The atmosphere was a little more tentative on Saturday in comparison to last weekend. With a clearance rate of 68% many people look at this and worry about the market. In fact there was the highest volume, dollar wise, of property reported to the REIV since mid-June. You have to go back to early June to see the numbers bigger. There were 1175 properties reportedly sold last week.
Interest rates remained on hold this week, and this never does much to buoy up the pace of the market. Contrary to common perception when interest rates remain on hold prices also tend to stabilize and buyers often feel they have more time to assess and negotiate purchases. When they go up it tends to create a sense of urgency – buyers want to purchase before they go any higher thereby increasing demand, however vendor’s who don’t ‘need’ to sell hold off not wanting and buy into a rising market.
It was not surprising then to see many of the auctions we witnessed over the weekend pass in and were later negotiated.
All successful post auction negotiations count towards the published clearance rates as SOLD, and in a fickle market where there is still an element of uncertainty in the atmosphere, most properties listed for auction will sell in this manner.
We had an interesting experience at an auction in Murrumbeena. 18 Adelaide Street is a beautiful period home although in need of work. A good crowd attended but there was little interest from buyers. One punter opened the auction with a genuine bid of 900K – well below the property’s reserve. The agent ‘vendor bid’ over this figure several times to reach $1.15M. It was at this point we entered the fray. Craig Cox, the auctioneer, took our offer and could get nothing further from the crowd and finally, after an unreasonably long period of time, announced it had passed in to us. Yet as we started to walk towards the house to enter into negotiation another potential buyer raised his hand to bid.
Craig Cox immediately asked his colleagues to confirm whether he had knocked the property down before the bid was made. All in attendance agreed that he had. To the auctioneer’s credit, he immediately explained the position to the prospective purchaser, that it would be unlawful for him to reopen the auction, and that he would negotiate with us first. If we did not reach agreement, then he could be consulted.
The prospective purchaser was furious, but Buxton’s did a very good job to handle the situation. A deal was struck and the other prospective purchaser was literally “left out in the cold”. He was turned away from the property without the option to be involved in the negotiations at all. It’s important for purchasers to understand their rights when bidding at auction. If a property does pass in to them, the rules they were bidding under during the auction no longer apply – buyers can now negotiate on all elements of the contract including settlement dates or make an offer subject to a building inspection for example. The vendor doesn’t have to accept of course, however the highest bidder has first right of negotiation at the vendor’s reserve – more importantly the agent is unable to deal with anyone else until he has finished dealing with the highest bidder. Therefore if property does look like it’s going to pass in, it’s important not to hang back but make intentions clear and get in the box seat.
88 Emo Rd, Malvern East had been quoted at $1-$1.1M. Again a good crowd of around 30-50 people were in attendance. The bidding opened on a genuine bid of $1M and unlike the other two auctions 2 bidders dominated. It was soon announced on the market at 1.2Mil – (well past the quoted price). Once a property has met the reserve the auction takes on a new and stronger pace. With aggressive bidding the property was secured for $1.210M. A very healthy result for this type of home.
Anyone who thinks buying at auction is as simple as putting up your hand is sadly mistaken. Anecdotally, only about half of the properties that are not sold prior to the auction day actually sell under the hammer. The rest are negotiated one on one with the auctioneer. By the way this person is usually the most experienced negotiator in the selling agents company.
Anyone thinking of purchasing a property this year can contact us for an obligation free meeting. We will explain how we can level the playing field.
Ian James
