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Assessment Task 1 – Short Answer Questions
1. Why is it important to screen potential buyers?
- To evaluate their capacity to buy and the time frame within which they intend to buy.
- To identify their needs and desires
- To identify their preferences and intentions
2. What questions might you ask? Give 5 examples
- How soon are you willing to purchase or lease a property?
- How many other properties have you looked at?
- What was your motivation for coming along to the inspection?
- What exactly are you looking for?
- Do you have any concerns about the property?
- What do you think about the price of the property? Do you think it is affordable?
- Have you spoken to any lending institution about finance?
- Do you have any property you are willing to sell?
- Must you sell that property first before purchasing this one?
3. How would you establish appropriate rapport with a potential buyer?
By being punctual, visiting at appropriate times, avoiding destructions such as phone calls during meetings, paying attention to vendors, identifying common interests with vendors, observing the vendors customs, avoiding suggestive comments, refraining from giving advice that is verifiable, using diplomacy, avoiding religious and political conversations and taking notes where appropriate.
4. You are going to charge a fee for your services. How will you approach this with the buyer?
I will make the buyer appreciate my role in facilitating their successful purchase of the property by assisting in the negotiation agreements.
5. An agency agreement needs to be signed. What would be the main reasons for doing this?
The agency agreement is a legally binding contract, which stipulates your right and responsibilities under the contract. Signing this contract means that fully understand these rights and responsibilities and that you have authorised the agent to certain things for you in the relation to the sale of your property. Such thing include carrying out inspections, arranging advertising, and receiving deposits from buyers.
6. How are you going to gather information about the properties that may meet a buyer’s requirements?
First I would seek expert advice from architects, building consultants, colleagues, the local government, industry professional’s legal representatives and property developers. Secondly I would analyse sales data for the region to determine the prevailing market prices and the trend in housing prices.
7. Why should you be careful when offering advice? When is it necessary to seek specialist opinions?
Offering credible advice to potential buyers and vendors helps to create good rapport, which encourages to transact with you.
8. Negotiations are regularly carried out with Real Estate Agents. Explain 3 reasons why these negotiations are often more difficult than when dealing with a “lay” person (someone who is not experienced, qualified or has knowledge of the real estate industry).
- They have unrealistic expectations
- They do not have a clear idea of exactly what they want
- They depend mostly on hearsay, which more often than not incorrect.
9. List 4 negotiation techniques that are used when dealing with the seller or their representative (agent). Briefly explain each.
- Reframing: This entails requesting something the seller said to be restated more positively or reinterpreting an attack on one party as an attack on the issue.
- Responding as opposed to Reacting: This entails managing one’s emotions, ignoring some accusations, threats and ultimatums and getting the other party to back down without feeling humiliated.
- Re-focusing on the Issue: A good agent should be able to review the common ground with their client and focus on solving the problem at hand.
- Identifying unfair tactics: This entails identifying unfair tactics, addressing the motive for using such tactics and countering them.
10. Why is communication important in the sales process?
Communication is very important in the sales process because it enables the buyer and the seller to clearly convey their demands and expectations about a specific property.
Assessment Task 2 – Case Study
You have been approached by a potential purchaser to source a suitable investment property. The buyer, Peter, has no real knowledge of the real estate market and has never invested in real estate before. His accountant has advised that he should be looking for “something” to invest in for his retirement.
Explain how you would approach:
- a) Your initial meeting
The first meeting will mainly entail introductions. I will get to know the buyer better and assess whether they have the capacity to purchase a property. Once this is established, I will get them to sign a contract acknowledging me as their agent. This contract will give me rights to act as their legal representative in purchasing the property.
- b) A subsequent meeting
In the second meeting I would endeavour to find out exactly what the buyer wants and continue to assess whether they have the capacity to purchase the available properties. In this meeting will gather information about the type of property the buyer wants to purchase and the much they are willing to pay for it. Moreover, because the property is an investment as opposed to a home for the buyer, I will use this opportunity to determine whether they prefer growth in the value of the property or high periodic returns (rent and lease income). On the same note, I will enquire whether the buyer is flexible in terms of the location of the property.
- c) Your search for suitable properties
You need to focus on establishing Peter’s needs, his ability and expectations. You should also cover the rationale behind your particular recommendations.
Depending on the buyer’s financial ability, I would search for a property in a prime location that offers a favourable annual growth in a value and an attractive periodic return.
Assessment Task 3 – Case Study – Demonstration
Following extensive qualifying of Peter and his requirements, you have established that the best option for Peter would be to buy a strata titled home unit in Jonesville or surrounding areas. The population is growing, there is a new shopping centre and commercial area being built and there appears to be an increasing demand for rental accommodation. The demand is yet to be reflected in purchase prices, so it may be a good time to buy in this area.
Your task is to demonstrate to Peter, WHY this is the ideal style of property to consider. Use real or fictitious figures can be used to calculate returns and costs. You should be able to demonstrate the use of charts, graphs etc to reinforce your feelings.
The real estate industry in Australia is characterised by increasingly high prices, which are on the verge of becoming unaffordable. This fact has been unearthed by the striking revelation that Australia has a median multiple of 5.6, implying that the prices are in fact unaffordable. Some economists have however pointed out that this methodology is misleading citing the law of demand which stipulates that high prices result in a decline in demand, which in turn forces market prices to fall. According to these economists, the fact that market prices are increasing is an indicator that there is a high demand for the latter, hence disqualifying the assertion that market prices are unaffordable. Notwithstanding, individuals intending to purchase houses and other real estate properties should carry out extensive research to determine the best location to purchase a house in Australia. Information on historical housing prices can provide valuable insights on the future trends in housing prices the country. This data can be obtained from the Family and Community NSW government website (http://www.housing.nsw.gov.au/NR/rdonlyres/9CF7A88B-527F-4771-A173-4BC3B7FCC071/0/8Rent_GMR_Trend_90q1_15q1.xls)
For simplicity, even though Jonesville is located in Western Australia, the future trend in the regions real estate prices will be modelled using the New South Wales historical prices. Basing on past historical prices since 1991, the average quarterly growth rate for all dwellings in New South Wales is 1.77%. As such, the property purchased in Jonesville will appreciate at this rate.
If the property is for instance purchased as $570,000 in September 2015, the property will have appreciated to $742,000 by December 2018 as illustrated above.
Assessment Task 4 – Case Study – Negotiation
Peter has agreed but after discussions with his accountant, has indicated that he is only able to spend $325,000 not the $375,000 he originally thought. He also wants a gross return of 5.2%. This is disappointing as the property that you have in mind is currently rented for $350pw and the owner is looking for $360,000. This would have been the ideal property but it now appears to be out of his price range. There are no other suitable properties on the market. Discuss your options and what negotiation skills could you use to ensure that the sales proceeds?
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