KEY POINTS:
With the downturn in the property market, more homeowners are finding traditional sales methods are not working for them.
This is a serious problem for those with little or no equity in their property and who could face financial disaster if they can't close a timely sale.
Property
educator Ashley Church of www.backstop.co.nz says prospective sellers' negotiating strength depends on their financial positions, and different strategies will be appropriate depending on how fast they want or need to quit the properties.
There are numerous creative strategies Church suggests motivated vendors should consider to help achieve a sale, such as using deferred settlement, which is particularly appealing to property investors and traders if they are allowed access to the property during that time.
Vendors in financial difficulty without significant equity in the property might consider a mortgage transfer.
In this situation, no money changes hands - the buyer simply takes over the mortgage with the consent of the bank.
Contemporaneous settlement - when properties are bought and sold on the same day - is a good strategy when a buyer is nervous about selling their own home in time to settle on a new property. If the vendor agrees the settlement date won't be until the purchaser sells their home, the buyer's anxiety is removed.
An emerging form of sale is a property swap - whereby homeowners effectively swap their properties and make up difference in value by including another asset exchanged as part of the transaction.
For sellers with some equity in the property, using vendor finance is a great way to take the emphasis off price - giving buyers the chance to pay less for a property up front and more for it down the track.
Lawyer Pat Rotherham says this is when a vendor leaves a portion of a sale price "in the property", so the amount the purchaser pays on settlement is reduced by that portion.
The unpaid amount is secured by a mortgage to the vendor registered against the property. The finance is repayable by a certain date and interest is charged.
Church says sometimes during the vendor finance term, the market turns and there is an increase in the property's value, against which buyer can finance the vendor-financed portion of the loan.
This strategy is much more likely to appeal to homebuyers or property investors rather than traders.
Vendors who would like to sell, but don't need to for financial reasons and who have not attracted buyers, should take their properties off the market.
"If it's been on the market for six to eight weeks and it hasn't sold, then clearly it's not going to right now," says Church. "Take it off the market and wait until it recovers."
Harcourts chief executive Bryan Thomson says given the volume of property on hand, sellers need to ensure they present and promote their properties well in the crucial first few weeks on the market and also ensure they have all current market information needed toallow them to recognise the value of offers received.
Vendors need to be transpar-ent, says Mark Ferguson of Harcourts Taranaki. "It amazes me when people spend thousands on marketing and include no price reference.
"We are not in a hot market, so why are we trying to make it hard for buyers to find out whether a property is in their price range or not?"
Even when a vendor opts to sell by auction, Ferguson recommends publishing the reserve price in this market.
Vendors need to realise a real estate agent's role is not about selling your house, says Church - houses are sold on presentation and price.
The value real estate agents can add to the transaction is that they have the ability to promote your property and put it in front of large numbers of people.
If an agent doesn't understand who you are targeting your property at, there are other promotional channels - and Church recommends reserving the right to sell your property yourself.
Vendors who are in a position of needing to sell as quickly as possible may need to deal with property investors and traders.
These buyers are looking for yield, and vendors need to understand how this is calculated so they can tell if the investor is offering a fair price based on their expectations - or if they are just trying to gouge as much from the seller as possible.
It is vital for those who need to sell because they're facing financial meltdown to talk to their bank if they are having trouble quitting the property, Church says.
There may be options of restructuring the mortgage or taking a payment holiday.
But in any event, it is important to approach the bank before it approaches you. Take control of the process and develop a sales plan with the bank.
Banks are seeing more homeowners in trouble and potentially facing mortgagee sales every week, says Church. "They're being faced every day with situations where people are throwing their hands up in the air and saying, 'I can't deal with this - you fix it for me, you take your property off me'." This is making banks receptive to dealing more patiently with mortgagors who are in trouble but propose some solution to the problem.
ANZ National Bank, for example, has seen a big lift in overdue home loans as higher interest rates bite.
About $169 million in home loans have repayments 90 days past due, and the bank expects overdue loans to keep rising.
Once you get to that point when you're either behind on mortgage payments, or are about to be, if you can go to the bank and propose some strategies to sell the property, Church says the bank is likely to give you more time. This doesn't avoid interest compounding on the mortgage, but may achieve a more preferable outcome than a mortgagee sale would.
