A tale of two

TTT1

This weekend on one of the quieter October Auction Days, we were involved in two auctions – one we bought and one we missed.

We bought 307 Beaconsfield Parade, Middle Park (Simon Gowling), under the hammer with 2 bidders @ $6,370,000.

We missed 40 Berry Street, (Paul Caine), under the hammer with 2 bidders @ $4,550,000.

It was a tale of two – two different couples, two different homes, two different results – however in many ways, both had the same outcome, from the same process.

TTT2

Between now and it’s easy to get caught up in the markets, the agents, prices, the internet and the general urgency.

Is that a good idea?

Big picture: why are you buying a home?

To get an outcome.

More sophisticated – don’t want just any outcome, they want a good outcome.

Sophisticated buyers go through a good process, to make good decisions, that in turn will achieve their desired good outcomes.

I haven’t got time for this theory crap, Mal – I’m too busy at opens and on the computer.

TTT3

For our two bidding couples this weekend, the process began with – understanding what they really, really wanted (us and them).

For one couple, (ten months with us) this was the first home we bid on and we bought it.

For another couple it was two weeks (we had bought with this couple before) and this weekend’s effort was more an opportunistic one; meaning if all the ducks lined up then great, if not, then also great.

Both couples had clarity of outcome and a game plan that reflected that in their PPP’s (Price, Property and Position).

CAD

Our buyers went through a process of due diligence – that can include pest and building inspections, checking with council, finances, legals and about another eighty steps including ratings and and …..

We find sophisticated buyers go through the same sets of proven routines and often have somebody else doing it for them.

They choose to remain big picture and not be distracted by minutiae.

For sophisticated buyers, it’s a lot more than just regimented actions like those mentioned above – it’s also about meetings to discuss the concepts, road testing a premise – examining some beliefs.

Sounds like a boring set of admin regulations.

Bugger that, Mal! I want to be free, have some fun.

Many buyers who repeatedly miss, are sick and tired of looking on the internet, dread their next agent contact and …… are they ……….. having fun?

Good process gives you more control, more enjoyment, takes less time and gives you a greater feeling of accomplishment.

And did I mention they reduce mistakes.

For our buyers who didn’t buy yesterday, there is $2-3 million difference between the really good and really bad. And that is with the same dollars and the same type of house. If they renovate their existing home to a position of overcapitalising and then sell; versus spending a bit more and less reno on their new target buy, then we are talking $2-3 million dollars on a $4 million buy and a $4 million sell.

$2 million to $3 million tax free dollars – hey, isn’t that a Tattslotto amount?

Wouldn’t that be enough fun?

Would you feel in control if you achieved that?

I’d crack open the champagne just for the concept!

In January 2022 when you open your CommBank app and you see no mortgage; is that a concept that would give you a sense of accomplishment – more so than 15 minutes of bullish bidding on a home – without help and afterwards WOW – you get a big slap on the back and a brand spanking new and glistening $3 million EXTRA mortgage.

TTT5

Sophisticated buyers at this level, realise they have got to where they are; by being able to assess (well) advice and guidance in matters that are mostly unknown to them. The unknown has little to do with the choice of home – that is always best done by the buyer – the unknown is simply that – the unknown – what goes on behind the scenes that determines more so than money; who buys and who misses the home.

Three things you can never have too much of:

Skill

Experience

Trust (yep, not a typo)

TTT6

A home can be a beautiful part of one’s life – it can lift you up as you leave in the morning and rest you down as you return at night.

A great home builds family strength.

A great home really means family.

For many and sadly, they do not ever live in a great home; but those same people know all the sqm rates, the market movements, are buddies with every agent and they have never overpaid.

TTT8

At 307 going into the auction, we felt we were the buyer after a 10-month odyssey together. This was the perfect home as it gave the couple with two different reasons for buying, the same outcome.

They were both smart enough to see that and they trusted each other and they allocated a significant level of resources (time, effort and $) to buy.

This great home they really liked (emotional); was basically land (free home – we believe the other bidder was planning to bulldoze) and gave flexible five-year outcomes.

Five year Futureproofing:

  • Do nothing and remain as is
  • Renovate
  • Rebuild
  • Rent out and move
  • Sell and move – with growth in the high land component (hopefully)

Those are the PPP (Price, Property and Position) reasons and that is why we bid strongly.

TTT9

At 40 Berry, we felt the agent quote was courageous and our client’s interests were actually below the quote. So we turned up on the understanding that everything needed to go right for us – meaning no strong other buyers – it didn’t go that way. David Morrell (buyer advocate) was there and he is a man who knows his stuff. We were not going to win, in this instance, if he bid strongly. He did – we could not match – he bought well and we moved on. Although the home was bought well and was not expensive – it still did not add up for our client, above the bid price we offered.

But Mal on your theory, you should have kept going for another $1 million or so.

Nope – this home was at the outer edge of what represented a good outcome (for our client). It was on the edge in terms of initial price, after purchase renovation cost and effort and time and then ultimately the finished product value (capitalisation).

It was worth having a go – a potentially great home – but for our client it had an element of edge and as we tipped over it – we stopped. Not to say that the ultimate buyer, who we believe was a neighbour, did not make a prudent decision. We believe they did and who knows the way they were bidding it could have made sense for another million. If they did choose to go to those numbers, then in certain circumstances for them, that may well have represented a great decision. For us, our 3 P’s got out of whack – A-grade Position, B-grade property (due to renos, not class) and in the end for us C-grade price (not high overall, just not right for our clients). So while we wanted to be the buyer if the ducks lined up, we were not and with a tinge of disappointment we all moved on – no regrets.

Two good clients, two good homes, two good outcomes.

See you next week, when we start the first of the 100 Auctions Bidderman Test to really understand where the Middle Spring 2017 Inner Melbourne market is at.

Towers

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