Exclusive properties like villas, large properties like new buildings, special projects like land, forest land, agricultural land & Co. – In this article we talk about the mistake, or risk and danger of private sales of larger properties and projects, or land or properties in need of renovation over 30, 40 or 50 residential units. As already learned in the rate giver 15 mistakes with the real estate sale, less than 300,000 real estates are sold in Germany in the year, mostly small dwellings and houses. Only a fraction, however, are plots of land, special or properties in need of renovation such as apartment buildings. Learn here supplementary more, to the mistakes they can make in such larger real estate sales, including golden rules.
Villa, property, new building & Co. – risk and mistakes
Important, this article refers to the sale of:
- Exclusive properties like villas
- Large properties such as new buildings
- Special projects such as land, forest land, agricultural land & Co.
If you “just” want to sell a condo or “just” a house, then read on here: the 15 most common real estate selling mistakes.
Everyone tells you about the typical mistakes, here are the additional real insights for selling real estate!
Preface: Mistakes are human and (!) avoidable
There are the typical mistakes that exist when selling apartments, houses and land. Mistakes that you will also find on all websites!
You may have come across lurid headlines like “Avoid these 7 mistakes” or even “10 mistakes you should avoid” and of course even better “the 11 biggest mistakes when selling real estate” when researching the sale of your property. These “typical” mistakes when selling real estate, you already know from the article “15 mistakes you should avoid”.
Errors are quite normal, because as mentioned in the introduction, only a little over 271,000 properties are sold per year, let’s look at the German real estate market. A significant proportion of these are also purely B2B (i.e. from company to company). So hardly any private sellers know about the risks.
Checklist: 15 mistakes summarized
These really typical mistakes are also quickly enumerated:
- Too little time planned for sales – Little time? Already comes pressure
- The wrong time to sell – Situation and economy
- Inaccurate description of the property – Exposé is written unprofessionally
- Unfavourable photos in the exposé – Just like exposé, hardly any demand
- Wrong target audience and strategy – For example, student apartment in newspaper instead of social media.
- Value of the property is incorrectly assessed – properties do not find buyers
- Documents and proofs are missing – Documents are not available
- Property is not prepared for viewings – Does not convince prospective buyers on site
- Underestimated effort of the sales process – So many get under pressure, e.g. if the new property is already financed
- Sale and negotiation are considered easy – preparation is then only half-hearted and leads to purchase price losses
- Selling phase is designed alone – selling privately without estate agent and expertise
- Prospects stall too long – Valuable time is lost, property is burned by long listing time
- Proof of financing (buyer) – creditworthiness of buyer not checked
- Defects in the purchase contract are overlooked – rights but also deadlines
- Burn property – Large or exclusive properties in mass portals
For small objects that are in private sale, certainly always a nice, first overview. But as soon as it is no longer “only” about 100,000 euros, but perhaps even about 1 million, 3 million or even 10 million, there are completely different factors that are important.
Golden rule for real estate: exclusivity as a sales factor
Rule number one:
The most important thing, exclusivity in the sale, when it comes to objects > 1 million euros.
Why? You can find out here, in this article.
Real estate in comparison
Let’s first look at the different types of buyers and how they review and value properties. The word “ETW” stands for condominium. We look at 4 groups of buyers:
- Group: ETW / house 80sqm ~ 200.000 rather indifferent; means also the buyer side is mostly inexperienced, it is less examined
- Group: 150sqm ~ 900.000 / critical buyer
- Group: 200sqm ~ 1.200.000 / researching buyers
- Group: 250sqm and over 1.5 M / examining buyer
- Group: large properties, new construction, agricultural land, etc. – special real estate / very experienced buyers, mostly with their own real estate office
Group 1-3, i.e. properties up to 200sqm, are mostly in the regular property market, in which “only” private individuals are interested. The typical marketing strategy here is: A lot, helps a lot. Often 2, 3 brokers are commissioned and the property is already in 4, 5 portals, newspapers, maybe even on social media networks.
Group 4 buys properties over 200 sqm, but still private. Who buys in this segment, is usually already experienced and knows, with building fabric, appraisers and so on. At the latest here it needs the help of a broker in negotiations.
Group 5 buys properties in the flow. 50 units (i.e. apartments) a quarter or even a month. Some investors buy 1,000 units directly, whether in A-location, B-location or even C-location. Properties in need of renovation, former hotels that are converted into condominiums or even forest land, agricultural land, old prefabricated buildings, etc.
Rule number 2, from group 5:
Time is (usually) more important than money
Group 4 and 5 need exclusive intermediaries, anonymous real estate sales, instead of “broad” mass and marketing, with direct line to investors, real estate funds and family offices.
Family offices (investors) and funds, rather than private individuals
If you want to achieve a high purchase price when selling real estate, you have to consider a few things, especially rule number 1: Exclusivity!
Real estate investors, family offices, any kind of “institution” check real estate offers and they prefer anonymity when buying and selling real estate. It is not only about exclusive villas, but especially about new construction, apartment buildings, neighborhoods, building plots and much more.
- Real estate with several units (terraced house, neighbourhood, street…)
- Exclusive real estate of wealthy and or well-known persons
Such objects should not appear in public portals, because ideally, only 1 interested party should exist, who quickly and immediately becomes a buyer. For objects over 5 million euros (read our purchase profile here), time is the most valuable factor.
Buyers must have a solid financial background, capital proofs should not be a problem. Knowing these specific real estate investors, private individuals and investment groups is our job. Accordingly, over 99% of our properties never show up anywhere!
Thus, the placement does not take months, but sometimes only 7 to 10 days.
The big advantage of off market real estate and selling to private individuals, family offices and others:
- Anonymity of buyers and sellers
- Good purchase prices, through exclusive offers
Apartment house in A-location with development potential.
Real estate burn – 10 portals, 10 brokers, … Danger
Real estate agent and real estate portal have risks? Yes, exactly.
Too many advertisements – Error 1
The big danger is this, your property is in portal 1, portal 2, portal 3, so solid buyers will be wondering:
Why is this property listed in so many portals?
Why. Real estate buyers compare offers (see group 1-5 above). So as soon as duplicates show up, people start to get skeptical:
- Why does real estate need so much marketing?
- Are there any drawbacks to the property?
- Is the purchase price way too high?
If your offer now stands between thousands of others, the probability to find interested parties decreases, as well as with the typical mistakes when selling real estate.
Too many brokers – mistake 2
Accordingly comes the 2nd fatal mistake that drives many private sales down in price: Because the object was not sold quickly, a second broker is called in, perhaps even a third, fourth and fifth broker.
You wouldn’t believe how often that happens. Even with high-priced properties from 10 million.
Danger: The object is burned.
Factors for the sale: buyer and psychology
Real estate is subject to 2 factors:
Emotions are quickly explained: everyone likes to buy nearby, they know their way around here. If it were purely a matter of numbers, there are usually always interesting alternatives (locations) with better returns. This means that emotional factors also play a role.
Of course, a “burnt property” does not mean that you lose 70%, 80% of the purchase price, but it delays the sale of real estate, sometimes even in the years. Especially in the case of houses. Often private sellers then have to accept a lower offered price.
After all, at some point it will have to be sold, especially if a new property has already been financed, whether the move is done or the new love lives in another city.
Anonymity, exclusivity: off market to known buyers
Selling anonymously isn’t just important for construction companies, these two groups usually don’t want to attract attention either:
- Wealthy individuals and public figures
- Disposal before inheritance
Wealthy individuals and public figures – In addition to price, there is the notoriety of the owners described earlier. In particular, wealthy individuals and public figures do not want their properties to be open to view. Whether fans or members of the press, anonymity is considered very, very important in millionaire circles.
Then there is another group that prefers to sell anonymously and thus at the same time benefit from the effect of the exclusive sale, a higher purchase price.
Sale before Inheritance – Even on the subject of selling property before death, there are many people who do not want their own children or closer relatives, often even neighbours to know about the property sale. This could lead to disputes before a sale is completed.
Scarcity effect due to exclusivity: influence purchase price
This shortage (i.e. the targeted approach of individual investors) also has a positive effect on the selling price that can be achieved.
As long as the offer is only available to one person, it is extremely exclusive and accordingly, higher sums are accepted in order to secure this offer.
Another advantage, this ensures an accelerated buying process.
After all, the prospective buyer then knows that he or she is the only person to whom the property has been offered so far.
Conversely: If a property is on five portals and it hasn’t sold yet, why push it? So far, it doesn’t seem to be going well either.
Now imagine using that knowledge as a savvy real estate agent (buyer and seller) when you sell your property, maybe even for the very first time. So good tips are worth a lot, as is experience. Especially when it comes to negotiations.
Negotiation risk: price corrections and renegotiation
Even in the preliminary negotiations, people like to play the supply / demand card. In the real situation, sellers quickly become uncertain. Some buyers negotiate until the last second.
It’s the same with real estate agents when they know that three other agents have the property. Suddenly you can make a lot on the price with skillful negotiations, I could call somewhere else.
In short, the more exclusive the sale of a property, the smaller the asking price, the faster and more profitable land, exclusive and large properties are sold.
Real estate portals clearly offer the wrong target group here. Private buyers have no interest in such costly and also elaborate projects. But for project developers, regardless of whether they are private individuals, property developers or large investment funds, such offers can be very interesting. At least if you have the right network.
How many people in Germany do you think would buy a plot of forest land in, let’s just say, Bavaria? How many people would buy a stake in a mine that extracts metals, for example? That’s exactly what you need very exclusive and financially strong investors for. Water source, ore mine, forest property, it becomes even more interesting with real estate and investment objects, which do not correspond to the typical condominium or the terraced house. Such things are e.g. water sources, mines for copper, iron ore or forest land, as well as agricultural land.
You can already see how diverse the things are that are taught. The A&O is always a sound value.
Valuation and expert opinion – Well-founded… !!!!
How much is your property worth? Believe me, a majority of real estate agents will figure in a great total! You’ll think to yourself:
How much is my property worth?
Why do most real estate agents do this? Of course, private sellers usually get one or two comparative offers. So if agent A says your house is worth €900,000, agent B says €920,000 and agent C says €950,000, it’s clear who you’re going to choose.
The danger: overvaluation by brokers
Caution. This is a false valuation that ultimately leads to the very mistakes mentioned above: 10 portals, 10 brokers. In the end, your condo, house or apartment building is on countless portals and worse, maybe even with countless brokers.
Why? Because the first broker has not achieved a sale, due to the overvaluation.
Another essential source of danger:
Credit check of interests: Proof of capital
Credit checks are extremely important for real estate sellers. After all, you don’t want to be negotiating with one, two or even three people who can’t even afford your property or their land! The higher the value of a property, the more thorough this check and valuation of the property needs to be.
Such properties (20, 30 or more units) are of course no longer bought by private individuals, but usually by companies, institutions or said investment funds. Accordingly, the complexity of checking creditworthiness also increases. It becomes even more complex with foreign investors.
If you work with off market, because here, as with us, a large part of the buyers are already known from the history. Accordingly, capital evidence can be provided quickly, communication is good and accordingly, information, documents and evidence are also available quickly.