Welcome to the new world. Well, not so new – it arrives every winter in Melbourne when the favourite weekend sport that is the public auction quietens down and a version of the Melbourne Club opens for the $M+ homebuying business. For four months between a certain royal’s birthday and a hoped-for Collingwood victory on Grand Final Day, auctions diminish as the favoured way to do business at the Top End – and private sales, off markets and expressions of interest take over.

For unwary buyers, private sales can present some issues. In fact a number of potential buyers start out on the back foot with private sale negotiations simply because they think they are easier than auction bidding.

We are not sure why anyone would think private sales are necessarily easier to negotiate than auctions. Sure, some private sales are straightforward enough: it’s simply a matter of paying the asking price. But it’s worth realising that private sales have no rules like the ones they have to read out at the start of an auction. There is no start and stop time and no bells to say the property is: ‘On the market’. For casual buyers there is no public confirmation of the right price level in the form of other bidders as in an auction.

As well, over the last few years the curious practice of not stating a price has crept in on some private sales. So when you ask a salesman the price, the response can vary from: “Make us an offer” to “Buyer interest is at $3,000,000 and the vendor wants around $3,350,000 (we think)” to “Price range, sir, is between $1,800,000 and $1,920,000”.

Even the inexperienced buyer should be able to see the dangers in being asked to “Make us an offer” – especially if they want to buy the home. There are solutions for a buyer involved in this process, but hand on heart you as a buyer would be best served by getting professional representation in this instance.

In the case of the other two price types which are a version of the range, it’s just as confusing. Could you buy the property simply by paying the Top End of the range? That depends on the process and on which agent you’re dealing with.

Which leads us to the second traffic stopper in private sale negotiations: process. Even if you offer top dollar, your offer may still be referred to others and that involves a 24 hour feedback process during which time you may be asked if you have any more (even if there is no other offer). Or you could be asked to participate in a Boardroom auction, which involves a new set of rules. Or you could simply be told nothing – which could mean it is sold to someone else, maybe because as a negotiation tactic your offer had a clause stating this was your final offer and they believed you and didn’t refer back to you.

Even if your offer of the top price in the range is accepted on the spot, you may wonder whether you did the right thing?

Each and every agency you deal with has a different private sale process and in fact a number of agents within the different agencies use different private sale practices.

Which brings us to the final issue of agents – who do you actually speak to? In some companies you could be involved with a number of agents during the buying process – but only two of them can actually help you. In private sales in Melbourne’s Top End it is a club, it works well for buyers and sellers and a lot of real estate is exchanged, however you need to know who’s who within the club if you want to get the result you want.

When you go to your next open for inspection, for instance, does that well dressed agent you spoke to actually know what is going on? Are they the listing agent, who has the ear and trust of the vendor – or are they someone so far removed from the process that you probably know more about the home and what it takes to buy it?

So welcome Melbourne, welcome to the winter of wonderment and the intensely interesting Private Sale process.

Printed each week in The Weekly Review – Melbourne’s Million Dollar Plus Magazine

If you feel that a win-win style will work for you; then you need to give a little to get a little before you can finalise a strategy.

Prior to starting one on one negotiations, you need a forum for pre-negotiation discussions and I much prefer a coffee to a phone line.

Naivety, experience and lack of preparation are not good prerequisites for the sorts of meetings I outline below, so if you don’t feel it’s you or if you have loose lips then engage a professional.

Background: Lyndon and Helen are considering a pre-auction offer, so I suggested to them that I meet with the selling agent first. The agent is Michael and we met at Laurent in Toorak Rd.

Note: the dialogue that follows  may look scripted and cagey (on both sides)  – but it’s real life.

Mal: Good to see you again, Michael.

Michael: Still a latte? My shout!

Mal: Yep, your team is looking strong.

Michael: Better than FBJ’s clearance rates … and so are the Blues, which I think is what you are talking about. (Both smile),

Mal: Thanks … I needed the caffeine.

Michael: How can I help? You have a question on Chrystobel, which has started well. We seem to have buyer interest around the high ones and …

Mal: The vendor?

Michael: Nice people. They may have a different view to this changing market but, as you know, time will tell. I think the home will sell well – good position, very light, lots of space …

Mal: You can do my rating report!

Michael: And your question?

Mal: I have got a new client.

Michael: Whose name is?

Mal: A new nameless client who likes their privacy and who may well be your buyer.

Michael: Mmm, that’s interesting. Continue…

Mal: May well be the buyer on Chrystobel now…

Michael: … Meaning?

Mal: … Got contracts?

Michael: Just hit my desk. Are you meaning a deal now? Needs to be strong – over $2 million.

Mal: Do you think the vendor would entertain a pre-auction offer? Have they bought or is this a sticky one?

Michael: Let’s leave that … a pre-auction offer may be viewed with some merit.

Mal: Some merit?

Michael: It’s a possibility, need to be very strong.

Mal: Of course. How very strong?

Michael: Very strong.

Mal: Say around $2 million-ish?

Michael: Circle that, yes.

Mal: Circle 2. OK. Preferred terms?

Michael: Flexible – they haven’t bought.

Mal: So would I be wasting time with an offer?

Michael: Depends.

Mal: Try not to be too helpful, Michael. Have you had any offers?

Michael: I’m happy to go to auction. You’re making the running. I will present whatever you put forward and, yes, we had a verbal before the campaign over $2 million.

Mal: Wow! Do they regret not taking it?

Michael: Not sure. They may get more at auction.

Mal: Really. So if I put in an offer around $1.9 million, you wouldn’t recommend it?

Michael: I doubt it.

Mal: You wouldn’t reject it outright?

Michael: Not my decision to make; that is the vendors’.

Mal: My clients …

Michael: … your nameless clients …

Mal: … my nameless clients have a decision to make between Chrystobel and another home auctioned a week earlier.

Michael: Oh … really Mal! (Both laugh)

Mal: Michael, I can only tell you the truth … (Both laugh). OK, their desire to offer may not be here at auction … (silence) … Michael, I’m feeling like a shag on a rock. Give me some guidance please.

Michael: Why not just come to the auction?

Mal: Why not indeed, but your vendor may not be getting best price.

Michael: Thanks for thinking of my vendor. Have they got $2 million?

Mal: Would that buy it?

Michael: Maybe – certainly would on the day.

Mal: I’ve never heard that line before (both smirk) so …

Michael: So….

Mal: So, do you think I would be doing both our clients a disservice putting in a pre-auction offer?

Michael: I think you should think about it. As you know, I will put anything up and, assuming your clients offered something strong, then my vendor may ……. go either way. I would appreciate no tomorrow-night deadline. I’ll still deal with your client’s offer, but I’ve got my son’s footy and, just in case you’re not hearing me, I may find it hard to contact the vendor, if you get my drift.

Mal: Got it. No deadline offer tomorrow. In return, do you think you could make some general enquiries how an offer may be viewed at this stage?

Michael: I could, but you would need to be over $2 million and unconditional – eg lawyers signed off, building inspections completed and finances organised. I wouldn’t recommend a conditional offer.

Mal: Procedure … post-offer if acceptable is …

Michael: Usual – I will ring the other buyers, then maybe a boardroom auction.

Mal: You’re sworn to secrecy on my client’s offer …

Michael: (Pause) … Mal, you know I enjoy doing business with you …

Mal: 120 days is preferred by your client?

Michael: Yes… Mind if I take this call? Have we finished? Shall I be hearing from you soon?

Mal: No, yes and maybe. Thanks for the coffee.

Nothing wrong with asking the "are we on the market" and other questions at the appropriate times. It is only a difficult and an unwanted question to a "Claytons Reserve" auctioneer.

It’s heartening to see more buyers sticking up for their rights at auctions by asking questions – especially about reserves and whether the property is ‘on the market’.

Because not all sellers and agents are respecting the auction system. Some agents are passing  in properties and then reporting an inflated reserve – which we call a ‘Claytons Reserve’. This kind of practice is, or should be, illegal and it’s not the Aussie way.

Quoting is not an exact science, but continued deliberate misleading quoting and Claytons (or false) reserves are hurting buyers, as well as sellers (through buyer mistrust) and the auction system itself. To try and negotiate around unhelpful quoting you need to ask the right questions at the right times.

A seller has a right to ask whatever they want for their home – but they don’t have a right to mislead you.

If you are told something by an agent why shouldn’t you expect it to have a modicum of truth? If Myer or Harvey Norman said a fridge was for sale at $1100 and it wasn’t, there would be hell to pay. But a seller can say a home is for sale at $2,000,000, and then say: “Whoops, I actually meant $2,500,000” -  and somehow that is fine – no problem – no consequences.

If sellers want the big price they should say so from the start – before you spend money on inspections and time and effort. 

That means that as buyers, wherever you can, you need to ask questions of those auctioneers who are not playing fair.

Asking the question is not just about fairness –  it is also about sensible negotiations.

If you want to be a good negotiator you have to stick up for yourself. You need to question and keep questioning unfair and/or illegal tactics.

And don’t feel you are imposing on the agent or the seller by asking questions. Only unreasonable sellers and dishonest agents would consider your questions an impost.

Questions to Ask

Towards the end of the campaign (before you spend money on pest and building and legal and valuation checks)

1. Do you have a reserve or can you give me an indicative thought on it?
2. Does the quote you are giving me relate to the reserve or (as agents loosely put it) to ‘buyer interest’ (which means very little if the reserve is miles away)?
3. If you are thinking of spending time and money on due diligence, tell the selling agent you are asking the questions because you want to avoid unnecessary expense.

On auction day

1. If the auctioneer doesn’t specifically say in their spiel that they have a reserve – put your hand up and ask them: “Is there a reserve?”
2. If the answer is “yes” then follow up with: “Is it near your quote?” If “yes” then great, go ahead and bid.
3. If “no” – well … it’s up to you. But a good follow up question is: “Do you have any idea what it may be… ?” Another good follow up question might also be: “Well, what are you doing here Mr Auctioneer if you have no idea?” But I digress… You can choose, as many buyers do with Claytons (not real) auctioneers, to not bid and walk away instead.

During the auction

Once bidding has reached the quote level, all bidders should start asking the question: “Is it on the market? Is it on the market?”

Some other statements worth making during the auction:

1. “I’ll bid an extra $20,000 if it’s on the market” – please only say this if you will, otherwise you are being unethical and actually you are not negotiating well.
2. “I have more money if you put it on the market” – please only say this if you do, otherwise you are being unethical and actually you are not negotiating well.
3. Why not think about ‘backward bidding’ (making a lower bid) if bidding has gone well over the quote and the property is not on the market? Why not stick up for other buyers, even if they are your competitors, in these situations? We do.

These measures can work well if a number of buyers band together to say these sorts of things in unison. It’s sort of like the blue team vs  red team in Masterchef. Work together to get it on the market then fight it out fairly.

It may not work, but at least you have tried. There are risks associated with any action – professional buyer representation is another option. And of course you can, as many buyers do, walk away from a “Claytons” auction and a “Claytons” auctioneer if you don’t like the answers to your questions.

Please also note

1. Keep yourself decent – no rudeness
2. Don’t involve yourself if you are not a real bidder – that’s illegal

If you are told a ridiculous or Claytons reserve compared to the quote when a property is passed in to you, you have a right to note it down and tell the agent and the seller and report both of them to the:

• ACCC
• Consumer Affairs
• REIV

Also, if you have spent money on pest and building and legal checks and the reserve is well above the quote – why not send the bill to the agent and to the seller and ask the question, can I get reimbursement? If you don’t get anywhere, then why not take it further – and ask the same question at VCAT? (Although at present it seems you don’t have a case unless the reserve is more than 15% over the quote.)

If you want to negotiate well, then you or your representative need to keep asking appropriate questions when faced with these situations.

We Only Buy Homes

Please note: We support Bennison Mackinnon’s ethical approach. It’s not a question of 100% accuracy (that is not possible) – it’s not a question of best representing sellers (that is expected) - it’s a question of sticking up for your rights.  Good negotiators keep asking the right questions.

Iain Carmichael aka "Captain Grumpy" - we have a nickname for every auctioneer. There is a reason Iain has been a top "James Market News" street auctioneer for many years and it's not because he is easy on buyers. He isn't. He is a top auctioneer because he extracts as much as he can from buyers at auction. The fact he and Benmac quote the reserve ethically to buyers is not the reason he is highly thought of; however it proves that you don't need to mislead buyers to be a great auctioneer. Buyers - keep asking questions.

What a funny lot we are at auction! Check out the Expressions! Malvern 4 Grace: Marcus Chiminello and Justin Long: 4 bidders, Bought After Auction

At 6pm on Saturday the James Million-Dollar-Plus clearance rate was 59% for the 31 auctions we attended.

Bidderman was at 1.5 – a more representative number than last week’s 2.2 we think. 

Main Points:

• A significant, but largely expected, drop in activity and dollar value
• 3 Longstaff Kew East – sold by Glen Coutinho of Hocking Stuart, had a crowd of 80 with 5 bidders and was bought for $1,413,000. This one was all about the renovation and not the position, home rather than location. See our report and click onto our ratings below.
• Albert Park – I got an interesting answer when I asked Michael Szulc of Cayzers why we had such huge stock levels early in the year. His response was the most original I have heard: With the GFC a number of investors took out 12 month leases. All those leases lapsed about the same time, just as we had come into a significantly better market, and were all put up for sale around the same time.

Guilty – Last Week we were harsh on The Early Million Market

The market has corrected both in terms of price and activity. However, as we put on our winter coats, we should also put our hands up and make our apologies: there is one segment of the $M+ market that seems to be exempt from our blanket market price-drop statement.

We think the market for $1 to $1.5 million-ish quality homes hasn’t really dropped as we first hoped it might have over the holidays.

Yes, there has been a major drop in demand across the Melbourne Top End. And yes, prices are off by as much as 10% since April. And yes, the gains for 2010 have dissipated in most market segments – especially for the unsolds that need to become solds. But the mounting evidence over the last week indicates that such a blanket statement is too strong when talking about quality homes in the early $1 million dollar range.

This segment still has a strong wave of demand – with new buyers taking up when other buyers drop off, albeit at lower numbers than May, but still at three and four deep. In this quieter July market, the evidence is strong (in fact it’s being pushed into our faces) that, even with the reduced stock levels, we may see prices increase faster than we thought possible even a fortnight ago in this early $1 million segment.

So, after a polite battering from some avid selling agent readers, as well as some of our own unsuccessful auctions and some relooking at sales and private sale basket lists, we’ve reworked our blanket statements to:

Reduced activity and price that started from late April, up to now and possibly continuing into Spring for:

1.  Poorer quality million dollar homes (weak 3Ps – price, property and position characteristics)

2.  Many homes over $2 million-ish

But this does not apply to the early $1 millions price segment for good homes. That market has survived the significant market adjustment better than we implied last week.

With the benefit of six more auctions under our belt this week, we’re already thinking that nirvana may be shorter lived than we initially hoped. But it is winter, and we are dealing in a lot smaller numbers stock wise. Even so, the mood at this level is positive and seems to be rebuilding quite quickly.

Our overall last week auction strike rate was 3 from 6 in this $1 to $1.5 million dollar quality homes range. Bidders have been 1-6-2-3-3-3 respectively.

The above $2 million market

The market above $2 million is, as we stated last week and in previous reports, solid on a few good properties and limited on the rest. There are large numbers of stales and unsolds in this range, and it seems that most of the limited demand is for new and quality auction stock, which is itself limited.

The last two weeks has shown little improvement in this area, particularly as you go further up the food chain dollar-wise – unless of course it’s for a first rate home.

Sales at $2m and above (not all are reported) were running at three (3) a day in May 2010. In July they are reported at being down to one (1) a day.

Compare this to the $1m – $2m range in Boroondara, Bayside, Port Phillip and Stonnington. These were at eleven (11) a day in May and while they are down, they are still up at five (5) a day in July.

Of the more than 140 sales over $1 million in those four markets this month, 5 out of 6 are mopping up the early $1 million overhang and new auctions, while just 1 in 6 are mopping up the over $2 million overhang.

Activity is down across all sectors or segments of the market (to be expected, given it is winter) but things are holding up far better in the quality $1million range than in the $2 million+ range – due to significantly stronger bidder depth. This is leading to less overhang than we may have implied through last week’s blanket statements.

Glad to have cleared that up.

166 Bank St South Melbourne. Crowd of 60 saw Gerald Betts Pass In at $1,330,000

We love auctions

Enjoyable auction No 1

Antony Woodley and Peter Mitchell of Marshall White – well done. The three bidders – well done. For me this is how you run an auction: a bit of argy-bargy and a bit of old fashioned fair play.

The quote during the campaign had been conservative, and when the first bidder opened with $1,700,000, at the quote, he asked: is it on the market? “No”, was the agent’s answer, “and I’ll take $25,000s”. A second bidder bumped it up another $100,000. Wow! The first bidder repeated the question to the auctioneer and Antony’s reply was ditto, requesting $25,000 bids. Again, bang, from a third bidder this time – another $100,000 rise. Now with the price up at $1,900,000, all three bidders asked the question: was the property on the market? The second bidder said he had more, but refused to bid unless it was on the market. In the spirit of auction it was put on the market. Another $10,000 and then the third bidder said $2,000,000. Wow – who says “on the market” doesn’t work? It was a great bid, which could not be matched – and the home was knocked down at $2,000,000.

That’s how an auction should be run: three bidders, five bold bids. It was a pleasure to report on. More power to buyers who work together to get a property on the market so they can battle it out fairly. And more power to auctioneers who respect those buyers playing the game.

Enjoyable Auction No 2

This was a boardroom auction with a James Market News’ favourite, Lachie Fraser Smith, and took place on Tuesday night at Bennison Mackinnon’s boardroom. Over the previous 48 hours Lachie had informed a number of buyers that a home going for around $1 million in Glen Iris had received an acceptable offer and that all interested parties were invited to attend an auction where the reserve was set at $1,050,000 and that the property was on the market. Sitting around drinking water, six (6) bidders fought it out pleasantly, with the property selling for about $100,000 more. Gee, it’s amazing what buyers will do when they are told the truth: a stated reserve and the property on the market with the first bid –  and six bidders still turn up.  Bennison Mackinnon continues to sets the ethical standards for inner Melbourne auctioneering.

We only buy homes

Mal

Brighton East 8 Carrington: Auctioneer Danielle Martin. Passed In on a Vendor Bid at $1,000,000

This is an advertisement for James Buyer Advocates.

You may have noticed: the rules on homebuying have changed. This market is no longer the one that was on fire from May 2009 to April 2010. That was a market where you might have been up against five or six bidders at an auction. It may have been something like a gladiatorial conflict – but someone emerged a winner and everyone else left, bruised maybe, but with a sense of fair play.

In the second half of 2010 the playing conditions have changed completely. You may be familiar with the underquote, the vendor bid, the pass-in and the undisclosed reserve, but you’ll now need to get used to a whole new pricing game: the mysteries of the Expression of Interest, the Price on Application and the Buyer Interest campaigns. Forget known unknowns. We have now entered the world of the unknown unknowns. Be very aware – these new systems are not set up to benefit the buyer.

The Rules Have Changed.

Where do you even start with your negotiations?

And if you thought dummy bidding was outlawed, be warned that putting up your hand at an auction until you’re the last one left standing isn’t how it’s working any more. These days, even if you’re the winning bidder, you’re as likely as not to be entering into the shadowy world of one-on-one negotiations. It’s you the buyer, up against the seller and their agent. (And, inevitably, a mystery bidder or two.)

Armed with these warnings, you can try to manage your way through all this. Tutor yourself on the new buying systems. Bluff your way through. Save yourself a bit of money. Who knows? The selling agent will tell you what a great deal you’re getting – that’s their job. Fact is, we think you’ll end up paying extra – let’s call it a “learning fee”. It could be $23,000 – it could be $235,000. That’s a pretty steep learning fee. And that doesn’t include stamp duty, the possibility of reduced capital growth or the fact that maybe you just bought the wrong property for your family and lifestyle.

A simple truth: in this new but ever changing homebuying market no matter how good you think you are, if you have only transacted once or twice in the last 10 years then you are at a distinct and significant disadvantage to the man or woman across the table who has executed 10 deals in the last month and over a 1000 in their lifetime.

Another simple truth: knowing about the rule changes is one thing. Knowing how to deal with them to your advantage is another. That takes experience – a lot of experience.

The Rules Have Changed.

Allow us at this point to spruik our services. We have bought literally hundreds of million-dollar-plus homes over the past 10 years. We’ve bought through all sorts of market conditions. We know the agents – and we understand that their job is to get the best deal for their clients, while our job is to get the best deal for the house that’s right for you.

We know the tricks, we know how far to push – and when to walk away.

Engage us, and you will not only buy the home that you and your family really want – you will also buy it well, fully informed and at the lowest possible price for your risk profile.

Come in and talk to us and we’ll explain how our costs work, and why the way we work will not only save you the stress of making one of the biggest investment decisions of your life – it could also save you a lot of money.

Call us now to make an appointment on 9804 3133 as the rules have changed.

Hampton: 28 Amiens Street: Auctioneer Peter Kennett working on his beard. Hmmmm. Bought post auction north of $2,375,000. Bidderman 1.

Discussions this week with Robin Parker of RT Edgar Real Estate included the  firm’s initiative to disclose the reserve price at the commencement of the campaign of 12 Cowper Street, Brighton. Throughout the campaign,  Rowan Thompson (the auctioneer), advised prospective buyers that property would be on the market at $1,425,000.   Buyers were informed and it paid off.  Mr Thompson successfully auctioned the property, with 4 bidders and almost 50 bids, to successfully sell the property for $1,641,000.  Their forward thinking to disclose the reserve price to buyers from the commencement of the campaign, not only encouraged people to bid, it advised prospective buyers that if they did bid at that level and they were the last one standing, they would buy it.  On a day where pass-in numbers were higher than we are currently used to seeing, this strategy worked and it worked well.  Declared Reserves  a winner for both buyers and sellers.

Still on land sites or major renovations, the potential new home site at 76 Carpenter Street, Brighton, auctioned by Campbell Cooney of Hodges, saw 4 bidders again draw the price to a close at $2,220,00.   A strong result with the property calculated at a little over $2,600 sqm.   The large land sale further south, however, at 5 Rippon Grove, Brighton remains unsold passing in at $3,252,000.  There were still 3 bidders  on that property, and given it’s location, is sure to sell soon.  Another with 3 bidders,  also passing in, was 9 Jillian Avenue, Highett. Lack of bidders was not the problem on all properties.  Perhaps some vendor expectations are still rising when the market is not.  Of the 10 Bayside properties we covered, 7 passed in, one sold prior and two under the hammer.  There were bidders on all but two 65 North Road, Brighton – well sized home on low maintenance block and 35 Reid Street, Beaumaris a large family home in a great location.  Others passing in with one bid apiece were 17 Connor Street, Brighton East and 4 Smith Street, Hampton.   However, Jenny Dwyer of Hocking Stuart, again showed her skills, successfully negotiating the sale of 28 Amiens, Hampton.  A great family home in the Castlefield Estate, initially passing in for $2,275,000, eventually selling north of $2,375,000.

Another result from an expressions of interest campaign for Ross Savas and Stewart Lopez of Kay & Burton, selling a block of land in Mulgoa Street on Brighton’s Golden Mile,  for more than $4,000,000.

Definitely poor selling results this week.!  Were they due to the upheaval seen on the stock market on Friday, the quality of property, the Vendor expectation or reduced buyer interest.  Bidder man was still at 1.8 on the 10 properties we covered.  Perhaps the next few weeks will tell.

Happy Wife Happy Life

Brighton East: 17 Connor: Leigh Hallamore passes into a lone phone bidder at $2,125,000

Here is a property that prospective buyers will be thinking long and hard about – and they need to.  Although livable it is need of serious renovation – the original house / facade must remain as this is protected by a statutory planning department  Heritage Overlay.

Golf Links Estate is a much loved area by many – it is pretty and it has a strong unifying architectural style. Although a good land size here a lot of it is unprivate (taken up around the corner aspect). Big plus is access to north light and logically the rear extension should built along the south boundary to take advantage of this.

Sam Macaluso from Jellis Craig expects buyer interest to exceed $1.3m for 3 Orrong Crescent Camberwell, which is scheduled to auction May 1 at 10.00am

Design Smart

Adam

Here is a property that prospective buyers will be thinking long and hard about – and they need to.  Although livable it is need of serious renovation – the original house / facade must remain as this is protected by a statutory planning department  Heritage Overlay.

Moorhouse Street is one of Camberwell’s best – close to Camberwell Junction, leafy and a no-through road which minimises traffic. This is an ideal location for a modern family.

This concept seeks to re-develop and extend the rear section of the house to create a modern open plan area, while taking full advantage of natural north and western sun. Flow will be dramatically improved, and the first floor extended to the rear, unaffecting the facade. The key to a project like this is to make the rear extesnion or new building works discrete from the street – in short a old house which is new inside. This will make the approval process from council as seamless as possible and your captial investment will be protected as much as possble – no one likes an edgey modern design dominating a cute period home. First impressions, particularly in real estate – really count.

This project is a serious one, but the end result if done right will be a successful one.

A question we get asked all the time from our clients  – how does one even start to think about such a project?

In order, here are some basic tips  -

1. Before scribbling on a floor plan or even star-gazing,  get some advice upfront (best to be done on-site) from an architect, and/or an independent heritage adviser/town planner;

2. Have a pre-application meeting with council’s Planning Department and Heritage Adviser;

3. Consult with your architect / quantity surveyor or your preferred builder to get some ball-park costings.

Heather Elder from Marshall White expects buyer interest to exceed $1.6m for 8 Moorhouse Street Camberwell. which is scheduled to auction March 20 at 11.30am

Design Smart

Adam

Strength of Character: Quietly in the background Andrew McCann of Bennison Mackinnon is bringing back common sense and decency to the Auction process.

It’s 6pm Saturday and the James Clearance Rate for million-dollar-plus auctions is 83 per cent on the 24 auctions we attended today.

The big news is on a very large day for auctions the bidder numbers per auction has actually risen dramatically to 3 per auction despite the interest rate noises. This is substantial and indicates to us the market is still moving in an upwards direction.

Chinese buyer interest definitely appears to be waning at present.

This week, we return to the issue of quoting and auction procedures. We would like to share a story that we believe has a message about ethics and about doing what is right. The star of this story is Andrew McCann, who manages the sales staff at Bennison Mackinnon. He is a driver of transparency and truth and he is a beacon in the real estate industry. Why? Because Andrew and Bennison Mackinnon have said “Enough is enough” and they have publicly stated that underquoting is wrong. Wrong like dummy bidding was wrong. Andrew and Bennison Mackinnon have made an attempt where others have not.

Andrew has driven Bennison Mackinnon’s PUBLIC policy of trying to, at all times, declare a quote that is representative of interest and has the vendor reserve within it. In doing so, they are returning us to the good ol’ fashioned fair dinkum Aussie auction days (thankfully without dummy bidding).

As you may or may not be aware, there are two types of auctions in Melbourne: yes, two, not one.

A. Bid to Negotiate auction
B. Bid to Buy auction.

They employ very different sales methods but both are called auctions.

Bid to Negotiate Auction
Marshall White, Jellis Craig, Hocking Stuart, Kay and Burton, JP Dixon and RT Edgar, to name a few, run auctions or selling campaigns for the right to negotiate, where they have no written price and no guidelines and/or no reserve declared within those guidelines. You bid for it to be passed into you or until you are told otherwise.

Bid to Buy Auction
Bennison Mackinnon auctions are auctions to buy and there is a price guide and reserve within that price guide. If you pay a set price, you buy it!

Is one right and other wrong?
No, both are legal. We are buyer agents; it is not our role to force down the throat of sellers or selling agents a message about how to run their business. It’s just that the majority of problems and damage to the industry’s image is caused through the Bid to Negotiate auctions as buyers do not like them and some are turning away from them when they have a choice eg Bid to Buy or Private Sale.

Why do buyers dislike Bid to Negotiate Auctions?

1. There are no written guidelines put out by the agencies on how Bid to Negotiate auctions work – they do not understand the process.
2. Bid to Negotiate auctions are open to the greatest misunderstandings when you get into the realm of verbal quotes and verbal reserves. After all, the contract you agree to when buying isn’t verbal and that is for a very good reason: to help prevent misunderstandings.
3. Bid to Negotiate campaigns waste time for many buyers, as they have no initial idea of affordability. Most buyers are time poor and their property searching time is valuable.

Which works the best? Bid to Buy with quoting and declared reserves or Bid to Negotiate with no reserves and no or misleading quoting?

Statistically, it seems impossible to prove either way - what is the yardstick?

Which one should you choose as a buyer?
Until recently, in Boroondara and Stonnington in particular, you had no choice, so you had to look at the home first and then manage, as best you could, the obstacles put in front of you. You only had Bid to Negotiate Auctions.

Which one should you choose as a seller?
If I was a seller, I would choose the system that maximised my price, within ethical guidelines. Either one is still your choice.

We don’t want to attempt to hide our bias: we are pro-openness (Bid to Buy with quote guidelines and reserves within those guidelines) for the majority of auctions; because we think truth is the best elixir for deals in our industry, not misunderstandings. Our agenda is we represent buyers – yes – but if you dismiss the arguments for and against as simply “Yeah, they would say that as they are buyer agents”, or because you think we favour Bennison Mackinnon, then that is your opinion. But, as a seller, you may have missed the main game. Trickery, misrepresentation, even ethical Bid to Negotiate does not seem to have a proven superiority over transparency and, in fact, there may be mounting evidence that you get a weaker price and less buyers to your door as a seller than Bid to Buy.

The question to sellers is do buyers perform better, eg will you get a higher price, when buyers are not informed or misinformed?

We as buyer agents buy a lot of homes – how does that work? Part of it is we inform buyers in a timely manner what they may need to do.

If there are the stats out there that show that buyers perform better when misinformed, please send them to us and we will publish next week, next month, next year.

We feel that, overall, the auction system is a superior way to sell when there are multiple buyers. This article is not about auctions per se; it is about the type of auction conducted.

Most people are aware of the Bid to Buy auction system: a home is quoted and the reserve is within the quote. You carry out your due diligence as a buyer and you bid if you think the quote is reasonable and, if you bid high enough within the quote to reach reserve or you bid over the quote, then you are the buyer. Yes, there still can be some shenanigans but they are few and far between. No system is perfect.

But it’s the Bid for the Right to Negotiate auction that we are examining in detail here, as this type of campaign seems to be the one causing the most angst and is more open to problems.

Firstly, Bid to Negotiate on some properties does work (after an auction pass-in, negotiation or in some cases interrogation can bring in thousands of extra dollars and it is the sole reason why we are engaged on some auctions).

We are not calling for it to be banned; with some sophisticated, high-end, or professionally represented buyers, Bid To Negotiate auctions can be most effective for the seller. We are just pointing out some of the “unloved” side that may in many cases hurt the overall price a seller gets.

In many cases, it is difficult for the buyer but it is also not in the seller’s best interests, as this Bid to Negotiate system has downsides for sellers that they may not have considered.

With a no guideline/no reserve “Bid To Negotiate” auctions, you alienate many buyers. What you, as sellers, are telling buyers, is possibly:

1. You don’t think we can handle the truth – meaning there is a reserve but either it is too high for buyers to contemplate or buyers are not sophisticated enough to be told it. Lovely, a buyer has $2 million to spend and the selling agent is telling them that the reserve may scare me so they won’t tell the buyers what it is.
2. You don’t know value yet: great, a supposedly professional selling agent has conducted a four-week campaign and has not been able to ascertain any value parameters for the property. Does that not speak volumes about the level of trust or skill between that agent and the buyer? Sellers, why are you hiring these people?
3. You are greedy. To sell your house to a buyer, you are going to squeeze every last drop out of the buyer. You are going to make it so painful that I almost don’t want to buy this house (more buyers than many sellers think simply walk away under these conditions). It is true that fear of loss is a driving force in our lives. But there are two other powerful forces from buyers: the fear of doing something stupid or that they will regret, and karma. Some people don’t act because they are scared of making a mistake and some people don’t want to buy a home that has bad deal vibes. Within the past month, we have had two homes that our clients were the highest bidders on but did not buy. Our clients have moved on and, in one case, the home was sold for less and, in the other case, the home remains unsold.
4. You still want more and that is your right. Fair enough.

That mistrust is what you, the seller, choose, when you run a Bid to Negotiate Campaign and it permeates through many things. There can be a real cost to you the seller when you hire an agent to conduct a less transparent campaign.

1. First, you get less qualified buyers through your door (granted this last few weekends makes a mockery of this – they are going through everybody’s door – but in normal situations). We know this is denied by any non-quoting agent, but we dispute this- many buyers simply do not look at your property if it has not got a quote on it. Our IT guy, Michael, just bought a home in Nunawading and he did not look at any properties that did not have a quote.
2. Sellers, ask around at your dinner parties – are people seeing more auctions where there is no bidding at all? Why is that? When we first saw this, we were puzzled ourselves but we delved further into it. There are some agents who are running auctions using this Bid to Negotiate method that are so low on the buyer trust scale that buyers just cannot bring themselves to bid and some, at the last minute, bid afterwards but many just simply walk away.
3. Quality Restaurant: Are you happier to go back to a restaurant that provides good and friendly and honest service or would you rather return to a restaurant where you are told it’s $15 for the scallops – they are good but when you leave, you are charged $25 instead. What about if you found another restaurant next door that tells you their equally well-cooked scallops are $25 and actually charges you that?

Running a Bid to Negotiate auction does have the potential for upside, however it also has the potential for downside when you consider on all properties there is only one best buyer and by your choice of auction you the seller may have alienated them.

Next step: the Negotiation (Ethical) / Interrogation (Unethical) part of the Bid to Negotiate Auction.

Fair, tough negotiation is totally respected by buyers and sellers alike. However, are you, as “squeeze the lemon dry” sellers, happy to condone any form of post-auction INTERROGATION?

I mean, nobody is going to shed any tears at a post-auction negotiation if I’ve got five heavies breathing down my neck and fair enough.

But if you are a “squeeze the lemon dry seller” with a Bid To Negotiate campaign and an unethical selling agency, what rules are in place for the post-auction interrogation. Put the shoe on the other foot: what if it was your 28-year-old daughter who was looking to buy her first home? She got a pest and building inspection ($600 to $700) and legal check and was told the home was $800,000ish and also got her finances in place.

She turned up to the auction and bid $845,000. The property is passed into her and she is taken inside by three men in suits.

There is no female present and no water is offered and she is told firmly that if she doesn’t pay $1.05 million, then her dream home will be sold to another buyer waiting outside.

She feels totally intimidated and she was given no warning of this – she thought she was going to a fair dinkum auction, not an interrogation. If she knew it was going to be like this, she may …………

How long does this go on for? PRESSURE. PRESSURE. PRESSURE. Is this a form of assault? Is this harassment?  What happens if she agrees to something she can’t afford because she is so intimidated (deliberately)? Is this coercion – is the contract still valid?

Can she sue you the owner or sue the agents? Is this a legitimate contract?

Should she have got a buyer advocate? Not the real question. The real question to you, as sellers, is: is this right? Is this particular Bid to Negotiate auction how you want to be represented?

With ethical sellers, you now have a choice. Bid to Buy Auctions with ethics. Buyers may still have to face very difficult negotiations with Bennison Mackinnon, but they also have a choice in that they can pay the reserve or asking price.

And, please, we have never witnessed or heard about any of the above intimidation tactics happening at any Marshall White, Hocking Stuart, Jellis Craig, JP Dixon, or Kay and Burton auctions. We have made up the example to illustrate a point about extreme ”squeeze the lemon sellers” in an unregulated and unethical Bid to Negotiate auction. In the above instance is it OK for a selling agent to say I was only operating under sellers instructions.

A strong argument as to why agents don’t put a quote/reserve out; is that it limits the buyers.  We agree but the reverse is also true. We have seen no provable evidence that misinformation or no information outperforms, across the board, genuine information.

We argue with buyers saying you sellers and selling agents are not idiots; so now we ask the question of you, do you think that buyers are idiots and don’t fight back against these tactics?

There are a number of strategies such as:

1. multiple bidders,
2. price with conditions, and
3. raise, raise and then lower strategies. Try getting slightly unreasonable with us and we think we are the only buyer – we will rip back a lower offer than before – that’s right, we go backwards – we will and we have – it is just that maybe your selling agent has disguised it and/or we are very polite about it.

I think some people misunderstand our role or our demeanor at James Buyer Advocate at times. Yes, we are polite and, yes, we have tremendous respect for the negotiating abilities of agents at Marshall White, Jellis Craig, Kay and Burton and so on. But we are not doormats on the buyer’s behalf. We have represented hundreds of buyers and most of the deals are done with respect, aided by a relationship and on a win-win basis; however, the auction practices of no written quote guidelines related to the reserve are counterproductive to our industry. We don’t just “whinge” about them, we develop strategies to deal with them. And so do many other buyer advocates and experienced buyers.

Sellers, you may not believe this but it “ain’t all about the money” for many buyers and we have always thought, and been prepared to pay, the strongest prices when the light is obvious at the end of the tunnel; ie when it is on the market or there is a clear price and rules. We often have two prices – one for openness and transparency and one for smokes and mirrors – guess which one of the prices our clients give us is the higher?

Our clients and many buyers can handle the truth when it is put forward.

We applaud Andrew McCann and Bennison Mackinnon for their ethical and also smart business approach in Bid to Buy auctions with quotes and declared reserves. Is your selling agent offering you the choice of quotes, reserves within the quote to bring more informed buyers to your door or are they telling you that the only way to run your auction is to keep everybody in the dark?

Buy Well

Mal

PS Andrew McCann 0414 643 744 or any other Bennison Mackinnon agent 9864 5000; ring them and hear what they have to say when you are about to list your home for sale.

Brighton East: 1 Regent Street: John Pollard of Woodards. Crowd 100. 3 bidders. Bought $1,853,000

Toorak, 78 Clendon Road: $4.35 million. Paul Castran as the buyer would see him!

It’s 7pm on Saturday and our James Clearance Rate is 82 per cent on the 22 auctions we attended and reported on. Need we say any more – the market continues its strength and subsequent price rising, despite being in an increasing stock level environment.

Flashback: our report from 22 November 2008: Today, only two of the 13 auctions we attended sold under the hammer. The weakest market is the $1 million to $4 million market. What a difference a year makes. In September 2009, the strongest segment at present is this same $1 million to $4 million market.

Summary of today’s Market Insight:

1. The James Connell State of the Market Interview.
2. Repeating 2007 and The Chinese Influence.
3. Buyer Stress.
4. Re-think rather than Give Up.
5. Control Price – Neighboring Properties Discount.

James Connell, Managing Director of Marshall White, one of the two dominant selling agencies in Boroondara and Stonnington, talks to Market Insight this week. James has 30 years in real estate (a slow learner) and has co-owned Marshall White, with John Bongiorno, since 1993. The water-cooler talk within our industry is that he has respect among his troops and his support is very hands-on, even when it was a bit tough. He has given our company solid helpful advice over the years and, while buying off Marshall White is never overly easy, we have always found their salesman quality runs to the bottom and this must ultimately be a reflection, in part, of his leadership.

Mal: Where is the Boroondara/Stonnington market going?

James Connell: Under $1 million, I think the market has peaked. The $1 to $4 million market, I think, hasn’t peaked and there is some steam left. Over $4 million, the air is pretty thin and still minimal activity.

Mal: Anything else?

James Connell: Most secondary properties, eg main roads, next to commercial, have, up till recently, taken a pounding; however, they are now gaining momentum again, along with the rest of the market.

What are you saying?

There are times to buy secondary properties – that time has passed. Buy quality – you will need to wait for the next downturn to again buy most secondary properties well.

Anything else?

Period homes in that $1 to $4 million market (which, in your past Market News’ articles, Mal, you have correctly identified as slow last year and hot this year) are very, very strong and, in a natural cyclic movement, we are finding Armadale is going better than Malvern.

What do you expect until the end of the year?

No change in the current strength of the market. Our company’s auctions are 20 per cent down on the 2007 peak (120 to 100) but, looking positively, we are 20 per cent up on last year.

What about bidding? What are you seeing?

Most of the same ol’ same ol’. People who don’t normally do it are taking advice from people who did it once 10 years ago. Giving your company a plug, Mal, and other professional buyer advocates – I really don’t know why people don’t pay your fee and hire some expertise. It is not as easy as people think and, under pressure, people make mistakes. However, the auction system, when run well, is still the most transparent and fair way to buy/sell a home.

What should buyers do if they are going to do it themselves?

Pre-determined figure. Actually bid and then buy it or walk away at a pre-determined figure (or maybe a little bit more).

Both laugh.

What about quoting: I have always thought you guys were wimps not putting some sort of figures out there.

It is not in the vendor’s best interests to do so, Mal. We think quoting puts artificial ceilings on homes. Also, as you well know with your Control Prices, you don’t get it right all the time and, in fact, in this market, we have media lag times for advertising of at least 14 days and things can change a lot during that period.

But you say at the door what the price may be?

That is buyer interest and we can change it and explain it.

Aren’t you alienating some buyers who simply won’t bother if they can’t work out price?

I firmly believe in this market that we are not missing any serious buyer enquiry.

Chinese buyers?

Major, major effect on our market. 25 per cent of our sales in Boroondara and 12 per cent in Stonnington. And I think Chinese money is here to stay. Chinese buyers are not scared to pay what they need to and, with government changes, it looks like this solid migration will continue. Mal, Chinese people have effectively kick-started our economy and underpinned all our housing values in inner Melbourne. We have a lot to be thankful for and I believe their influence on price has been around 10 per cent. Chinese people are buying $1 to $4 million homes, well positioned and good land and, with the FIRB changes, they have moved from buying apartments (which is very quiet – nowhere near 2007) to land.

And what else have you seen in the market?

The complete collapse, due to lack of success,  of Expressions of Interest Campaigns.

Why?

No standard rules, in fact no rules, and agents are just as confused as the public. That is our fault. Also, it’s human nature for people to only offer what they want to, not what they have to.

Please expand.

An expression of interest or auction is only a conduit, not a solution. The solution is good agent work. However, as a conduit, Expressions of Interest is not working and not allowing a good agent solution. Buyers don’t understand it (as many agents don’t) and buyers certainly don’t trust it.

What makes a good auctioneer?

Empathy with crowd – one with the crowd – can settle buyers and raise their excitement at appropriate times.

Premiership?

My team is your team – the Pies and Dane Swan for Brownlow.

Thank you, James.

My pleasure and good luck tomorrow.

(This interview was on Friday)

Continuing on with James Market Insight – Repeating the Past of 2007:

Flashback: October 2007 James Market Insight: …These large increases as per most of the rest of the world are largely confined to inner suburban quality properties. Land itself, meaning land where homes can be pulled down, is particularly well sought after in all Melbourne Bayside and inner eastern suburbs. What is driving the market? It is being driven by overseas buyers, stock market wealthy buyers, buyers who have seen large increases in their own properties and buyers who are confident in their future.

Back to now in September 2009:

The question I get asked the most. Why is our market so strong? It was initiated by demand from Chinese buyers. It started as a trickle in April and now the floodgates are opening, as evidenced by such comments as those from Pat Dennis of Jellis Craig, who, when we were on the phone, said his last 13 sales in Balwyn and Kew had been to Asian/Chinese buyers. Both Jellis Craig and Marshall White – the two dominant Boroondara agents – state that around 25 per cent of all their sales are to Chinese/Asian buyers. The market stock levels are reducing further, as most Chinese buyers do not have homes to sell – or do not wish to put other homes back into the market for sale.

I’m not saying this is a concern; I’m simply saying that this is a fact. It is government policy that is encouraging Chinese people to buy up large amounts of land here. Good on them – in many ways, while there may be some concerns now and in the future re price increases and stock tightening, if it wasn’t for Chinese money earlier this year, we may now be in a far worst state economically than what we seem to be.

However, we are a micro society compared to the wealth of China and maybe some thought needs to be given to the long-term effects of such amounts of money coming into the local housing economy.

Boroondara’s activity has placed price pressures on the nearby Stonnington suburbs of Malvern, Armadale, Toorak and South Yarra and prices have continued a steady rise, as more Chinese buyers buy more properties.

Bayside suburbs have not yet experienced the Chinese influence to the same extent and, consequently, have not had as sharp an increase in housing prices.

The biggest issue out there at the moment is increasing BUYER STRESS or panic or feeling of hopelessness.

If the market continues like this, then you the buyer have PPP adjustments to make or else you will not meet the market on Price, Property or Position.

While we encourage the buying of quality properties only, we don’t encourage paying more and more and more. There comes a time where you can either stop, (we have never found that a successful strategy, as most who stop are often too late restarting and miss the market again) or re-think. What we think works is a re-think. Adjust your Property or Position while still being a bit flexible on Price, but, if you can’t keep up with the market, then firmly focus on Position or Property adjustments. Rule of thumb; it is usually (but not always) preferable (long-term financially and emotionally) to adjust Property (land + building) rather than Position.

In September 2009, if you have $1.5 to $2.5 million in Hawthorn and you are looking for a family home, then prices like Urquhart Street say you have a lot of friends also looking for a home but little to choose from. If you can’t afford the $600,000 jump, then why not consider Eaglemont or Kew or Glen Iris? If that Positional change does not excite you, then why not consider a 1980s home or a period home that is a bit dated rather than a new home now.

Your mortgage levels need to be considered. If interest rates are about to be increased, then bigger mortgages at higher rates will soon take the gloss off your new home joy. Buying rubbish is not a suggested solution either, as we have often talked about the GAP LAW – time does not heal bad buying decisions. And James Connell confirmed above that the time for smart rubbish buying may well have passed.

So, if you can’t stop or get bigger mortgages or buy rubbish and be happy, what can you do?

Why not consider smaller land size and a smaller home (if that is possible)? It still makes sense if you keep Land Content to Value Ratio in the 70-plus percent range - even on some smaller block sizes. Albert Park (block sizes around 150-200 sq metres) as a whole is testament to this. You do have choices rather than give up or kill yourself with a huge mortgage – you can rethink.

In summary, some “rethink” observations:

1. Stopping or panicking usually isn’t a long-term solution.
2. Be careful with major positional rethinks. For example, do you really want to live in that area or have you just found a house you can afford? We feel yes, connect with the PROPERTY, but you still need to connect with the POSITION.
3. In property, it is position first, then go for a home with good bones, even if you can’t afford the “skin” right now.
4. PRICE is important as to paying market and your ongoing affordability.
5. And if all else fails, you can always get a new spouse with more money!

Now, a word on our James Control Price performances. Got a few “right” today and also a few “wrong” Another “wrong” by a million today and this time the agent was right. Happy to politely bag Jeremy Fox at times, but this time he was spot on and I got it very wrong. I used the James Control Price to say land at 6 Kensington should be worth $4500 per sq metre, or around $4 million for the dirt and $1 million for the home = $5 million. Jeremy said I was “on drugs” with that price, as the adjoining flats were hurting this home. He was right. It sold around $4 million. No excuses – he was a lot more on the money than our Control Price.

This neighbouring property discount was further backed up by 78 Clendon Road Toorak, which also had an incredibly dominating block of flats as a neighbour (you can see it in the marketing picture). 1143 sq metres x $4500 per sq metre plus $600,000 for the home (it needed major refurbishment) equals $5.7 million. Today, under the hammer, it sold for $4.35 million. So is the land worth less or do we keep the land the same and apply a negative emotion discount? Either way, just like irregular blocks or main roads, neighbouring properties with serious issues can present significant discounts to the end result.

But, please, I am not saying every block of flats presents an issue. We recently bought a beautiful period home that was next to a block of flats but those flats did not present an overriding privacy issue that it seemed to in both of today’s examples.

Finally, on this matter, as we keep saying, the air is still thin at $5 million, despite the pumping along at $1 to $4 million. Here the buyers do have more choice and they demand “perfection” or they discount or don’t buy.

Lead Photo today was a brilliant one by photographer Tom Wilson.

Buy well and make good decisions

Mal

Hawthorn: 27 Pine Street. Maurice Di Marzio and Lewien Gallus of Jellis Craig looking for bidders but none were found. Passed in for $1 million.

It’s 6pm Saturday and the James Clearance Rate for million-dollar-plus auctions is 66 per cent on the 18 auctions we attended.

The market is gyrating and still full of some incredibly strong sellers’ results but we feel it could be turning, or at least altering the incline of its recent ascent. Why? Stock levels are definitely increasing; the interest rate talk by Glenn Stevens is having the desired effect and buyers are definitely speaking to us in a more rational tone than even a few weeks ago. Bidders and crowd numbers per auction are down. Today, Bidderman was at 1.88 bidders per auction, having peaked at 3.2 a few months ago.

Wormy (James Anecdotal Price Graph) is moving again, also we have a Chinese translation, both to the right of this article.

Are we saying the market is going downhill? No, there is no evidence of that. But there is evidence of more stock, fewer numbers and fewer bidders per auction and, if that trend continues, there will be more pass-ins and, in time, lower prices. So spring may bring some joy to buyers, with more options and less frenzied buying. Here’s hoping it does and, as we said previously, here’s also hoping this is not just a blip or wishful thinking on our part. The market does need some balance. Stay tuned.

This week, we are going to look at bidding. At the outset, it’s worth restating this truism: you need to bid to buy.

You might think this is obvious but we’ve seen some interesting occurrences in bidding at auctions in the past week and we’re trying to work through the logic or strategy behind them. Perhaps there’s a new bidding strategy that we’re not aware of?

For example, we witnessed one borderline late bid and heard about another; the one we witnessed was at 2 Cole St Brighton. Then, last weekend, there were no bids at the auction of 26 Lambeth Avenue Armadale, yet it sold post-auction after three parties became involved in a private three-way post-auction contest.

We don’t understand the thought process behind these “strategies”. As four of the six bidders in the above examples were unsuccessful in purchasing, we’re not sure if any selling agents, other buying agents or seasoned observers understand it as well.

Let’s look in a little more detail at 26 Lambeth Avenue Armadale, which was sold by Kay and Burton (Ross Savas and Andrew Sahhar). Kay and Burton have a very successful style of quoting, or pre-auction price framing, in that they don’t quote or talk specific prices. They refer instead to buyer interest and move buyer interest levels towards their target, and do it very successfully. The “quoting” most times sounds credible and we find that they make most buyers feel comfortable with their consistency and patience.

But we don’t believe “quoting” was the issue at 26 Lambeth. In our opinion, Kay and Burton would have “educated” most buyers to around $2.5 million – they would have discussed the sale of 40 Lambeth earlier this year for $2.8 million and said that was a possibility but unlikely, as there were exceptional circumstances involved; and they would have gently moved serious buyers away from thinking low $2 millions was a goer, unless the world changed as Kay and Burton knew it.

So, when auctioneer Gerald Delany opened the bidding at $2.25 million, we would have thought that most buyers who had any contact with Kay and Burton would have thought that price was fair.

Why did nobody bid? Well, to know for sure, you would have to ask the bidders themselves.

We can understand waiting if Gerald opened with a $2.5 million bid. That would have been a high start, implying a challenging vendor reserve, and we would also have waited in those circumstances. Or we could understand hesitation if Gerald bid $2.25 million, a bidder said $2.275 million and then Gerald responded with a vendor bid above that. We also may not have followed above a vendor bid in those circumstances, especially if the vendor bid had a fair gap from our thoughts on “price reality”.

Maybe all three bidders were nervous; maybe all bidders were waiting for a sign. Well, two of them got the sign, after they were unsuccessful post-auction.

We’ll state it again: you need to bid to buy.

Buying the right to negotiate with your bidding is, in our opinion, a sensible thing to do (up to a point, of course). We find that ethical agents respect that exclusive right to deal. We’re not saying agents won’t apply pressure or talk to others, but, if you bid and it’s passed into you, we have found that you will get more of a shake at buying than if you didn’t bid, or tried to be a smart alec. Pass-in is not a dawdle; it will still be a stressful melting pot of emotion and pressure and you should consider professional representation if you are up against a Nick Elmore from Jellis Craig or a Sean Cussell from Marshall White or, indeed, a Ross Savas from Kay and Burton, to name a few. Nonetheless, you are still in the box seat compared to those standing outside.

Late bidding is a different sort of strangeness. 2 Cole St Brighton, which sold for $7.3 million, has received a large amount of publicity for what seemed to my eyes and ears (I was a few metres away from the auctioneer) a clear case of a bid coming a fraction of a second before the auctioneer’s hand hit his other hand and he said “Sold”. It was not auctioneer Julian Augustini’s fault: he called for all bids, warned bidders he was about to shut it down and then attempted to. Because there was clearly a dispute, he had no choice, in my mind, than to reopen bidding, in line with his comments in the pre-auction banter that, in the case of a disputed bid, he would determine the next step. Working for the vendor, believing the bid was unbelievably late but actually just before the word “sold”, he acted in his client’s best interest and, under pressure, achieved a higher amount. But I digress.

Our issue is not with the bidding but the late bidder. Why would you bid so late? At $7.3 million, you are not a first home buyer and, unless you just won Tattslotto, you have some experience with money. What was the logic? Was it impulsive (which is dangerous)? Was it inexperience (then consider engaging a buyer advocate)? Or was it a strategy (unsuccessful, as the late bidder missed out in the end anyway)?

In line with our leap of faith last week, you need to bid to buy and what is wrong with bidding sensibly?

Many people fought hard to get a transparent buying system in 2003 and we have the most, not the least, transparent home-buying system in the world at auctions, so why not participate?

If quoting could be fixed - and hasn’t the heat and anger gone out of the market now that agents have “noticed” this issue – if we could get that right, we would have a brilliant system (if you believe in capitalism). But it’s pretty good anyway, so, bidders, why not bid? Bid and if you haven’t enough, then you can go to another open for inspection early. We’ll be frank again: we are not that good that if it’s on the market and we’ve got $2.5 million and the other party has $3 million that we will be successful. There are ways to have purchased this home, but at the on-the-market stage, under these circumstances it’s too late. Get on with it or get to the footy.

Even if you bid, you can’t get them all. Two weekends ago, we bought two from five. Last weekend, it was three from five, and, next weekend, we have three auctions, so who knows for sure. The market still has plenty of heat, even if it may be changing direction or, at the very least, the angle of ascent.

So, how can you maximise your chances at auction? Do you bid firmly? Bid loudly? Do you wait until the last minute? Do you not bid?

It’s all of these, and none of these. It’s what is best on the day. You do need to have an insight into how things work at auction to avoid major errors and you can get some of that by attending a number of them. Other things like pass-in strategies and bold bidding can also be learnt but it may be very expensive for you to do so, as it really can only be learnt from practical experience (possibly big mistakes).

Like many things in life, which in fact are 10 per cent inspiration and 90 per cent perspiration, bidding at auctions, in our opinion, is no different. It’s 90 per cent perspiration, or preparation, and 10 per cent inspiration, or insight.

You can hire the 10 per cent insight. Get an experienced buyer agent and they can also perform the perspiration bit, or you can do the perspiration yourself and hope the inspiration and insight comes.

Here is an example of how the 90 per cent perspiration/preparation can work for you. We’ve changed details to protect our client’s privacy, but here’s a flavor of what is involved in preparing for auction. This is real and happened last weekend.

The client initially contacted us for some assistance to find good selling agents. I said to my colleague Adam “Put them back a bit until we clear the forthcoming weekend of auctions.” But Adam ignored me, as many people do, and met the person and found that they were also keen to move. While chatting, the discussion moved to a property that we had rated highly but did not have a client on. The person, who then became a client, visited and fell in love with the property. In four days, we had two night meetings; arranged full ratings report and pest and building inspections; had the legals checked and negotiated the removal of two special conditions requested by the vendor’s lawyer; organised a lower deposit to allow the client to bid with surety; arranged for settlement terms outside the advertised terms (to help with the client’s house being sold); spoke to other agents in the area to get pricing opinions (were we mistaken on good buying as our opinion and quote were miles apart?) and explained architectural options for a possible renovation(it is period, there is heritage, it needs a reno and there is a tree and it may cost you…). Sound daunting? It wasn’t over yet. On the morning of the auction, while I’m preparing for bidding with one hour to go, Adam is having coffee with the client, moving that client from, as it turned out, third to first place – which was not that easy, bearing in mind that all these discussions were hypothetical and at a level 50 per cent above the agent quote, and in writing and open for later scrutiny by anybody. We were successful with less than 1 per cent to spare and less than 1 per cent above second place and less than 3 per cent above third place and more than 50 per cent above the quote. It is a great home and a very solid long-term buy.

I repeat that our “strike rate” of the last 10 in two weeks has only been 50 per cent. so this is not a claim of perfection; it is stating, in our opinion, what good auction bidding is all about and that is rarely some tricky move. It is about preparation and experience and you need to prepare (CAN – Clarity, Assess and Negotiate – to make sure it’s right for you), you need to turn up and you need to bid.

You need to bid to buy.

Good decisions and buy well

Mal

PS Sunday Morning: Ran into Hocking Stuart’s Andrew James at the bread shop and asked him about 18 Van Ness Glen Iris. No bids at auction – 4 people approached him afterwards and 2 buyers “went at it” post auction. I’m sorry guys we don’t get it – why not bid at auction (if the price is reasonable) with the transparency and protection and “box seat” it offers – what are we missing?

Kew, 61-63 Alfred Street: Huge crowd to this Marshall White auction. Six bidders and sold for $4.85 million.

It’s 6pm Saturday and the James Clearance Rate stands at 59 per cent on the 27 auctions we attended. Yes, a drop-off from past weeks, but there should be a mop-up over the next week and, if there is, then it’s more of the same in a warming market.

Please note James Market News is now translated into Chinese by Su who now works with us and can be viewed by clicking button to the right of this column.

We think the issue of the moment is agent quoting, as highlighted in our Sunday Reflections article in last week’s Market News. Agent quoting is a perennial issue but it will become a bigger issue if the market continues to warm up.

Agent quoting is an issue that excites strong feelings but, without getting too emotional about it, let’s look at the issues and try to help you, as a buyer, understand why it is happening and how you can manage it.

Underquoting usually occurs at auctions because many agents believe that the old adage of “Quote ‘em high, watch ‘em die and quote ‘em low, watch ‘em go” is the most effective way to protect their vendor and get a deal done.

Overquoting in private sales occurs almost exclusively because the seller wants too much for their home and that occurs because the agent has highballed the owner to get the business or the vendor has got to a highwater mark all by themselves.

Some agents are now listing ranges for private sale, eg $1.3 million to $1.45 million. I’m not sure how that works when it’s not actually for sale if you offer $1.3 million.

A new quoting minefield is Expressions of Interest. Some agents feel it’s technically not misleading if you don’t write the quote out but whisper it under your breath.

Accurate quoting occurs when you have a genuine vendor and an experienced ethical agent who, for a private sale, lists a realistic sale price, possibly around 5 per cent above the mark that he or she might get from a keen buyer and/or allows for some negotiation if a buyer is close to the asking price. Accurate quoting in auctions occurs when the vendor’s reserve is within (not 10 per cent above) the quote range and that quote range reflects buyer interest.

So what is an agent quote? That, my friends, is the $64 question. Nobody knows for sure. Read through the Consumer Affair Victoria guidelines, which are well intentioned but have more loopholes than Grandma’s crochet, and you are no clearer. Is an agent quote:

• what the seller or vendor wants?
• what the seller or vendor will take?
• what the agents think buyers will pay?
• what the agents hope buyers will pay?
• what offers they have had?

Truth is, nobody knows, as it can be any, and all, of these.

You can have a vendor who wants $2 million, will take $1.6 million on auction day because the banks are pushing them, has refused a buyer offer in the first week at $1.75 million and somebody saying they may pay $1.9 million. In this situation, what does the selling agent quote?

Indeed, why quote at all? Well, it’s human nature to ask “How much?” and a selling agent who won’t say looks mighty stupid, so most nominate a figure. Many agents do say a figure to guide, others say a figure to deceive and some say a figure simply to appease. Please many selling agents are well intentioned but their mindset is to quote conservatively.

Should we even worry about accurate quoting? Good question!

In Victoria, the laws for homebuyers are incredibly weak, despite a house being the largest asset most people will buy in their lifetime. Consider this:

• if Myer advertised fridges at $1500 to $1700 but in fact only had fridges for sale at $2100, what would Channel Nine’s A Current Affair say?
• if you buy an apple full of worms from a fruit shop, in most circumstances you will have more recourse to fix that problem than if you buy a home full of termites.
• if you buy a second-hand TV at the advertised price and it fails to turn on, we think you have the Trade Practices Act and the Small Claims Tribunal to help you fix the problem, yet, as a buyer, if the roof caves in the day after you move into your newly purchased 10-year-old home, there’s not much you can do except pay to fix the roof.

So, in Victoria, unlike almost anywhere else in the world – except, say, an Afghani bazaar – it’s caveat emptor (buyer beware). And this lack of protection for buyers extends all the way to Agent Quoting. Although you may think there are laws to protect buyers from bad quoting, they are also, like grandma, toothless. Each Saturday, there will be breaches of the government guidelines and there probably won’t even be a letter of warning to an agent, let alone a prosecution. For example, the CAV guidelines specifically prohibit quoting such as “600+”, but grab a copy of The Age and count how many times you see such examples.

Here is an example of how flexible the quoting laws are when applied to a real-life situation.

27 Oak St Hawthorn, auctioned by RT Edgar’s Jeremy Fox. Jeremy is a good agent, we do like him and he gets deals done. Jeremy’s quoting is, in some instances, courageous and, in other instances, challenging. Many sellers hire him – they want him to sell their property for the maximum price. 27 Oak St Hawthorn, which we had an interest in, bid on and didn’t buy (absolutely fair enough – it’s all part of the auction game), had a pre-auction quote of $1.8 million to $2 million and, in fact, this quote was repeated at the auction when Jeremy called for an opening bid. Bidding started at $1.8 million and stopped at $2.11 million. The property was passed in and we were told two days later that the reserve was $2.5 million. Cutting to the chase, this property was sold on the following Wednesday for $2.15 million. So has Jeremy done anything wrong? In his mind, no, and, even though I’m a loser on this one, I would have to agree. Under the rules, it seems he has not.

27 Oak Street had a sale quote around the eventual sale price (within 10 per cent). Comparables of sales of the past few weeks, such as the two Mary St Hawthorn homes and the sale of similar land size property at Blytheswood Kew, prove that the quote was reasonable. Now, if you think a fair price for the property is just over $2 million, then a quote just under $2 million is regarded as within industry standards. What about the vendor reserve at $2.5 million? Are you allowed to quote below the vendor’s reserve? No, but a selling agent seems not compelled to obtain a reserve and a vendor seems not compelled to declare a reserve at any time, even at the auction. So, the reserve was not declared until after the auction, at which point Jeremy conveyed that to the public and so negotiations began.

I might not agree with what happened, and neither might you, but I cannot see a breach of the laws here as they stand now.

Maybe the laws need to change (although this is not our business, as we buy homes for people within the changeable rules that we find on each offering).

Here is an example of a different way of approaching quoting (full details available in our May 2 Market Insight).

“Agent Heather Elder of Marshall White should be congratulated on her management of the quote of 21 Trinian Street Prahran. Buyer value and seller value were miles apart and the temptation to quote $2 million-plus would have been immense when, in fact, the reserve was $2.5 million. Heather stated that buyer interest was at $2 million to $2.2 million and the vendor’s reserve was considerably higher at around $2.5 million. She gave us two figures: buyer interest and the vendor reserve.  I did not see ‘$2m+’ written anywhere and the fact the price ($2.5 million) was achieved proves that a quality agent can manage a very difficult situation without resorting to whatever ……. ”.

Several times through the auction, auctioneer John Bongiorno was asked “is it on the market”. He replied it would be passed in. Eventually when further bidding was refused above $2.42m the owner was asked again for a reserve and it was declared on the market and sold for $2.5m under the hammer. Our understanding is there were no breaches of the CAV guidelines, REIV protocols or Victorian Statute but it was a very difficult situation for our buyer and we assume other buyers at the auction. We find the Marshall White agents we deal with professional, open and honest.

As we stated last week, it is not possible for agents to get quotes right every time. The only perfect quoters are the hindsight guys and they don’t buy a lot. It is possible to get quotes right eight times out of 10 and good agents do.

Marshall White’s Mark Dayman is a good quoter (if you let him tell you the truth) and actually a good bloke and he has some good thoughts.

“We are naturally going to quote conservatively to the market trend – we work for the vendors,” he says, and that is supported by our figures last week showing that 95 per cent of sold results on the auctions we attended exceeded the quote.

“We are learning about the market each week” – that’s agent code for “we are lifting our sights a bit each week”.

“We will just start to get it right and then the Spring influx and probable price drops will make us look bad the other way.” That is Mark’s sense of humour but there is a truth there.

So, as a buyer, how can you best deal with agent quoting?

• Understand what it is, what it represents and, in fact, how useful it is. In some cases, not much, but, with more agents than you may think, it’s still very useful.
• Monitor and record the good agent quoters and the poor agent quoters. But be realistic: nine out of 10 within a 10 per cent range would mean the agent is the Tiger Woods of quoting. The agents can’t get every quote right.
• Don’t get too emotional about it and, unless you want to change the world, move on. Worry about buying the home, not making a complaint.
• It’s your choice but why make a complaint – you’re wasting your breath. If it helps you great. However we recommend spending the time researching the next home.
• Do your own research without being unduly blinded by agent quoting input.
• And, finally, consider hiring a good buyer agent (of course we’d say that) and have multiple plans just in case the selling agent quote or “your” quote, even the buyer agent quote is not spot on - eg strategies to deal with a pass in, vendor bid, weak bid and strong bid.

Thanks again to all the people that come up and say hello, and other nice things, to us at auctions. Yes, we like doing this.

Buy Well

Mal

No market news next week owing to the Queen’s Birthday holiday weekend so we have put in some summaries of the main areas we deal in. See you in 2 weeks.

A big thank you to Sally Zelman from Gary Peer, whose thoughts on Caulfield appear in Another Point of View.

Architect Adam this week has a really good article on the importance of natural light to properties and the advantages of a north-facing back yard.

Finally, thank you to Marshall White’s Andrew Hayne and John Manton for your help today – most appreciated.

At 5pm, the $1 million-plus James Clearance Rate is 35% on the 17 auctions we attended.

We had a sense at auctions today that March was looking weaker at $1 million-plus levels than February – but maybe it was the wind and rain. Time will tell.

2009 could be turning out to be the year of the wave, as opposed to 2008 being the year of the bus over the cliff that nobody wanted to hop on.

The 2009 wave so far: nobody wanted to put their home on the market in January 2009 and that is very evident by stock levels at auction now (there is a lag of six weeks between sellers signing an auction authority and the auction).

However, February produced stronger results for sellers than expected and this is filtering through to some discretionary sellers who are now moving from hibernation to market. We have seen a marked improvement in quality stock levels in the last week for late March and early April auctions.  As for right now, agents have been waiting till post-Labour Day to get their homes to market and bought in the run before Easter. Stock level increases, yes, but after today it remains to be seen whether or not the corresponding demand is there to match improving stock levels. We think maybe, judging by our enquiry rate, but maybe not, judging by today’s March start, which was not a flyer for sellers.

Still tomorrow and the next few days may prove we are not returning to pre-Xmas days – let’s wait and see the final count.

Anyway, back to the 2009 wave – so December 2008 and January 2009 had no buyer interest – the price wave went down – homes withdrawn and not prepared for market – lower supply – but buyer demand in February was strong on reduced stock levels – and the price wave went up. Supply may be now on the increase – but if the matching demand is not there, then prices will fall – this is what we mean by the 2009 wave. When prices fall, discretionary sellers go back into their hole (I mean that nicely) and so price trends may alter again.

This rising and falling wave is with us in all markets; it is just not as recognisable as, say, the Dow Jones or All Ords. But let’s look at the provable – 37 Westgarth Malvern East (we wrote about last news) – Saturday $1.2 million would have bought it at auction. Tuesday afterwards $1.358 million bought it. 42 Summerhill Avenue with Ian McLennan of Bennison Mackinnon for sale pre-Xmas and again two weeks ago at $1.25 million – let’s say $1.2 million would have done the deal. Last week, two buyers offered the full price and it was bought for $40,000 more than full ask at $1.29 million.

In 2009, we need to be careful on price and some homes are still $500,000 to $1 million overpriced; however, even for the correctly market-priced homes, it is still a real chance that one week your $2 million dream home could be bought by you at $1.88 million and next week you missed out at $2.2 million or the reverse – one week you HAD to pay $2.2 million but a month later the vendor accepted $1.9 million. That, in part, is the role of a good buyer agent to help you through these pricing issues. But I digress.

Not everything goes up, of course: let’s look at two recently concluded sales on failed auctions of late last year.

First St in Kew East and a cracker of a home, but not in a position to match Rookwood St of Balwyn North. Both sold recently well below their initial expectations, their auction quote and even their most recent asks.

Why? Price to Position. Those homes needed to be in Hawthorn or Kew proper to get their $2 million and $3 million respectively. The price wave didn’t change the fundamentals as it often did in 2007.

Off-market – this is still something we get asked about all the time and the market is still there – it’s just not doing as much transacting as was previously the case (2007). To give you a more specific idea of what the market is, we jotted down and listed the off-market homes we visited this week. They are in our off-market section below.

Finally, a big thank you to selling agent Geoff Cayzer, who features in our first agent interview this week. We have known Geoff personally since he and James Keep sold one of our earlier 90s investments. It’s true selling agents work for sellers first and buyer agents work for buyers first. However, of the hundreds of $1 million-plus deals we have been involved with, the large majority take place under an umbrella of professionalism, not abusive aggression. That is not to say there is not a time and place for pressure and tough language – there is; however, we like to think there is lot more mutual respect out there than some people may think. Please, we are not saying it’s a love-in or that a selling agent is actually on the side of the buyer first; we’re just trying to provide some balance to what we see in the press. And, of course, that is only our opinion - you, from your experience as a buyer, may have a differing view.

This may not be the highest quality interview but that is not Geoff’s fault – it would be our inexperience of presentation. Any feedback or suggested questions is greatly appreciated – mal@james.net.au

Buy well

Indicative Market Movements

At 5pm Saturday, just two of the 13 auctions we attended today have sold under the hammer, with another two or three expected to be sold overnight.

The market is speaking on two levels – at median Melbourne, the results are weakening slightly but overall the market hasn’t taken anywhere near as big a hit as the top end has.

The diagram above is to show you indicatively where we think the market is going.

It is no exaggeration to state that the million-dollar-plus market is currently experiencing some of the serious woes that the financial sector is also facing. This market did drop 0% to 10% in early 2008; then, around mid-year, there was another easing, as we reported.

The Spring influx of homes for sale has currently not been matched with equivalent buyer interest and consequently we have seen the biggest drop since the early 90s in almost all upper-end bracket homes.

Some exceptions, however: in our opinion, the $1 million to $4 million market is down between 10% and 30% in 2008 from late Spring 2007.

Last month’s, last week’s and today’s results have only confirmed what selling insiders have known for some time: if you don’t get some interest early in the campaign and you have to sell (frankly, if you are on the market today, then you have to sell), then you could be seeing a large price drop from Spring 2007′s expectations.

That is the market that we deal in today.

Some balance. First, we are aware of four $10 million-plus sales this month. This is as good as October 2007. While 25 Cosham St Brighton did not sell (we rated and wrote about it two weeks ago – it’s now on the market for more than $6 million), 14 Grange Road Kew did sell for a figure believed to be well in excess of the $5.5 million quote, which is a good result for Jellis Craig’s selling client.

Some more balance. While many properties did not attract any interest,among the negativity, you can see the results of a well-run campaign, such as that run by Madeline Kennedy and Andrew Hayne of Marshall White, which saw 1 Parslow Malvern flying at auction with a final result well in excess of where we thought a good result (bearing in mind position) would be.

And more balance: even a 20% drop for some properties represents less than half of their 2007 gains and none of their 2006 or 2001 to 2005 gains. So longer term……

Some more positives: if you are a buyer and you can hold your bottle or you are trading up (this is the best time since the late 1990s, as the gap between the rich and the not-so-rich has shrunk), then there are some serious opportunities out there to buy. There will be more opportunities before Christmas and then again in early 2009.

But what to buy? Buy what you really want and please still buy for the long term.

It is still about the quality of your decision – your ability to match your longer-term financial and emotional outcomes with the home you end up purchasing. That is the key to good home buying.

The best buy we made (to date) was a little $400,000 buy in 1994 that was cash-flow-positive from day one and went up five- to six-fold before it was sold in 2005 to fund other property purchases. This is not said for any other reason than to point out that the market you are in can have plusses.

If this market is showing you anything, then, hopefully, it’s showing you the rule is NOT HOW YOU BUY (eg you beat the agent or you bid well) but that the rule is it’s WHAT YOU BUY. Your long-term wealth and happiness will not be created by fancy selling campaigns (at the back end); it will be created by smart buying of quality homes in great positions at under value in the first place. I mean, look at what is selling now and what is on the nose and can’t be given away.

You have opportunities, in fact, we all do – the trick is to recognise them, act on them and avoid the false gifts along the way. We think, as buyers in the million-dollar-plus Melbourne market, that you have at least until March 2009 in this currently declining market (due to supply exceeding demand and reduced buyer confidence). We will make comment on the months after March 2009 as we get closer. For Median Melbourne (eg $500,000 plus), we cannot see the fundamentals pointing to any significant price drops.

Buy well and good hunting.

Mal

Continuing on from our comments last week about the increasing overhang of unsold properties. Of the 80 pass-ins (at around a million and above) we examined between April and now less than ½ have since sold after an auction pass in.

The current unsold pass in and private sale hangover and the increasing home stock numbers coming onto the market in Spring (as reported to us by selling agents) could see a number of property’s prices remain fairly stagnant to perhaps dropping even further despite any uplift in sentiment that may come, due in part from interest rate cut murmurings. Now please we are not making blanket predictions; what we are saying is “ all homes must be looked at on a case by case basis and at one extreme a hot home with multiple buyer interest priced correctly coming onto the market now will create a lot more positive market spin than a home that has been to auction three months ago and has failed to sell”. BUT

Which is the better property for you? If the unsold one has a North rear orientation with good land size close to transport and although a little tired has a very workable floorplan and is coming in at $6000 per improved square metre and the other is a glitzster with all the bells and whistles and ILVE stove, french doors leading to a courtyard, polished boards, granite bench tops on small land within hearing distance of freeway and is coming in at $12,000 per improved square metre then……. And hold on again if one is being sold through a TOP END marketing machine and the slightly older tired one is being marketed with a selling agent whom we have never heard of before then ….

Which one is better? Well of course depending on your specific needs one may have greater appeal (emotional and that is very important) than the other. Longer term financially one clearly may be better than the other.

So from a buyers point of view monitoring a number of failed auctions can be a good idea – who knows in a few weeks or months that property you really liked but could not afford may in fact become affordable if you know how to approach the agent or seller. And you do need to have a plan (ps one that works)

Having said that a bit of balance is required. In Bayside last week a large $2m+ property in Hampton was well sold quietly by Robin Parker of RT Edgar for a price we considered normal for last year but in excess of what we expected in the market of this year and add to that several strong $4m+ sales in Brighton reported in the press last week, an improving $1m+ clearance auction rate and you can see all homes are not being given away.

While the market may have taken a break from its freefall of April, May and July what does this mean for the future? If nobody can reliably predict the future from a timing point of view why spend so much time worrying about it. Our advice to buyers is if you are buying for the long term then in the future there will be ups and downs. If you are buying for the short-term like a developer does, then as the Americans say it’s a crap shoot. In any market there are good and bad buys however the market is working in favour of those that are trading up as our gap diagram of last week tried to highlight with many higher end homes dropping more severely than lower priced homes.

Finally comments on the market.

Under a Million:
Stunning Homes under a million are still selling very well however overpriced homes that need attention or in less than perfect position are nowhere near as strong as last year.

1-3 Million:
This is the hardest section of the market to read. Why is that? Because this section of the market is the most unpredictable? Why is that? The buyers and sellers involved have multiple decisions to make in a tough environment. Will I renovate; will I be able to sell my home if I buy this one? Should I take that price or hold?

Over $3 Million
This market has cooled considerably unless there are multiple bidders ready to buy at the time of the considered offer.

Good buying

The spring market has proved what we have been saying all year. The inner city, high quality, perfect home market is firing as strong as it ever has. Good quality family homes on good quality blocks are in a boom at present. It is also, in our opinion, not too great a claim to say that this market has risen 20-25% this year. However in outer areas of Melbourne, in the townhouse and in the apartment market the news is mixed. This market’s growth has been a lot lower and many properties are simply not selling. Interest rates have affected these markets but not the top end.

What will happen as we move through Christmas and into 2007? As usual our answer is who knows? We don’t. All we can say is the market is subject to rises and falls, however over the long term, good quality property has always risen and we see no reason for this to change.

What lessons can we learn from the current market? If you are buying to live in or invest, try not to go for cash flow charts/seminars, newer areas a long way from the CBD, or flashy builds on small blocks with small rooms and no land. Why not stick with the winners? Good area – established suburbs with a mosaic (our new favourite word) of cultures and styles; good position – near what people have liked for centuries – transport, coffee, food, schools; good land – orientation for light, street frontage, good back yard and good building – nice flow, rooms in the right places, good size, good light, good space.

In Love with Linda – Hawthorn (Grace Park Estate)

Whilst the market can still be fickle, here are some practical examples showing how hot the market is.

All these blocks had good period homes on them. Some needed renovations and some didn’t. People have privacy requirements so we have not been too specific deliberately. The point is to show you just how hot this area is at present.

1. Mid Year 2006
Linda Cres. – 10,000sq ft block, needs $300k renovation – north orientation – high $1 million.

2. One month later
Linda Cres. – same as above – low $2 million.

3. A couple of months later
Hawthorn Grove – smaller block, better home – well over $3 million.

4. A few weeks ago
Linda Cres. – big block – south facing – good house – high $2 million.

5. Last week
Christobel St. – good block, bigger home – did not sell at auction.

Some of What We Have Bought Since Our Last Newsletter (September)

• Caulfield North – Arthur St – Double fronted Edwardian (See Picture Below)
  
• Berwick – Miller St – front townhouse – owner occupier (See Picture Below)
  
• Fitzroy North – Newry St – blank canvas Victorian – owner occupier (See Picture Below)
  
• Brighton – New St – Individual standing townhouse (See Picture Below)
  
• Brighton – Were St – Edwardian on good land with a pool
• Langwarrin – Warrandyte Road – Large acreage – owner occupier (See Picture Below)
  
• Heathmont – Anne St – owner occupier – architecturally designed (See Picture Below)
  
• St. Kilda East – Brunning Street – Edwardian – owner occupier
• Hampton – Crisp St – Bungalow home on big land with pool and north orientation. This buy was particularly pleasing as it sold for more a few weeks earlier, and our client achieved a strong rental agreement for the next 1 to 3 years.  (See Picture Below)
• Prahran – Perth St – award winning home – see further pictures at end of report (See Picture Below)
  
• Williamstown – Rifle Range – townhouse close to the beach – owner occupier
• Hampton – David St – town residence – owner occupier – great location (See Picture Below)
  
• Kew – St. Anthonys Place – town residence within a larger group – great location and beautiful gardens (See Picture Below)
  
• Brighton – Warleigh Grove – Art deco style duplex with a great location

Vendor’s Statements

One of the major conveyancing franchises in Victoria puts a very specific clause into both the contract of sale and the vendor’s statement. If there is a problem at settlement and this specific clause has not been removed in both the vendors statement and the contract of sale (prior to signing), you will be at a very distinct disadvantage with regard to any negotiations to remedy the dispute.

This advice has now come from three different legal practitioners and all have said that they would counsel their clients not to sign a contract with this specific clause in it.

Many people we act for do not understand what the vendor’s statement is, nor do they understand its significance. We do not give legal advice, however we strongly advise our clients to receive legal advice at all times.

Karma

“Karma” – dictionary meaning – the good or bad flow felt to be generated by someone or something.

How much is a home worth?

. Peace, tranquility, a place to reflect away from the rest of the world.
. Vibrancy, amenity, and comfort.
. Satisfaction, accomplishment, a statement of where you are now.
. Future options, a wealth count of good decisions over a lifetime or part of.
. Security – fort and temple.
. Family, you, friendships, a place of positive isolation where human interaction can be clear, clean and without compromise.

A good home is a place of this and much, much more.

All great homes are different and the one consistent difference is not price or style or distance from the CBD or water. The one consistent difference is the owner. Beauty is in the eye of the beholder and has no greater variance outside human relationships than in home ownership. For the home to be a great dream, irrespective of its physical make up, it really does need to be a reflection, a happy expression of the people in it.

Some homes have all the bells and whistles required for significant buyer interest, but they struggle or they are sold for a lesser amount than something down the road that to an engineer’s eye would be regarded as the same or inferior.

Why is that? Price? Maybe, but another issue is karma. The positive karma of a home has significant worth. It’s just that few try to quantify it, however it can be a critical ingredient in any great dream home.

In our detailed Property Reports, which we prepare before proceeding with any purchase, we focus on the other four other critical ingredients: Area, Position, Land and Building. But you should also think about the “karma” issues connected with a purchase.

Perth St Prahran had some great photos to help explain what we mean. The clients that bought this bought it the right way and for the right reasons.

We hope you and your family have good karma over Xmas.

Why would you pay money to us to help you buy?

• All properties are not the same. Think of a few houses in similar areas with similar characteristics and ponder what they were worth 10 years ago. What they are worth now? Will they have increased or decreased in value at the same rate? Not necessarily. We can show you inner city properties within a few hundred metres of each other that 10 years ago were each worth $400,000. Today, one is worth over $2,000,000 and the other $600,000. If you had been purchasing either of those properties, which one would you prefer to own now? We know the difference.
• Strategies. How to buy, how to minimise cost, what to buy, where. How do I make an offer? What do I really want and how do I get it? Where do I want to be financially in the next decade? Why do some people own multiple properties without a mortgage and others have one property and are struggling? Strategy.
• Saving money. This is the number one reason why most people think about advocates in the first instance, and in many, many cases we do just that. Whilst this is of primary importance in all business negotiations it’s interesting to note that clients we survey after the buying process, rate savings as the number 3 benefit in using James Buyer Advocates. Buying property well is as much about MAKING money as it is about SAVING money. Happy to explain in detail at our first meeting.
• Property value. If you think saving money is about getting an agent to take a few dollars off the “asking price” or finding a cheap place “below valuation” then please lets talk some more. In many cases if you are not crystal clear on property values then you will be negotiating at a level that will not buy the dream home you wanted and may well leave you with a compromised property in the long run. Another of the most expensive and distressing mistakes a buyer can make is too pay way too much. Under these circumstances selling agents are very pleasant and helpful as they laugh all the way to the bank.
• Stress & Emotion. Buying a home is about as bad as it gets. It’s emotional, exhausting and sometimes terribly discouraging. You only need to miss that perfect property, drive for miles to find the picture on the brochure didn’t nearly match your expectations (or what you’d been told), have agents leave you hanging or be gazumped in the negotiation stage. It hurts. Careful planning is paramount. It takes exactly the same time to buy a home well as it does badly. We find them, evaluate according to your needs, budget and what the property represents as a long term investment. Most people might only ever negotiate the most important financial decision they will ever make once in their lives. We do this all the time. We love it.
• Expertise. If you were selling a home would you hire an expert? If you had to go to court on an important matter, would you hire a solicitor? Why is this? Because no matter the level of intensity an amateur operates at, an experienced professional understanding your issues and distanced from your emotions will give a better result with less risk 99 times out of 100.
• ALL your options. There are hundreds of places out there you may never get to see. Quiet sales, private transactions, sales without boards. There are places out there you will not be given the opportunity to inspect because they are not advertised. We deal with agents every day, we find the ‘hidden’ houses as agents and vendors approach us quietly all the time.
• Agents and Auctions. We actually like and respect many selling agents, but this is a minefield and gaining experience can cost you dearly. There are some pretty average but also some very good agents out there. They work exclusively for the vendor. If they are excellent and some are outstanding, then they are committed to gaining the highest possible price for their vendors – it’s the law. To understand more about how agents work, please view our critically acclaimed DVD “HOW AGENTS WORK”. You can view it online at www.jpp.com.au/video_audio.html or alternatively, if you prefer, we can send you the DVD.
• Privacy. You may wish to keep yourself private as a bidder. You may have tried and failed to buy a particular property or maybe your business is really just that – your business. In any event, we represent you in complete confidentiality and until such time as the deal is successful, you can remain anonymous if you wish.

Some Client Thoughts

A recent email from a past client. Scott paid a little over $600,000 for his 3 bedroom Edwardian.

Mal and Antony

How are you? Hope business is going gang busters for you. I just thought I would drop you an email since it is one year since signing of the contracts on Repton Road. Am I having any sleepless nights? NO. Am I on a sure thing? YES. Have I purchased the right property? YES. Have I improved my golf swing? Definitely NO. Price movement alone speaks for itself and shows that I have purchased wisely. I am definitely in front of where I was 12 months ago. Thanks once again Mal and Antony.

Also I wish you and your family a safe and happy Christmas.

Thanks
Scott

Dear Ian and Sam,

First of all, we would like to thank you for turning the stressful task of purchasing our first home into such a stress-free and wonderful experience! Having just migrated to Melbourne and not knowing much about buying the ‘right’ property, we decided early on that it was best to get professional help. And that was exactly what we found in James Buyer’s Advocate.

Throughout the whole process you were generous in sharing your knowledge and always reassuring when we had doubts. You were also honest with your opinions and never tried to steer us towards making an early purchase. Basically we were always assured that you had our interests in mind the whole time. In fact the whole process did not feel like a rigid, business transaction but more like a friendship. For this we will always be grateful that we found you.

What a fruitful exercise it has been. We are now just days away from moving into our very own home in Berwick. Plus with the arrival of our newborn son, Renji, we are very excited that we will finally have a place to call home in Melbourne. A new chapter in our lives is now unfolding. Thank you!

Best regards,
Eddie and Miki (and Renji)

Ian,

It’s only a week now before settlement and I would like to take this opportunity to thank you and your team for their professionalism and support over the last six months. You made the journey enjoyable and stress free and I learned many valuable lessons along the way.

Purchasing an investment property has been a goal of mine for many years, and with the abundance of properties available on the market I didn’t know where to start. You provided a methodology that was simple and well researched and this ultimately gave me the confidence to complete my first purchase – the first of many I hope.

What impressed me the most was your level of honesty and integrity. Your amicable and open style made the whole experience ajoy and I was never pressured to purchase any of The properties presented to me (including Rosslyn Avenue).

Thank-you so much for your support and I hope I can touch base with you occasionally to get your thoughts on the market – maybe over that cup of coffee you promised me in the early days.

Regards.
Michael Trigila

A short note/testimonial to thank Mal for assisting us with the purchase of Embling Road:

Finally we have been able to buy a property! After several months of searching and “trying” to buy from local Malvern agents, we met with Mal and immediately felt that we may be able to buy something.
When the right property did arrive, Mal “conditioned” us regarding the price to pay for the position & quality of the property.
The negotiations and finalising the sale documents was impressive and we really needed Antony, Kelly and Mal’s expertise here to get us over the line.
The knowledge, expertise & contacts that Mal can draw upon in his communications made us feel very comfortable with our new Townhouse purchase.
We are now relieved that we did not buy any of the properties that we were vying for prior to meeting Mal, Antony and Kelly. Shirl also says that Mal buys much better flowers than I do! So he’s good at that too!

Best regards,

Alec, Shirl & Anthony Arnot.

Dear Ian

The dust has settled and we are now waiting out the settlement time before getting into Bonnyview Street! I’m making use of your Aftersale Information in preparation for moving – thanks for this – another useful product from James Buyer Advocates.

Alan and I have reflected on the ‘journey’ that we undertook buying our first family home and we both agree that your input along the way proved to be extremely valuable. We have learnt much about real estate from you and found your manner and knowledge to be very enlightening and helpful. There is no doubt in our minds that your input reduced our stress and worry significantly – after all, once we’d found the property (and you had okayed It), all we had to do was decide how much to pay (taking into consideration your valuation of course) and let you go to work.

We know you worked hard and fast with the negotiations, and in the end it was quite painless for us – we kept on with our usual tasks while you kept us in the loop on the phone about the progression of the deal, Again, there is no doubt In our minds that your input made a significant difference to our ability to secure Bonnyview Street. I especially appreciated you accompanying me throughout the contract and cheque signing!

Given our family circumstances, we didn’t ever get to have the many café discussions that your information mentions – I look forward to being able to do that next time! Never-the-less, your flexibility to fit in around our schedules was great and much appreciated.

Best wishes
Colleen Young

Dear Mal, Kelly and Antony

It is with great pleasure that we write to express our heartfelt appreciation for your assistance in acting as our advocate on the purchase of our new home. We are now the proud owners of 3/43 New Street, Brighton and we honestly feel we couldn’t have done it without you. We thank you most sincerely.

As you are aware, in the last 10 months we embarked upon two very special journeys – both daunting and emotionally charged, but at the same time extremely significant in our lives. The one involved our relocation to Melbourne, the other, the process of buying our first home and putting down roots in this beautiful city. As with all life-altering events, we experienced both the agony and the ecstasy of these experiences. We are truly thankful to have had you as our trusted companion and watchful guide in the latter journey.

In July we felt relieved to have discovered the concept of engaging a ‘Buyer’s Advocate’, as the prospect of buying a house was proving to be a big challenge for us. From the start you put us at ease with your open, direct and friendly manner and very soon we had summed you up as a professional with a witty sense of humour: perceptive, knowledgeable and experienced in the property game.
Throughout the process you steered us in a logical, unruffled and unemotional manner. Every time we lost direction and focus, you firmly led our strayed thinking back to the criteria we were striving to meet. You anchored our thoughts and aspirations. May I also add that the whole time you were astute enough to understand that we, ourselves, had to realise the extent to which we could meet our expectations.

‘When the going got tough, the tough got going’ – Mal, you proved your excellent negotiating skills when you engaged in ‘tough’ dialogue with another agent and secured an extension on our current lease agreement, thus gaining us the time we needed to continue our property search. Between July and October, constant communication and numerous coffee, cake and lunch meetings cemented our sound working relationship. Being the good listener that you are, very soon you began to realise what these ‘fussy’ South Africans wanted.

3/43 New Street came along whilst we were seriously investigating two other equally exciting properties. At first you argued both the pros and cons of buying it, but when finally convinced that this was the property we really wanted and that it was a good buy, you sprang into action. Within a few days you had obtained the necessary background information, put together a detailed property report, concluded building and pest inspections and worked out a strategy for putting in an offer.

Although Friday the 13th was not a particularly auspicious day to be putting in an offer, we felt secure in the knowledge that we were going into it armed with your wise counsel and wealth of experience. As a result, the offer we made was perfectly pitched to secure the property (only by a whisker over someone else’s offer). The perfect ending to an experience that was extremely interesting, to say the least!

Without a doubt we will be contacting you when next buying property and have already recommended your services to our friends and relatives.
Many thanks for the beautiful flowers and champagne. They really added a special touch.
It’s been a real pleasure getting to know and trust you.
We look forward to enjoying many happy years in our new home.

Kind regards

Anthos, Martha and Costas
Yannakou

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Christmas Closings

Our office will be closed for the Christmas/New Year holiday break from December 23 to January 1, inclusive. We will re-open on January 2, 2007.

In addition, we are all taking a few hard earned days off during January on a rostered basis; please contact the office if you need to speak with a specific member of the team.

With the festive season again upon us, we thought it timely to include a wonderful Christmas recipe from Eileen James (Mal and Ian’s mum).

Dutch Ginger Cake

• 1 ¾ Cups Plain Flour
• ¼ Teaspoon Salt
• 125g Preserved Ginger
• 1 Egg
• 185g Butter
• 1 Cup Castor Sugar
• 60g Whole Blanched Almonds
• Hand full of glazed cherries

Sift flour & salt, add castor sugar and chopped ginger.
Melt butter over gentle heat. Allow to cool slightly.
Mix in beaten egg, reserving one teaspoon of egg for glazing.
Add butter to flour mixture, and mix well.
Press mixture into a Greased 20cm round tin.
Brush top with the remaining egg, and arrange almonds & Cherries decoratively on top.
Bake in moderate oven 180degC for 45 mins., or until cake is golden and firm to touch.
Allow to cool in tin, turn out, cut into wedges to serve.

Yummy!