Monday, 8 October 2012

My Property Journey Rewind - 2007

The latest government measures to cool the property market hit us on 5 Oct 2012. I will analyse the impact another day but it really seemed that the government is trying its best to stop the property bubble from happening.

Let's continue with part 5 of my story today where we travel back to 2007.

Part 1 is here.
Part 2 is here.
Part 3 is here.
Part 4 is here.

It was Feb 2007. HSBC just announced that it will have larger than anticipated losses from default of subprime mortgages. This was the first warning point and the start of the subprime crisis. I was watching the subprime situation closely.

Lesson Learnt - Be informed and always keep yourself updated to the things that are happening elsewhere in the world. Singapore is a small country with an open economy and will always be impacted by other crisis around the world.

The second warning came in June 2007 when Bear Sterns went into trouble and have to be bailed out. This has a ripple effect on major wall street firms that lent money to Bear Sterns. The failure of Bear Sterns was one of the deciding factors for me to get out of the market while I can. While the property market is holding up in Singapore, somehow my intuition told me that sooner or later, the reality will hit home in Singapore and more failures will hit the market. 

In August 2007, i began to market my property actively and i became a serious seller. In Oct 2007 i received a cheque of $1,000 psf. Someone has offered to buy my unit for $1,218,000. I decided to let go of my unit but i also learn some interesting lessons in the process.

Lesson learnt - Negotiate the commission with your real estate agent.

I have always thought that the agent's commission is fixed at 2%. I was quite naive then. I didn't know that the commission is negotiable, especially for units which you have given 'exclusivity' to the agent. The 2% works out to be around $24,360. Don't get me wrong, i always believe in paying my agents for their services but in this case, the property has not even TOP yet! There was nothing much for the agent to do except listen to phone calls and email the floor plans to potential buyers. In fact, i believed my agent didn't market my unit actively other than to post the ad on their 'intranet'. 

I will share about the importance of having a good agent working for you in future posting but remember my posting today. The commission is negotiable and you pay them more only when they deserved it. - In this instance, a 1% commission would have suffice.

Another Lesson learnt - Don't have to sign exclusivity with any single agent. 

Another lesson i learnt is that you don't have to sign on dotted line the 'exclusive agreement'. I made that mistake and i think my agent wasn't 'too hungry' as a result of that. She took her own sweet time to market my unit and since she is going to receive 2% of the sale proceeds as commission, she wasn't too hungry either. She is most willing to share the commission by co-broking and was not properly incentivised to sell my unit at the best price available. In other words, our interest weren't aligned. I have since learned to sign my agreement with my agent verbally. He or she has to take my word for it that he is the exclusive agent and i am a man or my word.

So here you go, i sold my condo in Q4 2007 and that was before Lehman Brothers went belly up in 2008. As you can see, i managed to sell my condo at the high price back then. The reason why i sold back then was that i didn't know how long the crisis will last and how it will impact the market but my intuition told me to get out of the market while i  can.
The chart is below for your reference.

Lesson Learnt - With the benefit of hindsight, what you think is clever may actually be quite foolish!?

The interesting thing about this was that i thought i was a 'genius' in selling at the top but with the benefit of hindsight, the unit  which i sold at $1,000 psf has since risen to more than $1,500 psf in 2012. So do you think i was clever or foolish in 2007!? :P

The answer to the above question is this. If i have sold and then do nothing after that, i would really have become the most foolish man BUT If i had sold the unit and then do something during the crisis, then perhaps, i am not so foolish after all? My mindset back then for selling was to switch out of district 8 and move into either District 1, 9, 10 or 11. 

Here you go. My story till end 2007. I had a good holiday following the sale. I will share my journey with you what happened from 2008 onwards in my next posting and the foolish things i did with my 'new found wealth'.  :)  

Happy property investing. 


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