Puzzle Finance Blog
What you don’t know about property auctions, and probably should
After scrolling through hundreds of property listings and finding that dream home, you feel slightly uneasy because it’s going to auction.
The auction process can be daunting – especially the first time – because it’s not enough just to know your budget and the ins and outs of the contract.
Buyers have to trudge through a minefield of jargon and rules, and battle psychological strategies from their competition.
Here are some common phrases that are worth a further look into:
1. Referring a bid to the vendor
When auctioneer Damien Cooley consulted Kim and Chris whether they were happy to sell their Block apartment, it appeared to be brief on TV.
But on site, buyers, journalists and producers waited patiently for about half an hour after the bidding reached a standstill at a price significantly lower than what the next-door apartment sold for just hours earlier.
It prompted some people to question the legality of such a long break; particularly given the property was technically on the market, and buyers’ advocate Nicole Jacobs found a new buyer for the apartment during the break.
That buyer eventually paid a price much closer what Julia and Sasha’s apartment achieved next door.
It turns out an auctioneer may withdraw the property from sale at any time.
In the real world, properties rarely get withdrawn after the price exceeds reserve.
But in the case of The Block, Mr Cooley wanted to do right by the vendor because the next door property – a comparable sale – sold after the reserve was set.
Sydney-based auctioneer Will Hampson, of My Auctioneer, says there is no time limit on negotiating with the vendor, or waiting for a prospective buyer to increase their bid. But the etiquette is to move the auction along swiftly and sell it to the highest bidder once the price is past reserve.
2. On the market
When an auctioneer announces a property is on the market, that price is not necessarily the reserve.
An auctioneer is not obliged to announce a property is “on the market” or “selling” if the bidding is flowing freely, Mr Hampson says, nor do they need to call it three times before selling the property.
“Most good auctioneers will always call it three times to give all buyers equal opportunity,” he says.
When the bidding comes thick and fast, auctioneers may tell buyers they are “playing for keeps” tens of thousand of dollars past the reserve price.
On the other side of the coin, even if the bid exceeds reserve, an auctioneer may still go inside to confirm with the vendor to ensure they are definitely happy to sell.
3. 10 per cent deposit
No one knows for sure if they will buy on the day – or how much they will pay – so it can be difficult to pay a full 10 per cent deposit on the day.
Deposit arrangements can be negotiated before the auction, but they have to be approved by a vendor and their solicitor.
Melbourne-based Nelson Alexander sales director Arch Staver says if an altered settlement has been offered to one person, it must legally be offered to all participants.
If an auctioneer says the settlement is 60 days unless prior arrangements have been made, someone can legally ask: “What are those arrangements?”
4. Vendor bids
Different states have varying rules about vendor bids; in Victoria auctioneers can make multiple vendor bids, while in NSW only one vendor bid can be made.
Vendor bids are generally used to move the auction along by lifting the price closer to the vendor’s expectations. Bidding higher than the vendor bid does not guarantee to buy the property, but it secures the first opportunity to negotiate exclusively with the vendor.
5. Cooling-off period
In Victoria, there is no cooling-off period within three business days of an auction.
Gary Peer, of Gary Peer and Associates, says if a property passes in at auction on a Saturday and sells on the following Tuesday, or if a purchaser buys two days before and they think they can cool off – they can’t.
Posted by Christina Zhou - The Age on 10th February, 2017 | Comments | Trackbacks | Permalink
The ideal time of year to buy or sell property
If you're looking to buy or sell property, when's the best time to do it?
Views are mixed on this. Some put it down to seasonal factors, others say it becomes a market-by-market and personal decision.
Many homeowners choose to sell in spring to show off their property at the nicest time of year. Photo: Graham Tidy Seasonal selling
Traditionally, autumn and spring are the two distinct periods for selling property. Both are defined by key Australian holidays, particularly autumn as people often use the summer to take stock of where their lives are going and indeed how on earth to get there.
Spring tends to do well as people generally see this as an opportunity to present property in the best light and it also allows them to get their affairs in order before Christmas.
We certainly saw that with the slightly stronger price growth in spring 2016, over earlier in the year.
The tip here is that if you are selling out of busy areas, avoid peak periods as too much traffic or lack of parking can be a real turn-off. Autumn, and particularly that pre-Easter Super Saturday auction weekend, is also when we see the largest number of property sale contracts, according to data company CoreLogic.
But Charles Tarbey, chairman of property group Century21, doesn't buy into the seasonal factors.
"In recent years the traditional seasons of real estate have been less pronounced and sellers may be better served by researching market dynamics in the area and making an informed decision on that information," Tarbey says.
"Winter is often overlooked as a good time to sell, however it may be possible to achieve great results in winter with [fewer] listings to compete against, which in turn may attract a greater proportion of interest compared to other seasons."
Investors tend to have a bit more flexibility deciding when they'll sell over owner-occupiers, depending on tenancy terms and property conditions of course.
"If you're an owner occupier, it's best to sell before you buy," says Jane Slack-Smith, director of Your Property Success.
"That way you know without doubt what money you have to spend and you don't have to get a bridging loan, which usually results in an ability to borrow less than you normally would.
"But often this means months of renting or a carefully orchestrated sale and purchase and in a fast-moving market most vendors don't need to accept your changes," she added. Seasonal buying
A buyers' market generally isn't a great time to sell because there are more properties available for sale relative to buyer demand and this can weigh on the asking price.
The Perth housing market has been a good example of this.
"As a region it does well in favour of buyers, with historically high stock levels that has resulted in a very long average selling time and larger discounts from vendors," says CoreLogic research director Tim Lawless.
"But stock levels in Sydney are roughly half of what they were five years ago, and it is this shortage of advertised stock that is creating urgency among buyers which is contributing to the upwards pressure on prices," he said. Market predictions
In the year ahead, property price growth is expected to stabilise and Sydney and Melbourne are expected to see a strong shift back to there being just as many buyers as sellers, plus a pull back in investors.
Many economists believe that with the US raising rates in December this will keep the Reserve Bank of Australia on hold with rates a little while longer, but it doesn't rule out another rate cut in 2017.
Concerns have re-emerged of a recession in the first half of 2017, and that the major banks may also continue to raise interest rates independently of the Reserve Bank.
If this happens, the timing of selling property could be better suited to earlier in the year as buyer demand tends to weaken when consumer confidence suffers in times of economic hardship.
"It can be better to go earlier," says Andrew Wilson, senior economist with Domain Group.
"We have the prospect of perhaps a recession next year that is likely to be announced in March. This could affect market confidence but I don't think it will affect the housing market too much."
Bianca Hartge-Hazelman is the founder of women's money magazine Financy.com.au.
Posted by Bianca Hartge-Hazelman - The Age on 19th January, 2017 | Comments | Trackbacks | Permalink
Tips for buyers locked out of Melbourne’s seller’s market
WITH the limited supply of houses that defined last year’s market in Melbourne tipped to continue, it is set to be another tough year for those looking to buy.
While a smaller number of properties means increased competition between buyers, there are certain steps that can be taken to increase the chance of securing a dream property.
According to Harcourts Victoria chief executive Sadhana Smiles, these are the top five tips for those looking to buy in a seller’s market.
1. WEATHER YOUR EMOTIONS AND MANAGE EXPECTATIONS
“More often than not, buyers will need to attend several auctions before finding success and it’s a good idea to familiarise yourself with the process and variables before embarking on the home-buying journey,” Ms Smiles said.
“Auctions can be stressful, tedious activities, particularly when you’re emotionally invested in a property. You will lose several homes that you pictured a life in; be mentally prepared for this so as not to lose hope.”
Ms Smiles said it was important not to over-invest in a home and if nervous it may be a good idea to enlist family or friends to bid on your behalf.
2. KNOW THE MARKET YOU’RE BIDDING IN
“The value of a house is what someone is prepared to pay on the day. Value comes down to how many parties are financially and emotionally invested,” Ms Smiles said.
“You may arm yourself with research and recent sales, but in today’s market this will only provide an indication of what the home could go for.”
She said to remember that while you’re buying a home, property is ultimately an investment, “so think about the long-term capital gains”.
3. CONSIDER ENGAGING A BUYER’S ADVOCATE
“If you feel engaging a third-party expert will help alleviate your stress on the day, consider engaging a buyer’s advocate,” Ms Smiles said.
“Buyer’s advocates will help make your auction experience and decision making on the ground based on logic.”
4. BE TACTICAL IN YOUR BIDDING APPROACH
Be confident in your bidding.
“There are many opinions on what the ‘right strategy’ is to bidding at auction. My opinion is there are many that work, but again it all depends on who’s in attendance on the day and how invested they are,” Ms Smiles said.
“Always bid confidently. This shows the auctioneer and, more importantly, the other bidders, that you are here to buy and mean business.”
5. BE PREPARED TO SACRIFICE
Don’t sacrifice a seaside holiday if it’s central to your happiness.
“To achieve a deposit that will allow for a manageable home loan, lifestyle sacrifices are necessary,” Ms Smiles said.
“As you’re in a bidding war for your ideal property, you’re going to run a list in your head of everything you would give up to be able to stretch your budget.
“This is fine, but know your limits and what lifestyle will truly make you happy. If a holiday, new clothes and two cars are part and parcel of you and your family’s happy life, don’t go there.”
Posted by Jordan Marshall - Herald Sun on 13th January, 2017 | Comments | Trackbacks | Permalink
All at once or bit-by-bit? How to tackle your home renovation
If you’re considering renovating your home or investment property, you might be wondering whether to do it all in one go or whether to chip away at it over time.
Of course, getting it done all in one hit can be preferable; mainly to minimise the inconvenience a renovation can cause. But renovating over time has its advantages too. The most obvious reason being that financially you can stretch your costs over a period of time without needing all the money up front. Renovating area-by-area can also work well for families or for properties you don’t want completely out of action for too long.
The problem with renovating your home over time is that it can end up looking that way. Unless your reno is pre-planned for the entire home before you begin, the risk is that you’ll end up with a look that isn’t cohesive. Good renovation design and flow generally only happens when the modernising of your whole home is considered and planned right at the beginning.
I’ve seen many examples where homes renovated over a period of time appear a jumble of design styles. The kitchen; reminiscent of one year, the bathroom reminiscent of a few years later.
The contrast of design styles is even more apparent when the height of the fashion trend is used in each room. For example, the style or pattern of tiles, the taps or the colours.
Another compelling reason to pre-plan your renovation is because it’s a great way to keep your spending under control. If you can plan from the outset what you are going to do to your home and how much it’s going to cost (even if only an estimate of costs) that is a good way to avoid your renovation spiralling out of control, which often happens when renovating over time.
The problem? It’s likely you’ll over-capitalise on your property without even knowing it. Add that to a possible assortment of incompatible design styles and you can see why so often the renovation dream doesn’t quite go according to plan.
Many of my clients renovate over a period of time. In fact, I still have a client from nine years ago calling me periodically for advice on the renovation they started back then! I also have lots of clients who renovate all in one go. Both strategies work equally well as long as the pre-planning phase is done well.
My top tip? Create yourself a “Renovation Action Plan” that details what you are going to do in each room and how much those things are going to cost. Articulate your ideas as clearly as you know how and make sure your design gives a cohesive feel to the property so that it flows.
Head to my website for a sample that you can use as a template.
Jane Eyles-Bennett is renovation mad and has been a professional designer for 23 years. She was a renovation designer on the TV series Property Climbers, winner of several interior design awards and design consultant to over 600 property owners in the past nine years.
Have a renovation or design topic idea? Contact Jane at jane @hotspaceconsultants.com or via her website.
Posted by Jane Eyles-Bennett - Domain (The Age) on 10th January, 2017 | Comments | Trackbacks | Permalink