing is, you still have to buy the property at the right price. Seems to be lots out there that are way over rented, some by their owners etc.

David

[tpr2]

It's actually illegal in QLD to "buy the listing" these days.

A great rule in my opinion.

[Davo36]

Thought of this thread while reading this this morning:

Exclusive hideaway attracts few bidders

4:00AM Saturday Feb 14, 2009
By Anne Gibson


One of the biggest, most exclusive Bay of Islands properties near the waterfront failed to sell when it was auctioned in Auckland this week.
Bayleys offered a huge slice of Mataka Station, a subdivided rural property on the Purerua Peninsula, outside Kerikeri north of Waitangi.
For some years, multimillionaires have been selling parts of the coastal block on the historic headland north of Paihia. Mataka, neighbouring Peter Cooper's subdivision Mountain Landing, is virtually surrounded by sea and has many private, white-sand, pohutukawa-fringed beaches.
The station is also home to the historic Marsden Cross, which marks the site of the first Christian sermon to be delivered in this country after the landing on Christmas Day in 1814 by the Rev Samuel Marsden.
Calls in 1999 for the Government to buy the farm failed when it was put on the market by evangelist Bill Subritzky, who had opened it up for Youth for Christ camps for 15 years.
Bill Birnie, a $100 million rich-lister, and barrister associate Evan Williams have been selling parts as luxury hideaways for the conservation-minded wealthy. They also have Living Nature, an organic cosmetics business.


A 53.5ha section - advertised as the single largest lot at Mataka - was offered on Wednesday at Bayleys' Viaduct Harbour offices but bidding was well short of the mark. The land is hilltop and some way from the beach.


The Government valuation on the property is $2.5 million. Scott Cordes, Bayleys communications manager, said bidding opened at $1.3 million and went up in one hit to $1.4 million.
"The auction did not reach the reserve and has been set aside for further negotiations with the highest bidder," he said.
The vendor's instruction was clear: "Priced to sell below GV and will meet the market", the agency said in advertising.
Mataka was recognised as New Zealand's best rural waterfront real estate and the site had breathtaking scenery, the agency said.
The station has a beach lodge, boat launching, hiking, horse riding and many kiwi.
The land being offered is also part of the 1148ha working farm.
Bayleys agent Michael Pleciak said the $2.5 million was "a bargain" because other lots on the conservation estate have sold for more than $3 million.
"It's a fantastic setting and the owner has been clear that he will meet the market price," said Pleciak.
Buyers, he said, were offered access to the entire farm, which included private beaches, boat-launching facilities, hiking and horse riding.

http://www.nzherald.co.nz/property/n...ectid=10556664

The bolding is mine. Funny how the salesperson is still saying, after the property failed to sell at auction that the vendor will meet the market!

David

[fudosan]

Just a follow-up. The "Must be sold this week" property is still on the market, but the guaranteed lease has been shortened to just one year.

[CJ]

It's actually illegal in QLD to "buy the listing" these days.

A great rule in my opinion.

How do you "buy the listing"

and how do you stop it.

[tpr2]

The term was called "buying the listing".

The PAMD banned the practice which is to basically go in and tell the vendor that they will get some ridiculously high figure.

So the scenario would go... agent one would visit and do his listing presentation and when the owner said I want 300,000 the agent said yes, easy I can do that probably $320,000 and then the second agent would visit and do his presentation and ask what the other agent has suggested was achievable. Once he knew the second agent said well I can get $340,000 and so on.

The way they stopped it is that the agent now must provide a comparative analysis report to indicate how they came to the figure of $320,000.

If the owner says $300,000 the agent must still show the comparative figures and give his price indication based on that. He can take the listing at $300k if the comparative figures are showing less but at least the vendor is informed before he makes the listing.