KNOW YOUR GAME Seminar Notes

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KNOW YOUR GAME seminar examines the complexities of a buyers market and offers tips, tools and tricks to overcome these and SCORE with sales. In particular, KNOW YOUR GAME, focuses on the demographic and economic environments effecting the real estate industry.

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KNOW YOUR GAME Seminar Notes

  1. 1. As presented by Dieter Deppisch Head of Property Data Research for SAPTG A division of Knowledge Factory (Pty) Ltd
  2. 2. Demographics: What are demographics? The classification of people by Age, Sex, Race, Marital Status, Family Size, Education, Location, Income, Language, Religion and / or Occupation. Figure 1: Land area by Province in SA Figure 2: Population of SA by Province Figure 3: Density of Population in SA
  3. 3. Figure 3: Provincial contribution to GDP (Gross Domestic Product) The Rainbow Nation Our uncommon demographic profile: A heterogeneous population base Social issues (the legacy of apartheid) Divisions within ethnic groups HIV/AIDS Emigration. Blacks 79.7% Whites 9.1% Coloureds 8.8%, Indian /Asian 2.4% Emigration: UK (200k), Australia(100k), USA/Canada(150k), New Zealand (50k). South African Culture Awareness of culture or cultural differences ensures: Professional & ethical service Compliance with the EAAB Code and the Constitution Understanding diverse clients Effective marketing strategies EAAB Code of Conduct States: An estate agent: 2.6 shall not deny equal services to any person for reasons of race, creed, sex, or country of national origin; 2.7 shall not discriminate against a prospective purchaser of immovable property on the grounds that such purchaser will not, or is unlikely to, make use of financial assistance made available by a specific person or financial institution and which the estate agent offers to arrange on his behalf.
  4. 4. Demographic Risks Figure 4: HIV / AIDS related deaths (left) and infection rate (right) is highest in the world! Population Diversity Set apart by gender, race, skin colour, language, physical appearance, religion, sexual orientation, education, economic standing, age group and way of thinking. Marketing strategies for diverse groups. Figure 5: Race diversity - Percentage of total population Black Coloured White Indian/ Asian
  5. 5. Figure 6: Race diversity - Breakdown of Property Sales by Race Demographics: Simple Answers Suburb Demographics report on SAPTG ClusterPlus Classification: Known as a geo-demographic segmentation tool. It reviews the geography (the “where) and the demographics (the “who” and “what”) of the "birds of a feather flock together" phenomenon. Housing density, location, education, occupation and income levels and are just some of the factors explored and categorised. Each category is given a catchy name - such as Fashion Café Society or Pram Pushers - and a detailed demographic profile of the people you may expect to find residing there. CrimePlus uses crime statistics reported by South African Police stations to help you determine the expected crime level at suburb level. Our “gun” rating is a scorecard of anticipated residential crime in the suburb reported as low, low-medium, medium, medium-high or high. MarketPlus, CensusPlus and IncomePlus are all used to give an indication of the estimated population, predominant living standard measure (LSM), average annual household income range and age distribution.
  6. 6. Trends and Development: Development: Adding, renovating or replacing buildings or improving the use of raw land. Real-estate Trends: • A change in the norm. • A popular route or option, followed by the majority • A pattern that emerges in the movement towards a certain product, area or price range. • Trends result from changes in the economy, interest-rates, popular sentiment, politics etc. Figure 7: Trend in Average Size of Household (shown by race) More Real Estate Trends: 1970 - 1974 2005 - 2009 Stand Size 1067m2 586m2 Dwelling Size 200m2 160m2 Swimming Pools 44% 17% Servants Quarters 48% 13% What are the trends in YOUR area? Suburb Trends: Simple Answers: Suburb Trends report from SAPTG. 1, 3 and 5 year growth analysis in terms of median sales price. Compare up to 3 suburbs at one time.
  7. 7. Property Sales: Figure 8: Knight Frank Global House Price Index, Q4 „09 Rank Country Q4 1 Hong Kong 27.6% 4 Australia 13.6% 7 Switzerland 6.9% 9 New Zealand 6.4% 11 South Africa 5.6% 15 United Kingdom 3.4% 26 Germany -1.7% 28 USA - 3.1% 29 Greece -3.6% 36 Iceland -8.3% 37 Russia -9.1% 46 Dubai, UAE -42.1% Figure 9: South African Property Sales Between R300k - R5mil comparing the period January - December 2008 to January - December 2009. 2008 2009 Change Full Title Total 105 952 69 668 34% ↓ Total Value R101b R70b 30% ↓ Median R700k R750k 7% ↑ Sectional Title Total 61 530 37 617 39% ↓ Total Value R46b R29b 37% ↓ Median R600k R616k 3% ↑ Cash Sales 28% 38% (ST 40%, FT 36%) Figure 10: Reasons for South Africans Selling Property Total High Mid Low Downscaling (Finances) 24% 19% 29% 30% Downscaling (Life Stage) 17% 19% 16% 12% Emigration 9% 8% 6% 4% Upgrading 13% 16% 12% 15% Change in Family 16% 16% 15% 17% Safety/Security 11% 11% 10% 9%
  8. 8. Urbanisation: IMPACT: World‟s population: Emerging Nation Economies  Climate 1950 (29%) 20% are overcrowded (more than 3 people/bedroom)  Health 2000 (47%) 54% have no water in their homes  Safety 2025 (60%) 25% lack adequate sanitation  Natural Disasters  Economy  Politics Socio-Economics: The relationship between economic activity and social life. Primary focus: The social impact of economic change. Causes: Results: New technology (cars, cell phones, internet access) Consumption patterns Changes in law (right to abortion, RDP housing) Distribution of wealth Changes of physical environment (urban densification) Behaviour (purchases, time) Ecological changes (drought, floods or fish stocks) Overall quality of life Competitive Environment: WHO: WHAT: HOW: Name, location and market share. Compare your listings and service Branding and Perception Sort by Major, Up-Coming, Minor USP's and CPA's DO: Simple SWOT analysis
  9. 9. Economics 101: INFLATION The general increase in the price of goods and services over time. GDP (Gross Domestic Product) The production of new goods and services during a particular period (the current production) The production, sale and consumption of goods and services : Non-Durable (food, drink, haircut) days/weeks Semi-Durable (clothes, stationery) 2-10 years Durable (appliances, vehicles) 10-20 years Super-Durable (property) 20-50 years or longer Figure 11: Differences between Command and Market Economies Command Economy Market Economy Supply and price regulated by government. Allocating resources based on market forces, (e.g. North Korea, China) such as supply and demand. Government planners decide which goods and Free of government influence, collusion or other services are produced and how they are distributed. external forces. Leftist politics here want a Command Economy. e.g. Nationalization of mines, land expropriation etc. Supply and Demand (in relation to real estate): Supply: the number of properties that are for sale Demand: the number of qualified buyers at any given time Macro- Micro- economy economy Property Prices Geo- demographics
  10. 10. Scarcity and Choice: Human wants/needs are unlimited Available resources are finite or limited (“scarce”) Immovable property is a product used to meet wants and needs. Cost of the choice is important Scarcity affects Choice affects Cost If demand exists for real-estate in a specific area but no vacant land is available on which to build: either change the use of an existing building to meet demand or demolish an existing building to for the erection of a new property Supply and Demand Scarcity and Choice Buyer's / Seller's Market Buyer’s Market: Seller’s Market: An oversupply of desirable properties in an area. A shortage of desirable properties in an area. Prices decline. Prices rise.
  11. 11. Technological Trends: Online Selling: Pictures, 3D tours Online Enquiries: Leasing, Buying, Selling Online Applications: Mortgage bonds, insurance SMS Enquiries: Leasing, Buying, Selling Client Relationships / Media Changes: Twitter, FaceBook, Blogging Access to Data: Websites: SAPTG Mobile phone: EVALUATE
  12. 12. Common Business Blunders: Simple Answers Management Diversification Human Resources Management: Basics: Blunder: Have office, have stock, will sell Market research. Sales volumes, Competitors Price Elasticity of Demand (PED) Relationships: Conveyancers, originators Being creative: Blunder: Cutting training, tools, advertising Rather assess: Admin staff/PA‟s Tea/coffee Office automation Franchise fees Office space and / or location Accessorizing Blunder: Advertising- Who’s fooling Who? Assess print media efficacy Measure online efficacy Communicate (newsletters, blogs, social media)
  13. 13. Diversification: Sales Bond Origination Rentals Maintenance/Improvements Referral business Business brokerage Property investment Variety Sectional Title: Residential, Commercial Full Title: Residential, Commercial, Industrial Special (Churches, schools, airports) Farms: Small holdings, Large Agricultural Human Resources: People Business Hiring agents Blunder: Blunder: Agents are cheap Feature dump Commission only Rather: compelling value proposition Financial Metrics: Blunder: Cost per person Broker‟s skill-set lower than best agent Goals per person Rather: Up-skill. Do both NQF4 & 5 Inexperienced Experienced KNOW YOUR BUSINESS GAME : SUMMARY Management: Research. Relationships. Spend? Cut? Diversification: Revenue sources. Variety. Human Resources: Financial Metrics. Value Propositions. Up-Skill.
  14. 14. Online Marketing for Real Estate The Advanced Use of Online Property Marketing As presented by Sonja Steincke National Accounts Manager: PropertyGenie.co.za And Laura Gibbon Regional Accounts Manager: Gauteng, Limpopo, Mpumalanga, KwaZulu-Natal
  15. 15. Introduction What is Online Marketing? Simply put, Online Marketing refers to the application of standard marketing principles and techniques via electronic media and more specifically the Internet. Online Marketing, Internet Marketing and Online Marketing can be considered synonymous. Online Marketing is the process of marketing a brand using the Internet. It includes both direct response marketing and indirect marketing elements and uses a range of technologies to help connect businesses to their customers. Aim of Online Marketing: o Attracting New Business o Retaining Current Business o Developing Brand Identity o Supplying Information Benefits: o Reach – no limits to the Internet o Scope – any business can use this medium o Interactivity – customers can now respond to market offerings o Immediacy – potential customers can reach advertiser immediately o Demographics & targeting – marketer’s dream! US Buyer Behaviour Research  Initial Action: (Secondary Action)  Researching online (36%) (20%)  Drive through neighborhoods (20%) (18%)  Contact Real Estate Agent (18%) (25%)  Print ads (8%) (11%)  Open Houses (4%) (11%)  Most useful tool  Researching online (42%)  Contact a Real Estate Agent (22%)  Drive through neighborhoods (10%)  Open Houses (6%)  Print ads (5%)  Least useful tool  Print ads (28%)
  16. 16. ARE YOU HAPPY? NO YES!! CHANGE SOMETHING! DO YOU WANT TO BE HAPPY KEEP DOING WHATEVER YOU’RE YES!! NO DOING!! Foundation of RE Online Marketing 80:20 Rule: 20% of the resources produce 80% of the result - It's vital to understand that the reverse is also true- things that take up 80% of your time and resources, will only produce 20% of your results o Own Website o Property Portal(s) e.g PropertyGenie THIS IS THE MINIMUM YOU SHOULD BE DOING!! Only consider investing time in additional initiatives once you have established this solid foundation.
  17. 17. Building of your Foundation Social Media / Web 2.0 When people connect, the impact on marketing, advertising is significant Facebook, founded by Mark Zuckerberg (25) six years ago, now boasts over 350 million subscribers and is available in 70 languages, making it the third- largest most populous platform in the world. FB's ‘scary' statistics include 1.8 million chat messages a day, 150 million search queries per day, six billion minutes spent online every day, 1.7 million downloaded per second and 70% of FB active users operating outside the US . A Video Sharing Website on which users can upload and share video’s. In November 2006, YouTube, LLC was bought by Google Inc for $1.65 billion. With its simple interface, YouTube made it possible for anyone with an Internet connection to post a video that a worldwide audience could watch within a few minutes. The wide range of topics covered by YouTube has turned video sharing into one of the most important parts of Internet Culture. A Free Social Networking & Micro blogging service! Enables its users to send and read messages known as tweets. Tweets are text-based posts of up to 140 characters displayed on the author's profile page and delivered to the author's subscribers who are known as followers. SO! YOU SHOULD HAVE a Facebook profile, post on YouTube AND have a blog………… As long as you’re doing it RIGHT!!!!!
  18. 18. To Be Considered LOCATION, LOCATION, LOCATION  Initial Action: (Secondary Action)  Researching online (36%) (20%)  Drive through neighborhoods (20%) (18%)  Contact Real Estate Agent (18%) (25%)  Print ads (8%) (11%)  Open Houses (4%) (11%)  Most useful tool  Researching online (42%)  Contact a Real Estate Agent (22%)  Drive through neighborhoods (10%)  Open Houses (6%)  Print ads (5%)  Least useful tool  Print ads (28%) Become The Expert! Provide Neighbourhood Information o Write about it!!! Events, Developments, News!! o Answer Questions o Respond to Comments Things people want to hear o Within Top-Rated School Districts o Close to Outdoor Recreation & Nature o Near Entertainment & Shopping o Economically stable Neighbourhoods o Near Public Transportation, Health Care & Jobs Where? o On your website o On PropertyGenie o Establish a Blog o Upload Videos o Promote on Facebook etc. o Always link back to your contact details.
  19. 19. Case Study FACEBOOK Aida Alberton o Created a group on Facebook o Results = 6 weeks later 2 UK cash buyers o 3.5 Mill & 4 Mill Value Properties ONLINE VIDEO o Highly Consumed o Cheap to Produce o Free to Publish o Massively Viral o Currently no Competitors in that space!!!!!!!! In Summary Follow the 80:20 Rule o Maintain your own Website o Advertise on Property Portals like PropertyGenie Establish yourself as THE expert in your area o Neighbourhood information & news o Allow for and answer questions o Consider Video Contact Details Sonja Steincke National Accounts Manager Tel: 032 481 6167 / Cell: 083 949 1049 Email: Sonja@propertygenie.co.za Laura Gibbon Regional Accounts Manager: Gauteng, Limpopo, Mpumalanga, KwaZulu-Natal Tel: 011-557 4036 / Cell: 084 604 6099 Email: laura.gibbon@propertygenie.co.za
  20. 20. Complex Finances – Simple Answers. Helping to Understand your Customers‟ Creditworthiness presented by Grant Briggs T: +27(0)31 5765626 F: +27(0)866803675 C: +27(0)824489633 E: grantb@sahomeloans.com W: www.sahomeloans.com
  21. 21. Some things to remember when assessing your clients: The 7 C’s of Credit Character Displays the willingness of the person to pay. Related to clients‟ honesty and integrity. Information such as period in current employment, occupation, marital status is important. How often does client pay retail accounts, credit cards and other obligations? ITC is important to scrutinize and understand. Capacity Reflects the consumer's ability to repay credit. Does the consumer have the financial ability and means to repay on due dates? Consumer's earnings should be high enough. All obligations of the consumer should be taken into account in determining repayment ability. Capital Denotes the financial strength of the consumer. It is the net worth of the consumer when assets and liabilities are taken into account. It is important because a consumers‟ net worth may enable the consumer to continue paying should a financial crisis occur. Collateral This is the security offered by the client. Is there sufficient security in the property – LTV is important. Things such as area, type of property, condition of property, etc. are important. Conditions Conditions range from economic to political. Conditions can be macro or micro. Conditions can impact on a consumers‟ ability to repay debt. Things such as interest rates and employment prospects can impact negatively. Credit History Past management of credit is a very strong indicator of future management of credit. Poor payment records and judgments are a red light to a credit analyst!! How many credit enquiries have been made on a consumer over a period of time? Common Sense The intuition that is not always backed up by tangible evidence. An opinion may be formed (positive or negative) whether a default will occur dependant on the credit providers experience and observation of a customer. Credit is not an exact science.
  22. 22. Self Employed Clients Improve your success rate at getting these clients approved for bond finance. It is an irrefutable fact that home loan providers will be more cautious with self employed clients and require more information to make an informed decision. It is also unfortunately an irrefutable fact that self employed clients have a higher propensity to default on credit agreements and are therefore more likely to be declined by the credit provider. Therefore, ensure that you are asking the right questions • What legal entity do you operate your business in? • Do you have audited financials? • Can you supply at least 6 months business bank statements which show business turnover in the account? • Do you have personal bank statements reflecting income? • Are you able to supply a copy of your latest tax assessment? • What qualifications does the client have? • How long has your business been in operation? • Are there any partners in the business? • Cash that the client claims to receive cannot be used as income; all income must be verifiable. • Turnover is vanity, profit is sanity!! Remember: • Manage your client's expectations. • Supply as much information as possible. • Never withhold any information which may be material to the application. • Do not be scared to ask for information upfront, it alleviates delays and frustrations later on.
  23. 23. Simple answers to Legal Issues "Voetstoots" - Does silence constitute fraud? Content prepared and presented by Dykes van Heerden Inc. At some venues where DvH were not able to present - this section was presented by local recommended attorneys. We would like thank the following for their contribution: Angus Warren from Bate, Chubb & Dickson in East London Liesel Greyvenstein from Greyvenstein's in Port Elizabeth
  24. 24. VOETSTOOTS CLAUSE? “As is” / “As it stands” PURPOSE: to protect the SELLER from any action by the Buyer, on discovering any defects he was not aware of when purchasing the property, from doing anything to jeopardize the actual sale contract. PATENT: Detectable by reasonable inspection LATENT: NOT detectable by reasonable inspection Important: Defect can be TANGIBLE, e.g. crack in wall, hole in the roof or INTANGIBLE, e.g. bad tenant or soon to be raised special levy. DUTIES: PURCHASER - to conduct a reasonable inspection BEFORE signing the OTP. SELLER & AGENT - to disclose any latent defects that they are aware of. LIABILITY: If the SELLER & AGENT were aware of a latent defect in the property and failed to disclose it to the purchaser before signature of the OTP, then the SELLER is liable. Failure to disclose is like scoring an own goal! PRACTICAL PROBLEM: Factual disputes are difficult, costly and time-consuming to litigate AND will delay the transfer process. SOLUTION: “Prevention is better than cure”
  25. 25. When taking the mandate, advise the SELLER to disclose ALL defects, and disclose same in the OTP. IMPORTANT CASES: VAN DER MERWE vs MEADS 1991 (A) Sets the benchmark for the Voetstoots clause: The SELLER is deprived of protection by the clause where:  The Seller was aware of a defect; and  Intentionally conceals the existence of the defect with the intention to defraud the Purchaser. WALLER vs PIENAAR 2004 (C) PURCHASER must be able to prove:  Defects were latent  Seller were aware at time of sale  Seller had a duty to disclose the defects  Seller fraudulently concealed existence of defects to conclude the contract OR fraudulently misrepresented that there were no defects. ODENDAAL vs FERRARIS 2008 (SCA) Building Plans i.r.o car port were not approved The Court held that:  Purchaser should check the physical AND LEGAL aspects of buildings on the Property  Either employ a professional to thoroughly inspect buildings or have the Seller guarantee building’s legal status
  26. 26. KNOW YOUR GAME: The NQF4 and NQF5 Qualification for Real Estate Presented by
  27. 27. The EAAB is on an exciting route and introduced new operating standards for Estate Agents to professionalise the industry. The EAAB, along with the Services SETA, implemented the minimum requirements of Qualifications for Estate Agents.  The Estate Agency Affairs Act, passed on 15 July 2008: FETC: Real Estate, mandatory for Estate agents (NQF4 =150 credits) National Certificate: Real Estate for Principals (NQF5=135 credits)  The “effective date” was set as 15 July 2008 and made law. It is a formal “cut off” date. Before the DATE: RPL possible After the DATE: 12 month internship + formal training by accredited training and assessment provider. All existing agents have until December 2011 to obtain NQF4 or NQF5:  Full Training – 12 months OR  Assessment/RPL – 3 to 6 months  The Qualifications must be maintained - CPD  Compulsory Legislation – effective 15 July 2008 So how does it work? NQF 4 = Matric Certificate NQF 5 = National Certificate 32 Unit Standards 28 Unit Standards 30% - theoretical (class room) 30% - theoretical (class room) 70% - practical assessment 70% - practical assessment Learner builds own Portfolio of Evidence Work is assessed & moderated for credits Learner must be found competent, no specific % for a “pass-rate” DITASA offers: Accredited Learning Programmes Campuses Countrywide Learning Methodology Practical approach (Learner involvement) Integration with Business Recognition of Prior Learning (RPL) & Assessment Other Services: Learnerships Internships Other sectors (not just Real Estate) Costs: NQF 4 : Full training - R9000 ex. VAT ; RPL - R5400 ex. VAT NQF 5 : Full training - R11000 ex. VAT ; RPL - R5960 ex. VAT Payment options are available as well as specials for a limited time only! Find your local campus at http://www.DITASA.co.za/campusses/contact
  28. 28. Certificate of Attendance awarded to The KNOW YOUR GAME content is based on the unit outcomes of SAQA 59097 unit standard 246735 entitled: demonstrate an understanding of the real estate environment. This is the first of a 2 part seminar and covered: Specific Outcome 1: the demographic environment affecting real estate, and Specific Outcome 2: the economic environment effecting real estate. Dieter Deppisch Head: Property Data Research and Training SAPTG Know Your Game: Part 1 - 2010

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