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My house is not selling! Why? – Featured Blog

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Today’s posts from our featured Port Elizabeth Blogger:

My house is not selling! Why? by The Port Elizabeth Property Blog:

I was phoned a few days ago for some advice by a owner who has had their home on the market for some time (3 months) with a reputable estate agent, but nothing has been happening.

The agent has held a show house but nothing seems to be happening and the owner is very upset because he cannot ever get hold of the agent and simply feels that he has been passed off to lesser qualified agents.

He wanted to know what my thoughts were and what I would advise.

  • When you instruct your estate agent, the agent should advise what they will be doing, as part of their mandate. Eg 1 show house per month etc. If you want a specific agent to attend to your sale, stipulate this upfront, as well as what exposure the property will be getting;
  • Also, be realistic, real estate is a time consuming profession if done correctly. To give an example, it can take a long time to thoroughly consult with a seller before a mandate is signed. This is because there are always three outcomes of an interview process to retain a property professional, namely you might hire him or her, you might decide not to hire him or her or the estate agent may elect not to take the mandate, and there is a lot that needs to be discussed;
  • Rushing through the initial steps can realistically mean that you have an above average opportunity to end up with the wrong agent;
  • The most visible agent may not necessarily be the right fit for you. But how can I say that? Simply because being visible to a self marketing activity, the question is what will you, as the agent do, to expose may property?
  • If an estate agent has 4 listings or 20 listings; will determine how much time they can spend on your property, its common sense.
  • How much time did the agent take before coming up with the valuation? In this case the valuation was done on the spot and the mandate was signed, when the agent agreed to go to market at what the owner wanted, they had not seen a property report or a comparative market analysis.

A valuation is supposed to be a predictive exercise to determine, based on present buyer behaviour, what buyers would likely pay in the present market for the property in question. Despite what the owner might think the buyer needs to make an offer which can be accepted. buyers do not care:

  • What you paid for your property or when you bought it;
  • They do not acre what you spent on it;
  • They do not care why you are selling;
  • They do not care why you need a certain amount to settle your bond;
  • They definitely don’t care what you need from your sale, to make your next transaction work;
  • Nor that your neighbour listed for x;
  • ….

You get the idea, you house is the one property you are selling and buyers have choices, not just in your area. This can have huge consequences for you as a seller. Price too high and people buy a house across the road, when they liked yours better. If you price is too high, they might rather choose a more affordable home in an area which is perceived to be a better area.

In the instant case, the home is priced too high for the area, location and the home in question; the agent has been very economical on marketing activities, but the bigger concern has been the lack of feedback, but most of all the lack of sitting down with the owner and price counselling them to commit to a  price at which the property can sell. This frank conversation has to happen in such circumstances.

Will leaving things as they are help?

In real estate, if you just leave a property on the market at a listing price above what the buyers perceive as value; id this a harmless activity? Definitely, it can be done, but it is not without prejudice. Buyers interested ion your area are constantly watching the homes on the market and a house which just sits there is a matter of concern. Nobody wants something no one else wants, its human nature. In some studies it has been shown that when a property is listed above the value attributed it by buyers; a strange phenomenon occurs where the eventual selling price is less than what one could have achieved, had you priced correctly at the outset.

In this case there needs to be dramatic interventions, however to do this would require a process which I cannot engage in while another agent holds a mandate. So I let the seller know that they need to sit their agent down and insist on a frank open and honest discussion. I also suggested that the seller insist on a written report on how the agent arrived at the listing price. Given that that the property is not selling, what is the problem and to come with answers. As property professionals, we are just that professionals and true professionals are accountable to their clients and to themselves to get the required results.

Clinton Begley (PPRE MPRE CEA B.PROC (NMMU)) is an full status estate agent, in Port Elizabeth, South Africa. In addition to his passion for real estate he is also an experienced trainer, coach and mentor. He holds a B.Proc degree through the Nelson Mandela Metropolitan University (previously the University of Port Elizabeth) and is a non-practising Attorney, Notary and Conveyancer. His legal and real estate experience is augmented by studies towards a MBA degree through the Nelson Mandela Metropolitan University Business School, which he is scheduled to complete at the end of 2015. This article reflects the personal opinion of the author only, it is NOT intended as legal advice nor may any reliance be placed upon it. The article is purely for information purposes and you are advised to consult an expert before making any decision. The author nor any other person or entity may be held liable for damages of whatsoever nature from whatsoever cause.

Read more here: The Port Elizabeth Property Blog

South African Estate Agents / Property Practioners can CHOOSE not to have a Trust Account by The Port Elizabeth Property Blog: What a wonderful idea!

Has anyone paused to think why estate agents even need a trust account, anymore?

Its is obvious that if an estate agent receives funds, which fall within the definition of trust funds that these must be deposited into a special account, defined in the Act, which is designated as such, which should be used exclusively for such purpose, in addition to the estate agent’s business account.

But is this still needed for most modern estate agencies?

In modern practice, most agencies do not use their trust account because it increases the already high auditing costs on the trust account. Most estate agents who need trust accounts for rentals, have moved to a proxy service like Payprop, which administers and operates a trust account for the estate agent as part of the service. The other use may be taking deposits for the purchase of a property, although this practice is not advisable as its better and the more common practice to have these funds deposited into the conveyancer’s trust account.

So what is happening in many estate agencies?

We have to comply with the legislation which requires that we operate a trust account, whether we use it or not. So, despite knowing that we will not use it, we have to open an account and deposit funds into the account, to keep it open. The deposit is sadly not the only cost. We have a wonderful banking system, but cheap, it is not. Irrespective of how they are described account fees begin to run from day one, plus the costs have to come off the business account so, additional accounting entries are created just to maintain what in essence is a dormant account.

Once a year the agency has to audit this account, which means that all the costs associated with audits are incurred and this process has been made fraught with technicalities which can result in an audit not being accepted on a technicality. This naturally pushes up the cost of estate agency audits, but what is the real benefit being obtained? And at what cost?

In an attempt to reduce fraud, the EAAB extended the audit to the business account. But why? The answer may be to ensure that trust transactions are not being funnelled through the business account. But as a matter of interest, what happens if a criminally minded individual just opened another account at another bank? The business audits are very costly, time consuming and stressful.

Lets look at the objective, namely protecting the consumer. How is this done – naturally the approach has been to ensure funds are always in a controlled environment with checks and fidelity fund insurance.

But when funds are deposited with a conveyancer, has this objective not been met?

Is auditing, in view of its cost and the collateral issues the best option? In spite of auditing, crime continues. In the US the SOX Act was brought in to prevent financial irregularities in corporations, many commentators have noted that in realty the costs of complying with the SOX Act, exceeds the prejudice that was suffered. In other words the proposed cure is more harmful than the disease.

Is auditing a perfect protection? I am personally of the opinion that auditing is great but it is not effective to the degree that we can be sure that after and audit, which gives the all clear, that everything is all clear.

But what if we step back from traditional thinking and look at what we are trying to achieve?

Let’s consider the position, which could happen in the future, where an agency elects not to operate a trust account because it will not accept any trust funds and if it operates a rental department that this account is dealt with by a proxy like PayProp. The agency has no need of a trust account facility. It does not open the trust account saving money on the additional bank account. Given that it does not operate a trust account which needs auditing, there is now no need for a business audit. This saves thousands of Rands and hours of stress, not to mention frustration.

What remains for the EAAB to check is: do the agents comply with the remaining requirements of the Act, such as qualification to be an agent, education, and compliance with FICA etc. There is no need for the EAAB to extend its requirements to areas not required in the Act or for which other regulatory agencies have existing structures.

How could this work? The Act must be amended to say that no estate agent may accept trust funds as a rule, unless they apply for one and are authorised to do so. All other agents have to get their clients to sign that they are are aware that the agent may not accept trust funds and that these need to be forwarded to the conveyancer. If a non-trust account holding firm accepts any trust money that activity could be criminalised, after all its fraud.

What benefits could be realised:

  • It would not affect the client’s experience;
  • It would increase the confidence in estate agents as a profession;
  • It would decrease the number of opportunities for fraud/irregularities;
  • It would decrease the costs both for the EAAB and the estate agents;
  • It would greatly free up the EAAB’s resources from auditing, handling non-compliance issues etc
  • This would result in greater compliance and allow the EAAB to focus on policing real rogue agents;
  • It will greatly improve the relationship between the industry and the EAAB;
  • The EAAB has been accused of having weaknesses in its administration and this will alleviate this to a greater degree;
  • It would decrease the evidential burden, in the case where a non-trust account agency receives trust monies, would be sufficient to ground a conviction.
  • But most of all it would increase access to the profession, by many of our colleagues who are previously disadvantaged, have marginal income and cannot afford the compliance costs.
If a simple amendment to the legislation can make this a realty, why has it not been done?
Its just a thought… 

Clinton Begley (PPRE MPRE CEA B.PROC (NMMU)) is an associate at KW Explore Properties, at their Port Elizabeth Market Centre. He also holds a B.Proc degree through the Nelson Mandela Metropolitan University (previously the University of Port Elizabeth) and is a non-practising Attorney, Notary and Conveyancer. His legal and real estate experience is augmented by studies towards a MBA degree through the Nelson Mandela Metropolitan University Business School, which he is scheduled to complete at the end of 2015. This article reflects the personal opinion of the author only, it is not intended as legal advice nor may any reliance be placed upon it. The article is purely for information purposes and you are advised to consult an expert before making any decision. The author nor any other person or entity may be held liable for damages of whatsoever nature from whatsoever cause.

Read more here: The Port Elizabeth Property Blog

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This author is a 'catch-all' for occasional articles and letters written to MyPE. The Author of each article can be found in the signature at the bottom of each individual article.