I Spy

I Spy

I spy with my little eye something beginning with ‘I’ … (and no, it’s not interest rates!) It is Insurance. The momentum is rapidly building and we are fast approaching a transformation that could change many lives. The current wave of insurance crisis cases is just the beginning and the United Medical Protection debacle, which shook the medical profession this week, is what many believe to be just the beginning. Whilst our dollar stands up to the greenback, it is not just the currency that many are watching. We are fast moving towards the ‘litigious society’ and the words “it can only happen in America” no longer ring true. This week we paid our Professional Indemnity Insurance. It has risen from $3,000 to $9,000 and we have never even had a claim made against us. This is a clue to what could eventuate. Imagine if as soon as a solicitor has concluded the conveyance on the sale of a home, she/he could then commence legal proceedings against the agent on the same matter!!

Here are two interesting case scenarios that I observed this week:

Case One: Steve Patrick was called to a home that is going to auction shortly with another agency. The vendors called Steve because they were told that he was honest and reputable. Now the selling agent had told them they would attain $3,500,000 and now he is telling them $2,500,000, which is thirty per cent reduction in just over a month. He told them that the market had gone “soft”. Well there were two auction events conducted by agencies this week, one sold 14 out of 15 and the other sold 8 out of 10 properties, which hardly infers that the market is going soft. Clearance rates still hover at just over 80% for the week. Steve told them that their home was only worth $2,500,000; the additional million was nothing more than the agent buying the listing!

Case Two: I was approached by a couple who are interested in purchasing a property from another agency, and we discussed the likely value, based on comparable sales. The agent had told them over four million. In my opinion it was not worth that, so they made an offer of $3,800,000. Now the agent couldn’t get them up, nor the vendor down in price. The prospective purchasers had me value their home and I told them $1,800,000 to $2,000,000 on a good day. Next they called the selling agent of the other property in and he told them $2,500,000! The idea being, that if he tells them that their house is worth more, they might up their offer. Once they buy they will be forced to increase their mortgage. We all know that some agents still believe “that money grows on trees”! When I was told what the agent said, I told them to go back to the agent and say “we will increase our offer on the condition that you underwrite any money that we receive under $2,500,000”. Interestingly enough, the agent declined the offer of generosity by the prospective purchasers!

This is happening all over the market and it will only be a matter of time before a vendor challenges an agent’s opinion, and for quite a few agents, the days of a $9,000.00 Professional Indemnity annual account will be seen as being cheap!!

Now back to the property market… The school holidays are now over and we did learn something. Next year we are going to advertise in the ‘Noosa Journal’ over this period, because that is where the Mosman market retreats to at this time of the year! Makes sense… it really is an awesome destination. I am actually liaising with the licensee of our Noosa office, Peter Butt, to display their properties on our web site. It is amazing how many Mosman residents own real estate in Noosa.

I was interested to read this week, that a consultancy firm called “Market Intelligence Strategy Centre” (MISC) stated that one in six households took out a new housing loan last year, and that a record one million home loans were written by lenders. Now when you take into consideration the number that are mortgage free, it comes as little surprise that the property industry is the biggest employer in the country, which also explains why The Reserve Bank is not that keen on raising interest rates just yet. Whilst on the Reserve Bank, it was announced this week that figures show the lending boom has continued this year, with total home borrowings reaching $334 billion in March, which is up $10 billion since the end of the year.

This week I was asked to speak at my old school – Shore – for the upcoming careers night, about a career in real estate. Yes real estate now rates a mention! I made a rough count and in our market we have around twelve agents who are directors or employees who also went to Shore. A few agents have sons that attend the school now. Should be very interesting for the boys who discuss my speech over dinner at home! …^_^… Cheers.

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