Motivations for Selling

Whether you’re considering selling your home, or perhaps looking to buy one, it is valuable to understand why the vendor is selling. For a seller, it is relevant in considering the possible method used to market the property, and for buyers it is potentially beneficial in the negotiation process.

For most of us, the decision to sell our home is not made overnight. It tends to be the culmination of other events in our lives. Real estate agents sometimes refer to the four D’s that often drive property sales: Divorce, Death, Debt and Desire.

The fourth driver, Desire, is about aspiration — when the owner wants to upgrade to a better house, move to a higher status area, purchase a property that reflects their success, or invest for profit.

I would suggest two other “D” factors here: Demographics and Departure. An example of Demographics would be when a couple has young children and wants a home with a bigger yard, or when the children have left home and a couple wants to downsize. Departure is about moving to another location because of a job transfer, or for lifestyle reasons, such as Victorians relocating to the warmer climate of Queensland.

 

It should not come as a surprise then that the motivation behind selling implies potentially different time frames, different processes of selling, and potentially different price outcomes. For example a “Debt” situation where the bank is knocking at the door may require a quick and guaranteed sale. Stressed sales often are sold by auction for that reason (although auction is also used in many other circumstances).

If you need to move soon the preparation you undertake will probably be much less than if you’re a middle aged couple considering downsizing. Selling the family home that contains the fond memories of raising the children will be an emotional event, and there may a reluctance to sell. There may even be dispute between partners about whether to sell at all. Health reasons will often come into play here. Where one partner is uncertain about selling, it may only be at the stage of considering a formal offer that the decision to sell or stay is confronted.

Some sellers are less than candid with their agent about why they’re selling, sometimes to their detriment. Of course, there is no obligation to tell your agent if you’re in financial trouble, or getting divorced. But you should only use an agent you feel you can trust, and being open about your circumstances will help you and your agent work out the best strategy to meet your needs, for example the timing of the sale, the likely price range it will sell at, the most appropriate selling method, and the way in which the property would be most effectively marketed.

Below are examples that show how different motivations might influence the selling process and considerations that come into play. This is not a definitive list.

 

Demographics (Life Stage)

Example: A couple in their sixties wants to downsize from the family home

Price Goal: Maximum possible market price (so they have some funds left over)

Time Frame: Willing to look around until they find a suitable property before selling on a “subject to sale” basis. Would prefer to sell when the market is near the peak.

Considerations: There may be an opportunity to sell “off market” to a buyer on a local agent’s database. This will save costs, and might help in terms of the settlement period, as agents know buyers who are ready to purchase now. This might be necessary, if the sellers have committed to another property.

The timing of the “on market” period is important, as a premium online listing generally lasts for 30-45 days. Sellers normally do not wish to have their house on the market for long periods of time, as it is a burden to keep spotless for open homes and inspections, and can be stressful not knowing when and for what price the home will sell.

Possible Selling Process: Exclusive private treaty.

Divorce

Example: Couple who have separated and have trouble agreeing on anything.

Price Goal: Top price. One wants out; the other wants to hold on.

Time Frame: Quicker the better for all parties.

Considerations: How to achieve agreement on price and sale, how to accept an outcome.

Possible Selling Process. Auction with 21-30 day campaign and 30 day settlement. One party can buy the other out.

Death

Example: Family wishes to dispose of asset.

Price Goal: Fair market price.

Time Frame: 30-60 days, preferably a short time frame.

Considerations: De-cluttering, cleaning and presenting the home — there may be costs involved in preparing it for market.

Possible Selling Process. Exclusive private treaty or auction.

Desire (Aspiration)

Example: Couple with young children want to upgrade current house for more yard and a pool.

Price Goal: Best possible price to put towards next home.

Time Frame: Want to find new home first then sell.

Considerations: An accurate assessment of likely sale price is important, to know what the changeover costs will be. An honest appraisal by a local agent is essential.

Possible Selling Process. Exclusive private treaty. Auction if in a popular location.

Departure (Moving)

Example: Family with school children moving to another city for job.

Price Goal: Fair market price.

Time Frame: Quick sale to enable family to resettle.

Possible Selling Process. Exclusive private treaty, off market sale to agent database, or auction if in a popular location.

Debt

Example: Need to sell to reduce debt.

Price Goal: Fair market price or as close as possible.

Time Frame: The bank requires auction in 30 days.

Possible Selling Process. Auction (with offers considered prior to auction).

So whether you are buying or selling, consider the motivations behind the sale and the implications of this for the sale.