Be prepared and market internationally

10 March 2007

A few months ago I wrote about different forms of competitive pressure principally focussed on the real estate market. The key messages were aimed to encourage differentiation in products and services and to increase awareness for strong international marketing from which to source potential new buyers.

At the time I did not focus on another strong influence that can effect competitiveness – that of Government Policy change – which Porter also includes. He’s a smart guy.

We can now add pending changes of the Foreign Business Act (FBA) and the influence this will have on foreign buyers considering Thailand versus other international locations for home ownership. As of today, currency controls are being lifted but this has also caused some short-term damage to investor confidence. This is not an easy time for the foreign investor and those in the property sector can choose to ignore the implications of investor uncertainty or choose to do something to strengthen competitive advantage.

While most seasoned professional managers are able to deal with these issues, undoubtedly the real estate business will be affected in some shape or form by these changes. Buyers are a valuable commodity in any market.

So my message to private real estate sellers in the secondary market, looking for buyers is very simple and perhaps a little firm – you must be ready to sell.

If you are selling a secondary market residence you MUST prepare your sale thoroughly before you go to market. By this I mean you must know what you are selling (lease, company or condo). All of the relevant documentation must be prepared for review to save time. Your agent should be able to help you prepare the sale.

Sound simple? Tens of millions of dollars of transactions fail every year in Phuket because of insufficient support documentation, poor preparation and a slow legal process.

The issue is serious enough that we now provide a list of required documentation, in English and Thai for every listing to help sellers ensure that they are well positioned and ready to sell prior to an offer being made and accepted. It is critical to have this documentation on hand so you can move quickly when the offer comes.

Being prepared is more than useful if we consider that on average 70% of private property sales worldwide are driven more by negative reasons such as divorce, financial concerns, unplanned relocation, downsizing as children move out, passing away of a family member etc, than positive reasons such as taking a profit or upgrading to a larger house.

Once there is an offer and a firm buyer you need completion, and that means there is a need to manage your appointed legal advisor and in particular the time they may take to complete the deal. This should take no longer than 30 days and in most cases our experience is that the longer it takes, the more likely it is that the deal will not complete.

For developers, the same is less of an issue, but it does happen that a product can go to market too early and when a delay occurs due to building permits, approvals etc, sales can be lost.

International Marketing is now more critical than ever before. Europe and also the Middle-East are huge potential markets that sellers need to be able to reach effectively and efficiently.

In our experience, more buyers are coming from Europe and Europe represents a much larger potential market than Hong Kong and Singapore.

Penetrating the European market requires a strong agency network with a good reputation and potential to reach new second home market buyers.

In general, sellers should expect to receive one offer for every fifteen viewings. To generate one viewing, your agent should be contacting ten qualified candidates. The maths is easy, for every offer, at least 150 qualified contacts are required to be contacted by your agent.

As such, advertising and promotion cannot be overlooked and Europe is the key to generating these qualified leads.

The two prime reasons for a property not selling within the average market lead time is two fold – firstly price and secondly a concern with the actual property (a poor location, noise, privacy, condition of the property) or a combination of both. The best way for overcoming these objections should be discussed with your agent.

In summary, it is very important that sellers are ready and have prepared the property to sell. Manage the legal process firmly. Reach the international and European markets and leverage marketing opportunities through an internationally capable agency network.

- Martin Phillips

Source: Phuket Post