Are buyer agents the new bad guys?

Each week as we go through the inbox we come across a number of what we  call “love letters” from sellers who in no uncertain terms question our parentage and suggest that our eyesight and perceptions are slightly below that of an umpire in a losing Collingwood game.

In a buyers’ market there are new people to ‘hate’ other than selling agents and they are – wait for it – buyer agents or advocates.

But please wipe those tears from your eyes, as our job is basically a joyous one where you meet a lot of exciting people, walk through some incredible houses, have coffee with the wife, spend more than the husband wanted to and get paid a healthy living to do so – or so it seems to some.

Seriously though, when some sellers read a less than perfectly clean bill of health, such as a rating, on their property they go into an emotional frenzy and think abusive phone calls, legal action and threats.

But really, does balanced comment that may include a few negatives actually damage a home sale?

Does it actually result in fewer buyers, and necessarily lead to a lower price on the home – or does it in fact result in a higher price?

Think about it: how do we as buyer agents actually buy homes for our clients? We in fact buy homes by paying the highest price. If we pay the highest price are we not a positive factor for the seller?

How are we the enemy, even if we do point out the negatives (as part of a balanced report), if we pay the highest price to you the seller?

Do you think our role as buyer agents is just to highlight the positives of a home? Do you think we earn a living by acting for hundreds of professional people with millions of dollars to spend by exaggerating the positives and hiding any negatives a seller’s home may have?

Most buyers engage us because they want to make good decisions but they accept that there is no such thing as a perfect home – so therefore most purchases are made in the knowledge of some negatives.

Buyers feel more comfortable when they have all the facts in front of them, when “unknowns” have become “knowns” – and they do stretch further than when they have only half the story (the positives)

Take a home on a main road. A main road may be a negative in terms of noise and traffic and car access. But it can also be a positive, as long as the price is right, as it allows buyers to buy into an area they may not otherwise have been able to afford.

A number of houses perform better in this market when they are marketed by a skilled selling agent who presents facts in a way that counteracted negatives, rather than by a poor agent who hides them hoping  buyers won’t notice.

You might say that is just wordgames. After all why would someone use an advocate if it wasn’t to get a lower price? True, we do lower prices. At times.

But in our experience any lowering we achieve is when sellers were expecting a price above what the market was prepared to pay – otherwise somebody else buys it!

So yes in a falling market, we consider price, if it is above market – but our primary focus is convincing a client to buy a good home that meets their needs.

And in a rising market or when we are looking at an exceptional home most of our effort is getting the client to the right level to compete and that in fact may be up not down on their current position.

Next time as a seller you have to deal with a quality buyer agent, please consider that although we are working for the buyer; that may in fact be in your best interests if you have a well priced, quality home and a skilled selling agent acting for you. And if you don’t, we still may be your best bet in a few months when after a couple of price drops you do have a quality well priced home to sell.

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

102 Keele Street, Collingwood - 7 bidders when sold in March 2010 by Paul Markovic of Peter Markovic

You may have seen an advertisement recently talking about the benefits of Shares Vs Property.

Essentially the advertisement comes to the conclusion that “shares can work harder than property only with a lot less work”.

The ad compares the results of investing $31,000 in 1993 either in a diverse range of Australian Shares or used as a deposit to borrow and buy a residential property worth $200,000. The outcome, the ad claims, would be $654,000 and $570,000 respectively, making you better off buying shares by $84,000 over that 13 year period.

While I am a firm believer of a balanced investment portfolio and agree that shares should form part of an overall investment strategy, I want to look at a few assumptions made in this ad.

Firstly, the ad calculates the appreciation in property price using the median house price index, which is an ABS statistic that measures growth Australia-wide, in all suburbs – including those which are not suitable for investment.

If you had invested in a property in an inner city location such as Brunswick, Albert Park or Hawthorn, it would have told a completely different story. Using the same initial amount the value of the asset would have been greater than $900,000 – approximately $250,000 better off than shares.

Conversely, if you had picked an average suburb like Melton South or Frankston, the balanced portfolio of shares may have been a better option. But this just emphasises the importance of property selection and quality advice when investing over the long term

It is fair to point out that the value of some shares might have been in the millions if you were lucky enough to have picked them well. But poorly picked shares may have also returned a lot less. And the reality is that Albert Park, Brunswick and Hawthorn will always be well performing areas because of solid fundamentals that are not going to change in a hurry.

Invest well.

Paul McDonald moving things along nicely at 98 Primrose, Essendon: 3 bidders: Bought under the hammer for $1,312,500

The rest of $M Melbourne Melbourne slipped a cog this weekend with a 64% clearance rate on 25 $M+ reported auctions – a fair way down from last week’s stellar 83% on our 30 monitored $M+ auctions.

Some Highlights

• In Yarra (Richmond to Fitzroy) there were six properties up for auction at around a $million, and six were bought
• Elsternwick 9 Gladstone – Bill Stavrakis - bought at around $2,500,000. Land in that area is pushing $2000 per sq metre if you presume you’d bulldoze 5 Gisborne Elsternwick, which was bought yesterday for $1,505,000 (750 sqm) – Daniel Ashton of Biggin and Scott
• Caulfield saw three from three $M+ bought at auction on Sunday – all with Gary Peer: 7 Palm with Eyal Malka, 22 Pental with Daniel Rees and 53 Bundeera with Darren Krongold
• Williamstown 2 Hannan – a nice little double-fronted, bought this week for $1,720,000 – Michael Harvey of Williams

Agent Questions: Stock Level and Premierships

David Oster, Jellis Craig, Ivanhoe: “Stock levels are looking very good after a soft September. It will be a late Spring.”

Stewart Oldmeadow, Miles Real Estate in Ivanhoe: “We’re finding numbers pretty strong at the moment in this area.  I think it’ll hold at this level through to Christmas now.  People have seen that the sky is not falling in, so emotion alone will determine if it has hit the apex or not. And I think Collingwood will win this year.  To win, St. Kilda would need Riewoldt to do something amazing, whereas with Collingwood each man does his own thing on the team.  I think that’ll win it for them”

Paul Anderson and Paul Anderson Real Estate Essendon: “Stock levels are low for the general Essendon area and we are hoping, and that is all at this stage, that stock levels will pick up towards the end of October”

Around the Grounds - Auction  Flavour

Elsternwick 5 Gisborne: Daniel Ashton; 3 bidders, Bought After $1,505,000
Bill “I love every street in Elsternwick – but this particular one I’m auctioning today just that little bit more” Stavrakis, of Biggin and Scott, gave his usual entertaining and polished performance extracting bids between $1,300,000 and $1,440,000 from 3 bidders within a crowd of 50, before a strategic pass-in took place at $1,440,000. Feels like it was going to sell soon afterwards for a bit more. Bought after for $1,505,000. (Mal James)

Essendon 98 Primrose: Paul McDonald: $1,312,500; 3 bidders, Bought under the hammer
Paul McDonald is one of your quieter auctioneers – he starts things on time, moves through the rules and proceedings at a good pace and gently brings the bidders into the start position. Unlike many others he doesn’t yell and scream and dance – he just tells you where things are at – consistently, firmly and without agro. I found it a refreshing change. The first bidder started things at $1,200,000 and the third bidder finished it under the hammer at $1,312,500. Solid. (Mal James)

Alphington 22 Yarraford Avenue: Craig Shearn: $1,390,000: 3 bidders, Bought under the hammer.
This peaceful, tree-lined street was the picture-perfect setting for an entertaining auction. With an air of anticipation within the crowd, Craig Shearn was surprised and delighted when offered a decisive opening bid of $1,000,000 right off the bat. Whilst two other bidders bravely entered the fray at times during the auction, there remained little question as to whom the successful party would be. Each rising increment offered by other bidders was immediately thwarted with a confident and definitive increased bid. The knock-out bid came at $1,390,000, which brought spontaneous applause from the crowd as the happy couple marked the momentous occasion with a warm embrace! (Nikki Hills)

Ivanhoe East  489 The Boulevard: Stewart Oldmeadow: $1,740,000: 2 bidders: Bought under the hammer
The chance to snap up a home overlooking the Yarra Flats was enough to attract a good crowd to this auction. When Stewart Oldmeadow’s request for audience participation brought silence from the crowd, he commenced proceedings with a vendor bid of $1,400,000. It had the desired effect and what continued was a two-horse race, with strong and steady bidding from both parties until the final bid of $1,740,000, which took it across the finish line to victory. (Nikki Hills)

Monitored Auctions

We only buy homes

Alphington 22 Yarraford: Craig Shearn of Jellis Craig: 3 bidders and bought under the hammer for $1,390,000

Looking cool under pressure, Michael Nolan (Noel Jones) tries to encourage some bidding at 11 Scheele St, Surrey Hills. One bidder entered the fray, the property was passed in at $1,100,000 and bought afterwards for $1,150,000.

Key Points:

• Balwyn 23 Bevan, Richard James & William Chen. Quote $3,300,000 to $3,600,000. James Home Rating 742/1000. Bought After Auction Around $3,500,000. Bidderman 1. James Video Auction:  http://www.marketnews.com.au/video/?vid=316
• Hawthorn 24 Coppin, Jock Langley. Around $9,000,000 Private Sale. This basic house, on an acre on the river in Hawthorn’s river precinct, has been on the market for well over a year and had quotes at $15m then 12m and then…. A number of agents have worked on this. I went through this home last year and finally Jock has got a sale through under $10m. It’s a great block, and its only fault was its price tag.
• Kew 30 Wills, Scott Patterson. 3 bidders. $2,615,000. Under the hammer
• There were bidders at all 10 auctions we went to (although Aberdeen St Hawthorn East was bought immediately after auction, after no prior bidding)
• Clearance Rate of 78% on the 36 $M+ auctions we monitored

Agent Q & A: Premierships and Stock?
Andrew Gibbons, Marshall White, Hawthorn: “Oh … you would have to go the “CATS” my friend…back to back Premierships…they clearly are the most dynamic team in the way they handle the ball and play as a team. They are in fantastic shape with all the key players fit & healthy…they are HUNGRY!”

John Bradbury, Noel Jones, Balwyn: “You would have to say Collingwood, unfortunately. I would like to think the Saints could get up and win but after Collingwood’s defeat of Geelong, you’d have to go the Magpies.”

Michael Nolan, Noel Jones, Balwyn: “After (Friday night), Collingwood. They made Geelong look old!”

Daniel Bradd, Jellis Craig, Hawthorn: “The Bulldogs because it’s about time.”

Richard Winneke, Jellis Craig, Hawthorn: “The Saints because it’s about time.”

Daniel Wheeler, Marshall White:”There are few good houses coming on the market in the next few weeks”

Doug McLauchlan, Marshall White, Hawthorn: “Stock is extremely low at the moment and the concern is that potential stock offered in October will not come onto the market until much later in the year. These low stock levels could be in  part due to the exceptionally high stock levels on the market in the early part of the year. Added to this, an election that took 7 to 8 weeks to resolve wasn’t helpful. Uncertainty seems to be an issue.”

Bidderbuzz Auction of the Day: 2 Cusdin St, Glen Iris, Paul Williamson, Jellis Craig, Bought Under the Hammer, $1,300,000, 3 bidders.

“There was a good feeling at this auction. So much so, that agent Paul Keane had time to look after someone’s pet dog while they were doing a pre-auction inspection. This atmosphere continued as the auction gained some momentum and, after an initial vendor bid of $1,100,000, two bidders competed as if it was a two-horse race. Just at the pointy end of the auction, after eleven bids, came a bold and aggressive bid of $1,300,000, which blew the two other bidders out of the water – and the property was sold at this price.” (Guy Angwin)

Biggest Auction of the Day: 30 Willis St, Kew, Scott Patterson, Jellis Craig, Under the Hammer, undisclosed above $2,600,000, 3 bidders, crowd of 80 people.

“There was anticipation in the air as auctioneer Scott Patterson commenced proceedings with a vendor bid of $2,400,000. With the clouds clearing, things progressed rather slowly until a very determined bidder entered the fray, and the auction began to take shape. Three genuine buyers all fought to secure this great piece of Kew, which created a very exciting auction. After some boisterous back and forth bidding, the successful buyer secured the property for his client for an undisclosed amount.” (Dustin Cracknell)

Clearance Rates & Monitor Table:

Forward Auctions:

A day for the Dogs? A happy Jack Bongiorno, Marshall White, (a one-eyed Magpies fan!) with a canine friend at 22 Willis St, Prahran. Passed in at $1,305,000, two bidders.

Key Points:

• We covered 8 auctions across Stonnington on Saturday and all of them were bought.
• Armadale 28 Seymour, Joanna Nairn. Quote $3,500,000 plus. James Rating 682/1000. Bought After Auction, around $3,500,000. Bidderman 1
• South Yarra 38 Park, Warwick Anderson. Quote $3,500,000 plus. James Rating 725/1000. Bought After Auction, above $3,000,000. Bidderman 1
• Thursday Auction: Armadale 21 Adelaide. John Bongiorno auctioned this bulldozer or significant rebuild home at 4.30pm today. Bought for $3,130,000, or just over $4,000 per sqm. Bidderman 3. Heather Elder and Rae Tomlinson
• Finally Bought: Toorak 8 Macquarie, Jeremy Fox. Private Sale after an auction. $6,400,000.
• Off Market Action:
  Malvern Elizabeth, Marcus Chiminello. Off the plan $3,300,000
  Armadale 81 Rose, Tim Derham. Bought Over $3,300,000. A  terrace home that needed a fair bit of work but did have rear access and was north facing to rear. A solid result.

Agent Q & A: Premierships and Stock?

John Bongiorno, Marshall White, Armadale: “COLLINGWOOD !!!! Because I’m not one-eyed just a little biased towards the Pies. Collingwood will absolutely thrash whoever gets through to the Grand Final” John Manton, Marshall White, Armadale: following on “Unless, Jack, there are injuries which will restrict player rotations!”

Paul Keane, Jellis Craig, Glen Iris: “Stock levels seem to be increasing although slowly. We would expect normal market conditions will start to improve in the latter part of Spring.”

Alex Schiavo, Kay and Burton, South Yarra: “There is not a large amount of stock, especially compared to last year, but interest is starting to pick up. Some nice listings picked up in the last week or two but not the volume.

Bidderbuzz Auction of the Day: 10 Hillard St, Malvern East, John Morrisby, Marshall White, Under the Hammer, Undisclosed, 6 bidders.

“A slow auction to start with, but things really picked up when the property was declared on the market at $1,640,000. Auctioneer John Morrisby led the charge, with a massive six bidders battling it out until the end. The property was bought under the hammer for an undisclosed amount. Reasonable sized crowd of 65 and a strong vibe.” (Kristen Hatt)

Biggest Auction of the Day: 28 Seymour Ave, Armadale, John Bongiorno, Marshall White, Bought After for an undisclosed amount above $3,250,000, one bidder, crowd of 150 people.

“When I first arrived at 28 Seymour Avenue, Armadale I was pleased to see that John Bongiorno was going to be conducting the auction of this impressive Victorian double-fronted property in the heart of Armadale. John Bongiorno is both professional and entertaining and when he quoted “we only sell to nice people in Armadale” I wondered where he was heading. It didn’t take long before he followed up with a second quote “this is an outstanding property just like Collingwood was last night”. These quotes, whilst entertaining, didn’t have any affect on the large crowd of 150 as it was necessary for John Bongiorno to quickly come in with a vendor bid of $3,200,000. An eventual bidder raised the bid to $3,250,000 and subsequently secured the right to commence negotiations.” (Guy Angwin)

Clearance Rates & Monitor Table:

Forward Auction Stock:

We Only Buy Homes

A big crowd of 80 turned out for the auction of 2 Hume St, Armadale. Despite his best efforts, Anthony Grimwade (RT Edgar) was forced to pass the home in for $1,025,000. Two bidders. Bought Afterwards

David Hart saying "Ok I give up - for the moment" 42 Clinton Brighton East - Passed In with No bidders. Bought soon afterwards over $1,700,000.

Key Points:

• Two big sales during the week: 282 New St Brighton with Regina Schmidt and Brian Devlin of Buxton around $9,000,000, and 21 Moule Ave Brighton with Stewart Lopez of Kay and Burton (off market) reportedly in the high $6 millions
• 15 sold over $1 million in the last week – including four in Beaumaris
• Clearance rates trending upwards quickly – Saturday was a big improvement on previous weeks
• We covered 8 auctions in Bayside on Saturday and there was a 100% strike rate with three selling before auction, three selling after auction and two selling under the hammer.
• Bayside Bidderman is still low, with only two auctions attracting multiple bidders.

Video Auction this week at 24 Susan St Sandringham – and a cracker it was!

Agent Q & A: Who will win the AFL Premiership and why?

David Hart, Buxton, Brighton: “Geelong will win because when it comes to the crunch they’ve got the class and the players – and I don’t like Collingwood!”

Mark Bury,  Kay & Burton, Brighton: ” St Kilda because we’ve got to support the locals and because Ian (Jackson) will kill me if I don’t say St Kilda!”

Jason Gill,  Hodges, Brighton: “Collingwood because they have had a fantastic year and everyone hates them.”

Gerry Gordon,  Hocking Stuart, Brighton:” Collingwood – because they have to!”

Nick Johnstone of JP Dixon: “Collingwood by a mile”

Rowan Dent,  Hocking Stuart, Sandringham: “Collingwood – based on this year’s performance record.”

Steve Tickell, Hocking Stuart, Sandringham: “The Saints of course! History will repeat itself and the Saints will win by a point, on the siren like they did in ’66.”

Bill Jowett, Buxton, Sandringham: “I’m sorry to say it’s Collingwood”

Stock Comments

Steve Tickell, Hocking Stuart, Sandringham: “Stock is slowly building. There seem to be a lot more inquiries from people, and I would say it has been more positive in the past week – more like 2007 than 2009. In Bayside, villa units and good family homes continue to attract a lot of interest.”

Bill Jowett, Buxton, Sandringham: “End of October is looking strong, top end a little tougher and a bit of strife with development sites due to banks only lending at 60%”

Nick Johnstone of JP Dixon: “Stock levels are OK – compared to last year on par. Shortages in $2m range for family homes that are comfortable.”

Land Sale Price Pointer:
46 Bay Brighton – Vacant Land in precinct between New St and St Kilda St – 800 sqm in size was bought for $2,225,000 or $2781 per sqm Nick Johnstone JP Dixon

Bidderbuzz Auction of the Day: 24 Susan St, Sandringham, Mark Earle, Buxton, Under the Hammer, $1,220,000, 5 bidders.
“Spring was certainly in the air at the ‘Sandy’ auction. The sun shone, birds chirped and 70 people swarmed to the property like bees to a hive. The atmosphere was chatty and cheerful as auctioneer Mark Earle stepped out. A crowd bid of $960,000 got things started and bids soon came in from every angle. One resilient bidder made herself known early with some courageous bidding. She continued to power through despite being “attacked from every side,” past the selling price at $1,110,000, to buy the property under the hammer at $1,220,000 to the delight of her supportive cheer squad.” (Julia Atkinson)

Clearance Rates & Monitor Table:

Forward Auction Stock:

We Only Buy Homes

Marcus Peters (Biggin & Scott) led a brisk, successful auction at 5 Bright St, Brighton East. Bought under the hammer, $1,420,000, four bidders and a crowd of 60.

Canterbury 23 Chaucer: James Tostevin of Marshall White: Great atmosphere with three bidders over $3,800,000 - a strong result. Bought after; undisclosed price.

At 6pm on Saturday the James Million-Dollar-Plus clearance rate was 50% for the 38 auctions we attended. Of note is the fact that only 1 in 4 sold under the hammer.

On Sunday the post-auction clearance rate rose to 66% on all 61 monitored properties. That tells us that the market is right on the brink, but still limping over the line. We’ve been seeing these kinds of significant differences between “under the hammer” and “post auction” clearance rates for a few weeks now (see last week as well), a very different situation from earlier this year. As buyer agents, and for you as buyers, that tells us a number of things about post auction and private sale negotiations.

Bidderman, our Demand Indicator, has dropped significantly to only 1.2 bidders per auction. Almost 1 in 3 auctions had no bidders at all. This was our most significant stat of the weekend and a key indicator  going forward – let’s see if it bounces back in two weeks.

Market: The REIV clearance rates might not show it – but the market was soft this weekend. Many agents and reporters described a real hesitancy amongst buyers and the $M+ Clearance Rate and Bidderman confirms that. Now is possibly the start of another downward price trend, especially with stock numbers on the rise. Possibly it’s an election slowdown or maybe buyers are seeing more choice coming into Spring and are acting accordingly with reservation and only when it makes sense. Wow! September has more excitement on offer than just Collingwood.

But conditions are varying widely across the different council areas. If you are in Bayside, for instance you may be thinking that very few buyers bid at auction any more. You would also be seeing plenty of stock around, some which has been there for a long time (especially over $2m). So with plenty of new homes coming on, you are probably thinking prices are likely to be weak in Spring in Bayside.

If you are in Boroondara you are probably seeing some heat building up in the market, with good stock attracting good competition and most things selling on the day or soon after. You can see more stock coming on but you know you are probably in for a fight. But you can also remember May and you know if too much comes on it could well be a buyers market in Boroondara this Spring.

If you are a buyer in Port Phillip you may be thinking that the market is still a bit sleepy and hasn’t started any sort of Spring run – either in auction numbers or new stock.

Finally, those of you in Stonnington are probably a bit confused – some things are selling that shouldn’t and some aren’t that should. You are likely aware that the market is very price sensitive but you haven’t as yet seen the Spring stock surge start and like all of us you are not sure if and when it will.

Agent Opinions: This week we followed up on the $3m+ market asking agents: “Where is it?” Their full answers are in the Market wraps, but here is a sample of what agents are saying:

Richard Winneke, Jellis Craig: “Three auctions this weekend all over $3m – that will be a true indicator  – if only one or two sell then sellers will be cautious putting property on the market. Buyers out there at that level, but they are also cautious. Market at lower level is very different. Not seeing a great amount coming on in the higher level – 8 properties over $2m in September for Jellis Craig which is not huge, at least a third down in terms of numbers compared to last year.”

Activity and Stock Levels – The graph below shows New Stock ($million+) in Boroondara, Stonnington, Bayside and Port Phillip. To note:

• Consistent big stock levels until end of May
• Big drop in mid June stock levels
• Steady build from mid July

Highlights and Lowlights

• No bidders in Sandringham today at the three auctions we attended. At one of them Steve Tickell, of Hocking Stuart, curiously said he was testing the market by not offering an opening bid, or any vendor bids…and passed the property in without announcing any amount at all… Stephen, what did we all learn here?
• The biggest result was at 23 Chaucer Canterbury with Marshall White’s James Tostevin firing up 3 bidders to reach over $3,800,000.
• Check out the video auction of John Bongiorno at 10 Walerna Glen Iris in the Auction Reviews Section.
• Credit where credit is due: Auctioneer Kaine Lanyon of Bennison Mackinnon deserves mention today for achieving a great result for his clients while keeping the crowd well entertained at 76 Spring Street, Port Melbourne. He did so with a combination of wit, charm and humor that only a skilled auctioneer can execute. In my opinion he did affect the outcome and I am sure many people left the auction convinced he single-handedly pushed at least one of the parties over and above what they intended to spend – Author David McMillan.

BidderBuzz Auction of the Day

64 Maud St Balwyn North – Julian Tonkin, Jellis Craig – 4 bidders, sold under the hammer – $2,015,000 Maybe it was auctioneer Richard Earle’s comprehensive preamble, or maybe it was the comfort of an indoor auction. Whatever it was, this auction got off to a flying start with a genuine opening bid of $1,800,000 from the 60 people present. Two more bidders joined in, resulting in an intense three horse race. When it seemed to all that the property was going to be bought at $2,000,000, a fourth bidder jumped in out of nowhere to be the successful buyer at $2,015,000. A strong result.

The wind was up, their tails were up and so was the price. David Lack gets a solid result post auction - over $2,250,000. 2 bidders. Port Melbourne, 2 Swallow.

Are Special Conditions costing sellers BIG MONEY?

Sellers may be costing themselves big dollars all in the name of legal “protections” they would never agree to if the buying shoe was on the other foot.

One prominent conveyancing company claims to be protecting their selling clients with a list of clauses in their selling contracts – but in fact their efforts and attitudes are causing buyers to walk away from deals. In this market that is not a good step for sellers.

If you watched the two latest episodes of Channel 7’s “ Under the Hammer”, particularly the one about the Yarraville auction which featured one of our buyers, you’d be interested to know that the real drama wasn’t what you saw on TV but what happened behind the scenes with the 20 or more phone calls and emails between auctioneer Adrian Butera and our company just to get our buyer to the starting line. It was all about this conveyancer’s Special Conditions.

In Victoria when we buy or sell a home the paperwork we are required to agree to is made up of a number of sections. These include the particulars of sale price, settlement arrangements and chattels; normal contractual conditions governed by the REIV and the Law Institute; and Special Contractual Conditions.

With regards to the Special Conditions sections the conveyancing firm we are referring to is putting in clauses or conditions that are interpreted by our clients’ buying solicitors as meaning that:

• If the home burnt down, the buyer would still have the pay the seller the purchase price in full.
• If the seller couldn’t provide title (we thought that is what you were buying) – they would still have to pay all the money to the seller. (We’re sure the banks would love that idea – NOT!)
• Some of these special conditions may affect the buyer’s ability to insure the home they buy.
• If the buyer had a dispute with the seller, they would still have to pay the seller in full and only after could they dispute.

Back to the Yarraville auction: it took three days and all those phone calls and emails, but the sellers finally agreed to strike out the special conditions.

Even though things have been quiet, we still managed to get 5 $M+ homes over the line this last week in Malvern East(post auction), Balwyn North (off market), Malvern East (under the hammer), Port Melbourne (pre campaign) and Canterbury at auction. One of them (Port Melbourne) could have been very, very different as our client had to walk away from an acceptable deal; owing to this conveyancer’s special conditions. It was only when the seller ignored the conveyancer and crossed out these additional onerous special conditions that the deal was revisited and consummated.

We think sellers need to know about this practice because buyers’ lawyers are increasingly refusing to accept these special conditions, which means that $M+ investors are simply having to walk away from a deal – even on good properties. It’s a practice that could be costing them tens of thousands of dollars.

To illustrate, see our chart below where in Identical Auction One Bidder 3 was able to have the Special Conditions removed but in Identical Auction Two Bidder 3 was not. He did not bid, which reduced the purchase price significantly.

We are hoping to name the conveyancing company, pending legal approval.

Sellers who read this need to be made aware of these issues so they can decide whether they have hired the right conveyancer.

And buyers be aware of what you are signing up for if you come across these kinds of contracts. Make sure you get good professional advice, or you could be up for something more (or less) than you bargained for.

James Buyer Opinion: This week our James Buyer Opinion is on “Carrot and The Stick and Other Negotiation Styles.” Next week in Buyer Opinion we have a special Buyer Agent Conversation – Getting Info to Make an Offer.

Also next week, Election Saturday, we will have a reduced coverage; but there will be a Market Insight – just no wraps - owing to significantly reduced auction numbers.

We Only Buy Homes

Mal

Took this photo at an open at 59 Studley Road Ivanhoe - Liz Walker Jellis Craig - all laid out on the kitchen table. Just want buyers want - fair dinkum information. Sellers - Liz Walker and Jellis Craig Ivanhoe provide what buyers want - reasonably accurate information.

What is it with redheads? They're running the country - and now they're taking over the auctions. We counted six in this photo in amongst auctioneer Phillip Kingston from Gary Peer. 7A Nightingale St Kilda East. Bought After $1,200,000. 1 bidder.

At 6pm Saturday the James Clearance Rate on the 22 $M+ Auctions we covered was 59%.

Our Demand Indicator Bidderman was 2.2.  Hmmm – an interesting increase but it was off a very low turnover.

Today’s Highlights

1)      Bidders were present at 18 of the 22 auctions we covered –  and at three auctions there were 6+bidders

• 23 Sunburst Avenue Balwyn North (Doug McLauchlan of Marshall White)
• 12 Lennox St Hawthorn (Russell Turner of Christopher Russell)
• 7 Monomeath Avenue Toorak (Justin Long of Marshall White)

2)      The Pies are top of the ladder – and the election is on

We couldn’t find many $M+ auctions worth covering and only one of the auctions we covered went over $2m this weekend. So with the small numbers – just coming out of  the winter hiatus – it was like a first back training run before we get into the winter season proper over the next few weeks.

Agent Quotes

Scott Patterson of Jellis Craig: “Sold 12 from 16 today throughout the company. Opens and auctions were well attended…those who wish to sell in next month or two could enjoy quite solid results due to lack of supply, because demand seems reasonable… August 28 is looming as big weekend, particularly as it is now the week after the election…only thing is that Hawthorn vs Collingwood might affect crowd numbers etc…’

Hamish Tostevin of Marshall White: ”Opens were steady without being over-run with buyers. Certainly a lack of property at the moment in terms of supply. Should be a solid spring, particularly when the election is out of the way.”

Now, where were we before we were so rudely interrupted (by the school holidays)?

It has been a month since we last reported, and we have seen more Top End activity at Tullamarine than in any other suburb. Was it sales? No. It was our selling agent brethren jetting off to Europe to recharge their batteries. This poor humble buyer agent can only give you a travelogue on the Dubbo Zoo so I won’t bore you with tales of kids and a 12-hour car drive or the fact it ain’t a patch on the Werribee Zoo.

The world is a different place since our last report: back then Kevin ’07 was in charge, Masterchef was still a competition to find the best amateur chef in Australia, not the luckiest cook as it is now, and our $M+ market had prices cooling quicker than a Melbourne winter, after a blistering start to the year (although there were still an incredibly high number of buys).

A month ago we reported that the early 2010 gains had evaporated in the five auction weeks of May due to the sheer number of listings. May’s record supply finally stopped what had, since March 2009, been a rising market, driven initially by international buyer demand and then solid local demand.

So what is happening in our Winter Market (June to August) right now?

To be frank we don’t know for sure yet. But here are some of our thoughts.

1. Prices Now
2. Stock Quality Now
3. Method of Sale Now
4. Risk v Reward Now

Prices Now
Selling agents love to use the ‘p’ word plateau (rather than the four letter ‘f’ word)  to reflect on, or deflect away, thoughts of a declining price market. Right now, we actually agree with the ‘p’ word – especially if you accept that prices fell significantly in May and June. (By the way, the ‘f’ word that selling agents don’t like to use is fall.)

Some reasons prices may be plateuaing are:

• Seasonally reduced action (winter)
• An election on the horizon –  so some buyers and would-be sellers will pause to wait for the result.
• We had a big price fall in May and  for most of us market watchers the way forward is still unclear. Will we see more price drops or …. who knows? Like many, we are waiting for a sign.

Demand in Relation to Price

• This weekend Bidderman was at 2.2 – but, please note, this is based on very low auction volumes and therefore statistical distortions are possible.
• As a buying company,  we have had commitments from a significant number of new clients over the past few weeks.
• We feel it’s better to reflect overall demand as more cautious rather than dropping – however another month or two may tell us a different story.
• Right now, buyers still do have the rare luxury of having their cake and eating it too – if they choose to. Prices have fallen in May/June, and in July we are in a market of reasonable choice. Hooray for buyers!

Private Sale Clearance Rate – the number of Proven Sales is only 11 from 50 – or 22% – over the past six weeks.

Six weeks ago we randomly selected a basket of 50 higher end Private Sale and Expression of Interest properties, right across our $M+ Melbourne market. We did this with the aim of  checking  what was bought 6 weeks later (roughly the same time as a “go to whoa” auction campaign), and to therefore calculate the clearance rates  to see how Private Sales and Expressions of Interest were really going.

We thought this snapshot would provide the best reflection of private sale market activity and confirm or question comments by some selling agents that: “Oh yes, auctions were not as good as March, but we are selling a heap via private sale”. The results proved that while in May agents were selling a heap, it wasn’t so much the case in late June to early July. However,  it could have just been that many agents were away.

• We have made an effort to contact those that were withdrawn without a sale price, and we may have missed a few sales – but overall the non-auction homes are NOT running out the door any faster than the auctions. In fact you could make a strong argument that, as an effective method of sale, auctions are still outperforming private sales in many cases – despite the declining clearance rates, given that only 1 in 4 private sale properties have been bought in 6 weeks.
• These figures must surely help smart buyers put together an offering strategy. It’s certainly prompted us here at James Buyer Advocates to change how we buy in the last two months.

Today’s final word on price – are you a glass half empty of half full person?

If you feel the double-dip recession is fast approaching and the world as we knew it is about to end, then, by all means, don’t buy – and in fact sell (and please give us a ring if you have a good home to sell).

If you feel Julia (Gillard) won’t be changing the legitimate immigration numbers any time soon (demand) and Justin (Madden) won’t be able to release large numbers of housing blocks in Inner Melbourne because they are not there (supply), you may wish to ignore the doomsayers and take advantage of this current price breather combined with good stock offering. The GFC lasted less than a year  (for us) and in July 2010 Melbourne $M+ home prices are still 20 to 30 per cent above 2008 GFC home prices. Remember the 2008 ‘bulls**t’ rumour of the year, which said the NAB and other banks were about to foreclose on 200 homes in Toorak alone – it never happened. Yes we are biased and make a living by encouraging buyers to buy – but the facts are still very positive for buyers.

Stock Quality Going Forward
Spring quality and auction numbers are the variables we don’t have a clear handle on as yet. Right here and now in July, we have a market with excellent stock numbers for buyers – if you know where to look and you actually act correctly (please see the following paragraph on methods of sale). We also think the quality is good. Going forward, quality stock levels are not clear to us, because traditionally when quality sellers see a declining market they are loathe to put their home on the market on a speculative basis (in that, if they don’t have to sell, they won’t). This obviously leads to less stock on the market, which may affect price but, more importantly, it affects choice. Good buying decisions are more likely when, along with good advice, you, the buyer, have good choice.  You have that now.

Method of Sale
As we said, there is choice now if you know where to look, whom to ask and how to deal. Look at the above private sale table – there are some good homes there. We keep overhang lists (stales and unsolds) and there are also a number of off-markets and quiet pre-releases available. Granted, some of the vendors are still in their price cocoons but  quality sellers who have adjusted their price expectations may have homes worth considering. The off-market (unadvertised properties) may well be the market of choice for a number of buyers and sellers in the next few months.  But, please note buyers, you will have to sharpen your negotiation strategies to take advantage of all that is on offer.

Risk v Reward
To digress – Risk v Reward is where Masterchef’s Adam and Claire had it all over Jono. While Jono was going for the big dish on every occasion – and you have to admire him for that – he wasn’t playing the game to the best of his abilities. Adam is the quiet master at the Masterchef game. He sees a situation and says: “Yeah, I want to try and make a dish that will impress the judges and maybe get me a shot at immunity – the reward – but I don’t want to push the boundaries that far that I risk getting in the elimination round if I fail.” Good Home Buying and Negotiation is absolutely the same as this. Why is that? Because in the first instance the strategy should be to get yourself into a strong position and not risk all for the pot of gold. Once you are in that strong position, then you can make a run for the prize. Another analogy is acclimatising at base camp before you make the assault on the Everest summit. This is Risk v Reward.

A full James Buyer Opinion on Risk v Reward in today’s Market will be published here on Tuesday – so look out for it this week. At the moment you will find our biggest ever ‘clicked on’ James Buyer Opinion article – The Learning Fee - right next to this article.

It’s good to be back

We Only Buy Homes

Mal

Balwyn North 23 Sunburst. Big Crowd for Doug McLauchlan of Marshall White - 125 in fact. Seven bidders. Bought under the hammer for $1,567,000.

McKinnon 40 Wheatley Road Nick Renna Passed In. Huge crowd of 200 saw 3 bidders fight strongly for the right to go toe to toe with Mr Renna post auction. We await the final outcome.

Unless you have been in a cave you would know that property prices in Glen Eira have been increasing for some time now. However in the past two weeks, after the Easter break,  million dollar prices have been common as common as Bagels in Glenhuntly Road; as common as Gary Peer signs on Bambra Road and as common as Collingwood premierships (woops that’s wrong); anyway (25 in total) in Elsternwick (5);  Caulfield (12), McKinnon (3) , Bentleigh (1), Ormond (2) and Murrumbeena(2). That is very strong and unlike early 2009 or all of 2008.

Caulfield North $2m+ private sales: 3 in fact at 5 Rowena (Rodney Morley TBM), 8 Craddock (Gary Peer) and 8 Fosbery (also Gary Peer) averaging out a tad over $2.5million. These were all new homes and shows that in Caulfield if you build it in 2009 they will buy it in 2010.

The market didn’t show a similar strength today on the 6 homes we chose today. Three had issues and they all passed in – the other three were bought. However there were bidders atall bar one auction.

Some land sales for values:

66 Shoobra Elsternwick with Bill Stavrakis of  Biggin and Scott. 668 sqm for $1,300,000 or just under $2,000 per sq metre. Seriously across Melbourne this far out from the CBD in that caliber of precinct it sounds cheap. The sale  is good – that is land value in the are – we are saying the precinct for what is offer is cheap. Glenhuntly road shops, synagogues and churches, rail and tram (sounding like a selling agent, but its true). It’s almost a hidden treasure except everybody knows – sort of.

20 Marriott St Caulfield with Mark Rogers of Buxtons. Nice north facing rear block of 73o sqmetres sold for around $1800 psqm. It’s a little bit away from the action but after a good home goes on it you are looking well north of $2,000,000 which supports those 3 new home sales mentioned above

So far this year we have seen regular crowds of up to 70 to 100 people; far bigger than in Stonnington and Bayside. Why I’m not sure – there maybe even greater buyer depth here than we first thought and many are not getting the chance to put their hand up on the goodies.

The median price trend chart below, courtesy of the REIV, shows as we are finding, a solid recovery in prices began around the middle of last year and has continued on into this year. We think these charts accurately reflect what is happening in the Glen Eira $M+ market.

All this is showing the potential of buying in Glen Eira for those that can’t afford Malvern or Brighton and for those who simply want to live here for the family life and period homes on offer.

If you haven’t noticed Glen Eira before then just take a drive around the suburbs and you will be pleasantly surprised.

Stay Focused, Stay Happy

Strange. Very strange. Yes Glen we can see you but check out the guy to the right. I'm not sure if he was there for marketing or to revive injured buyers. Maybe he will be mandatory at all auctions soon. Camberwell: 52 Athelstan Road: Glen Coutinho. Passed In.

It is 6pm Saturday and the James Million Dollar-Plus Clearance rate for the 38 Auctions we attended today was 74%; basically no change on the 77% ( pre Easter Super Saturday -March 27).

Bidderman was down from to 3 to 2.3 bidders per auction but that is still very strong all things considered (stock quality and Easter holidays).

Market Mood

Today was expected to dip to reflect this being a secondary weekend for $m+auctions; but it didn’t. Many of the really top homes wouldn’t have been launched with an Easter or School holiday start and May 1 and May 22/29 are shaping up to be the next $M+ Super Saturdays (stock quality and numbers wise).

The last 2 weeks confirm the March 27 strength. Hot! Hot! Hot! You know the market is very strong when you see that REIV agent members have reported 170 properties $m+ properties as sold since that pre Easter Super Saturday. That does not include today’s auctions. So basically the large majority were private sale at a rate of 8.5 a day.

This tells you the mood far more accurately than auctions today. Some expected and some unexpected suburbs below ($m+ sales in last fortnight).

Balwyn (5); Brighton (7); Caulfield (11); Docklands (3); Eaglemont, Elsternwick and Elwood (4 each); Hawthorn East (5); Malvern (5); McKinnon (3); Melbourne (5) and how about Mounts Eliza and Martha (6 between them); Surrey Hills (4) and Williamstown (4).

Interest Rates, Population Pressures, Volcanoes  – not sure what is going to stop this speeding train but it does need to and should slow down some time ……..

FIRB rule changes and major price increases confirmed.

The REIV trend chart confirms the effect on prices the FIRB rule changes had in March of 2009 and the leveling off that occurred when the Aussie dollar started to strengthen strongly against the US dollar (relevant to the Chinese community) later in 2009. With the help of Canberra, the Chinese community single handedly (a bit of exaggeration) rescued our Inner East $M+ property market and whether you like what is happening now with prices this was the beginning, one of the catalysts for the incredible 2009 price improvements right across Top End Melbourne.

Liar Liar Pants on Fire

Hi I’m Mal James and some people think I’m a liar.

It’s a bold statement. Is it grounded in truth? Initially, when representing a client, if I do not know the other side well, I instinctively hold information back. I offer information in a structured way, which helps me in assessing the objective and subjective connection to whatever information I perceive they control. If I am asked a direct question, but I believe that it is not in my client’s best interest to give up that information, then, at times, I will make a statement that may not disclose the whole picture or may allow confusion. Eg Privacy of a client’s identity or limits.

So, to some people, I am therefore a liar. That’s fair enough – you can call me what you like, some people do. I also assume that, at any time, I may be lied to – not always to deceive but I assume that some people are communicating to me in a way that, if I want to jump in over my head, then they will let me do that.

What is a liar?

Is it one who makes false statements? False is a most interesting word with a myriad of meanings and powerful consequences, depending on the interpretation applied in each and every specific instance.

On the definition of making false statements is Channel 7 weatherman David Brown a liar when he tells me tomorrow will be sunny and it’s not? Is Eddie McGuire a liar when he says Collingwood will win and they don’t (it seems he could be an infrequent liar this year) or is your bank manager a liar when she promises something will happen by next week and it doesn’t?

In real estate, is Low Bidders Real Estate’s Artina Deco a liar when she says a property should go for $X and it sells well above reasonable expectations, meaning she is 12 per cent out? Is Top Drawer’s Eddy Wardian a liar if he says a house will be on the market at $Y, the vendor changes their mind and it’s not? Is Victor Rian of Home Sweet Home  a liar if he says Z will be sold by tomorrow and that doesn’t happen, because a previously trustworthy buyer recants?

Are any, or all, or none of the above liars?

You may say lying depends on intent. In the end, does that really make any difference to you?

Is it important?  It was rainy, Collingwood lost, the loan didn’t go through or you missed the property.

Is it the lie itself that is of importance or the rules you apply and your reaction to the lie?

The community views deliberate and accidental “lies” very differently in law, despite in many cases the consequences to the “victim” being the same.

Let’s forget the word semantics. Let’s say an agent told you the reserve on a property is $2.45 million when, in fact, he knew it would not be sold for under $2.7 million, or, conversely, it could be sold to you at $2 million. Is it the deliberate lie or what you do with it – and how you react to it – that is the issue? Or does the lie itself determine the end result?

A deeper question is how should a lie affect you?

That may lie (excuse the pun) in the rules you apply to the circumstance.

If you perceive buying a home as being like a relationship, then you will probably react very differently to a lie or liar than if you perceive buying a home as like a business transaction.

What is the right way to react to a lie?

For me, truth or lies are mostly varying shades of grey – even the ones that seem black and white have shades of grey. To be honest, in business, I prefer truth but I’m not fazed that much, if at all, by a lie. In my personal life I take a very different stance. You may have an alternative take and fair enough, but if that different take involves an emotional response that doesn’t maximise your outcomes then …..

Is lying right or is it wrong?

1.  Is wrong related to unacceptable behaviour or self-interest or the greater good?

2. Unacceptable behaviour usually revolves around

• community self-interest (standards, laws etc) and/or
• individual self-interest (your opinion).

3. If it’s right for you but wrong for other guy – is it right or wrong?

Your self-interest opinion may be different to mine, in turn different to the seller’s, the seller’s agent and different again from community expectations. A current real estate and lying conundrum is notional propriety and the disparate self-interests of underquoting.

So, is a lie always right or wrong? You know, truthfully, I’m not exactly sure. We are taught that, morally, a lie is always wrong. I think a lie that kills a soldier is wrong but, if it saves 100 others, maybe it is right to tell a lie in those circumstances. A less dramatic situation is whether a lie is wrong that gets two parties together on a $2.5 million deal, which would not have happened but for the lie and the fact that the deal is in the best interests of both the buyer and seller.

Does a lie really matter?

Let’s return again to the example of a house quoted at $2.45 million, when, in fact, it can be bought at either $2 million or $2.7 million. Is the real issue the lie of $2.45 million? Or is the real issue the fact that you might get it at a different price if you know how? Is the issue that the lie is a danger to you or is it that you don’t have a lie detector process that is the real danger to you.

If you have a tried and true process – in other words a certain set of self-interest rules (such as the CAN process that we use) then is a lie a big deal?

If you have a process such as the CAN process,  then no matter what is presented, you or your advisers will break it down and look into it in an organised and beneficial self-interest manner. You will save flair and risk for the last little leap of faith when the agreement gap is small and all other elements of the deal have been explored and confirmed. Your procedural disciplines will discourage reactions that can be dangerous for you in the event of a lie.

In real estate, when you have such a process, liars are just interesting people you meet along the way that present opportunities to you rather than dangers.

If, however, you do not have a solid set of rules such as the Clarity-Assess-Negotiate process, then liars are Melbourne Real Estate dangers to you.

Is the issue in home-buying the lie or the process required to obtain the truth?

Finally sometimes the liar is within

Yes, some liars are faceless agents representing their clients. However, for some buyers, a far more dangerous liar is part of the inner sanctum.

He says to his family. “It’s just bad luck” that he keeps missing out. He is constantly surprised by the actions of agents, the process of real estate purchasing, the sold prices compared to the quotes. He has missed numerous times on homes his family wanted to –and should have – bought.

Or it’s a she: one who expects history to not repeat itself, just for her, and reacts badly when it does. She ignores that her emotional world of buying a home has collided head-on with the unemotional world of selling agents. She has taken no action, and made no change to her modus-operandi to cope with the emotional/unemotional disparity.

These liars take a “she’ll be right” attitude and say to their family “Let’s move further away” and accept less than they have to, or they say “Let’s look again in five years time, when prices will be cheaper.” Furthermore they take the identity of a victim, a victim with a family and worthy of pity, but a victim without a family home.

In real estate, and in life, some lies are very wrong and can hurt deeply. We have all seen and experienced that. However, lies can allow beautiful things to happen. As truth does; lies save and destroy. Truth and lies are a part of life. Your level of understanding, management and reaction to lies will ultimately determine your short and longer term property outcomes.

Buy happy

Mal

Footnote: Clarity on my position: I personally think truth adds considerable value to the home buying process. The best agents, deal makers and negotiators know how to use both lies and truths to maximise their client’s position and most do so with little emotion. Most experienced negotiators realise truth often bridges gaps that lies cannot. Please, for all my talk of lies, most of the deals James Buyer Advocates are involved in with high-quality selling agents are often win-win and with a high degree of truth. Truth and lies are why again and again we outline the benefit of professional buyer and seller agent relationships.

Rocket Rodney Morley and Marvelous Mike Gibson; Real Estate’s dynamic duo usually playing on opposite sides - this time K&B and TBM were working together to extract a lazy $10,000,000 plus from the market. Toorak: 4 Trawalla and next door: Sold $10,450,000. 4 bidders.

Abbotsford: 8 Turner: Bidder 3. Bought for $1,520,000. John Piccolo of Woodards talking 3 bidders through their options.

Since the start of 2010 we have seen buyers itching to get into the market… the amount of bidders in the North has increased as the weeks have progressed.

Where is everyone coming from…? Well it appears a combination of people who missed out in 2009, investors returning to the market and obviously a new bread of buyers that made the decision to purchase at the beginning of 2010. Add this to positive media commentary, historically low interest rates and relatively low stock levels and you have the ingredients for a boom. But values already rose 20% in Melbourne last year so that should mean we are at the end of the boom…? Correct?

Well the truth is we really don’t know, but we are seeing strong results in the market place and we are seeing bidders in serious numbers.

Take 290 Lennox Street, Richmond sold by Edward Hobbs of Biggin & Scott quote range of $700,000 – $770,000, 8 bidders in totals and more importantly 4 bidders still in the race as the property moved above $900,000, eventually selling for $985,000. The main story line here is bidder depth and market movement with 3 bidders who would have paid above $900,000 for that property that are frustrated and still active in the market place. It was a great auction with Mr Hobbs adding “the market is red hot at the moment with vendors extremely happy achieving prices above expectations across the board”

Similar storey at 102 Keele Street Collingwood sold by Paul Markovic of Peter Markovic, huge crowd of over 150 people, so big that the auction was stopping traffic. The original quote was $490,000. Bidding was opened strongly at $570,000 and then bids went to – $620,000 – $670,000 – $700,000 $710,000 $740,000 in literally a matter of moments. Needless to say the vast majority of the crowd were in amazement. There was a total of 6 bidders however I suspect there was the same amount hidden in the crowd who did not manage to place a bid – again frustrated bidders and lots of them.

David Oster of Jellis Criag Ivanhoe indicated that when the market was strong in 2007 that used to mean  4 or 5 bidders, now it means 8, 10 sometimes 12 bidders. Mr Oster aslo added “there are frustrated and desperate buyers out there who just want to get into the market” and importantly “despite price increases properties are still more affordable than they were in 2007 as interest rates at that time we approaching 10%”

So with the amount of bidders  and people rushing into the market are we starting to see a pack mentality? remember Warren Buffet’s famous Quote -  ”be fearfull when others are greedy, and be greedy when others are fearfull” I don’t yet believe its time to be greedy nor fearfull its just time to be informed.  There are prices that we see out there that are well over the odds and there are prices out there that are just strong results given strong market fundamentals – its very important to know the difference.

Know Your Market!

Andrew Gibbons (Hocking Stuart) had his work cut out for him today: Grattan Pl Richmond passed in on a vendor bid.

Another strong week of Auctions putting to rest any doubt that a seller’s market has not started with a bang.

Out in Eaglemont Andrew Sein of Duncan McIntyre was reportedly stopping traffic with over 150 people attending the auction at 22 Waldemar Road – 7 bidders emerged from the crowd and the property sold  for $1.37 million . The property is a development site on a moderately sloping block with multi street frontage (976m2) showing $1,403 per square meter – This is in contrast to the sale at 46 York Avenue which sold on the 13th of February for over $2,100 per square meter – obviously a premium being paid for the Ivanhoe East location and level topography.

Another strong result for Anthony Lapadula of Jellis Craig in Coburg with the sale of 13 Strathern Avenue selling for $711,500 against a reserve of $625,000. Coburg at the moment is really struggling for quality stock so that may have proved a slight windfall for the vendors in this instance. A good result in Richmond for Liz Walker also of Jellis Craig with 6/659 Victoria Street, Abbotsford being bought for $875,000 against a reserve of $800,000 – There were 6 bidders at this auction who no doubt fell in love with the intimate views of the Yarra river.

With the market moving it also appears some vendors are getting slightly ahead of themselves - at 24 Campbell Street, Collingwood on an asking price $520,000 – $570,000 the property passed in at $631,000… With over 100 people at the auction and several bidders in the crowd I am sure there will be some questioning as to how far do you have to be over an asking price before a property is actually for sale.

Despite all the strong results there are still some patches in the market…  5 Carlyle Jackson Lane, Eaglemont – passed in at $1.45 million on a vendor bid. 1068 Heidelberg Road, Ivanhoe – very slow auction, 3 bidders – finally passing in at $1.16 million (main road location). 17 Grattan Pace, Richmond – not a single bid passing in with a vendor bid of $870,000 – that are not selling.

Know Your Market!

The Not So Old Gun? Tim Fletcher: Are Fletchers becoming the Top End third force in Boroondara? Kew: 10 Vista: 200+ people. Five bidders: Sold $3.936 million.

It’s 6pm Saturday and the James Clearance Rate for million-dollar-plus auctions is 84 per cent on the 25 auctions we attended today.

The market today (Saturday) was again very, very strong. In fact, this is one of our biggest ever clearance rates for $1m+ homes. This, despite stock increasing and interest rate talk. Still two big weekends of auctions to come before Collingwood’s premiership and Bidderman is steady at 2.2 bidders per auction. Supply is up, demand now obviously hasn’t missed a beat and subsequently prices are reflecting that. The stand-out result was Kevin Sheehan’s 10 Irving Road auction – a small sub-500 sqm block had two ferocious bidders fighting it out to more than $3.5m or $7771 per sq metre. Where is this going?

This week we have featured the portrait work of one of our best auctioneer photographers, Julia Atkinson. Most of the bigger pictures are her work today.

A number of buyers and clients now use our James Full Ratings system to help them answer three questions:

1. Is the home right for me?
2. Is this a good home and what does the market think of it?
3. How much?

What have we learnt over the years and what are our thought processes behind the Ratings system?

Introduction

Nobody can predict with complete certainty the behaviour of each individual buyer or seller in a property exchange. However, it is possible to predict with a high level of certainty how large groups of human beings (market) will react to a home.

That is, there is a body of facts or truths that, when systematically analysed, show the operation of general laws with regards to home exchange. It is therefore a science as medicine is but, arguably, not a pure science like mathematics is.

The Science of Property has laws. We have based our Ratings system and CAN process on those laws.

These are those laws as we see them.

Law One – Outcomes

Home Ownership or control has two Human Outcomes:

• Emotional - a place of belonging.
• Financial - a store of wealth.

Law Two – Characteristics

A home has three main characteristics. The 3Ps are:

1. Property (eg building, land size).
2. Position (eg near CBD, street).
3. Price that is asked or paid.

Law Three – Position

Position is the single most important characteristic in determining financial and emotional outcomes

Law Four – Property

• Building and land characteristics can have a major effect on an owner’s emotional outcomes through light, space and flow.
• Financially, the building characteristics are an integral part of cash flow, as the land characteristics are the key to growth. Building and land can be diametrically opposed in terms of longer-term value.

Law Five – Price

Unless the transaction is a major distortion from the wider group (market), then price, while thought to be the most important, can be the least important characteristic in a longer time frame with regards to maximising financial and emotional outcomes.

Price is a reflection of two opinions: the buyer and the seller matching expressed opinions at a particular point in time. They are often (but not always) influenced by a wider group of opinions (the market).

A buyer has flexibility of choice on all three property characteristics; a seller only has flexibility on one characteristic – Price.

Law Six – Emotion Outcomes

The nesting instinct/comfort felt by the owner(s) in the home’s characteristics is the key to long-term outcomes.

Law Seven – Financial Outcomes

Price growth, through its compounding effect, is the key determinant of financial outcomes.

Cash flow and risk are the riders.

Law Eight – Relationships

There is an interrelationship between owner’s outcomes and property’s characteristics.

They are different for each property and owner combination. However, across large populations and over long periods of time, owner outcomes matched with property characteristics fall into predictable patterns.

Law Nine – Control

People who “control” or own properties generally have better emotional and financial outcomes than those who do not.

This is true of individuals, as well as of whole societies.

Law Ten – Time

Time does not create equal financial and emotional outcomes for all.

Time magnifies the quality of the owner’s decision (good or bad) in relation to the property’s characteristics (good or bad) and therefore, ultimately, the owner’s outcomes (good or bad).

This we call the Gap Law.

Law Eleven – Demand and Supply

Across a wider market, home prices will rise (unless artificial controls are in place) if buyer demand exceeds seller supply, and home prices will fall if seller supply exceeds buyer demand.

Law Twelve – Migration Demand

Overall population is the key determinant of demand and migrants have the greatest influence on change.

With new migration comes new opinions and those opinions are reflected in price, which ultimately establish new market price levels and requirements.

Law Thirteen – Land Supply

The most consistent long-term determinant of supply is land content; that is, the combination of the land’s characteristics: size, position and allowable use.

Land’s improved value, eg buildings, and available money supply are other supply determinants but they do not have the level of long-term effect that land content has.

Law Fourteen – Risk

Risk (things not happening as planned) is increased with poor property characteristics; however, it is not isolated to the 3Ps.

It also rests with the owner’s characteristics (cash flow, debt, family and physical etc).

Risk and outcomes are determined at the matching of the property’s 3Ps and the owner’s characteristics.

Process

To best match an owner’s outcomes (financial and emotional) to a home’s characteristics (price, property and position), we have found that the following process works. You may, of course, have no process or a different one.

The CAN process:

1. Clarity
2. Assess
3. Negotiate

And  the Tools we use:

• My Home Score
• Home Ratings
• Control Price

We do appreciate people coming up to us at auctions and, yes, we do enjoy putting this together and the input we receive from the public and our clients. If you think the above rules makes some sense, we missed something or is a load of old codswallop, then we are always happy to hear from you.

We can forget happy wife, happy life for one day – happy father’s day tomorrow.

Mal, Adam, Kris, Grant, Eddie and Melinda

Richmond, 2 Gipps: I'm Chris Murphy and don't mess with me (please). Three bidders did not, buying at $1.878 million under the hammer. Good quote at $1.7 to $1.8 million. Good result. Good agent.

It’s 6pm Saturday and the James Clearance Rate for million-dollar-plus auctions is 60 per cent on the 20 auctions we attended but that may change by Sunday.

The market today (Saturday) was again strong across the board but crowd numbers continue to drop and there was a 40 per cent pass-in rate at auctions we attended (and higher if you remove the bought befores) – this is obviously related to the number of homes on offer. The jury is out as to whether this will lead to a price leveling, because today says quite clearly it is strong and steady as she goes, despite big stock increases. It was a shocker of a day weather-wise; well done to our photographers on getting a few good snaps and thank you to the auctioneers for allowing us to take those snaps inside.

Sunday note: The Sunday James clearance rate is now 70 per cent clearance and the norm and we’re not seeing any stat today that says the market may be leveling. Auction stock levels have increased dramatically and our Bidderman (bidders per auction) actually moved upwards. There are three big weekends of auctions to go until the footy is over and this is the real test of market depth and strength. If sellers get through this unscathed, then it may be next year or another GFC before we see any meaningful price leveling. The past few weeks may have been no more than a lull. But let’s wait and see, as a month is a long time in this market.

Markets

How do we know what is happening in the market and what do we think the market is doing? Why are markets  important to read?

We, as buyer agents, need to read markets because our clients expect us to be able to offer information on expected price, reasonable value, expected competition, negotiation strategy and so on.

To be able to read markets reliably, we have found that, for us, Bidder Depth or Bidderman is the most reliable market reader. It is, in fact, the market’s DNA. It shows healthy and unhealthy, rising and falling, strong and weak markets. And, in our opinion, it does it better than clearance rates – although we still like this a lot as a measure.

The Bidderman measure is better than how you went against agent quote or median price or other measures that are either artificially manipulated or well out of date.

Our pre-auction offers and post-auction offers rely on Bidderman data also. We keep Bidderman records on agents. Some agents have lots of bidders because they communicate well and others have smaller numbers. We also keep records on types of homes – eg Bidderman is strong and alive for family homes in Hawthorn but has gone missing on high-end apartments.

We are finding the media are now starting to talk about a very strong rising market. That was true from February to July, when people were reporting doom and gloom. We are now not so sure that the market is in a strong rising phase. Our bidder depth per property is dropping (except today) and this may be telling us that the market may be in a leveling phase, price wise. But it is still too early to call and, of course, may change direction again anytime soon.

So, just repeating: we are not saying that the market is falling in price or will fall soon, and we are not even convinced that it is leveling, but the price increase incline could be flattening after an incredibly steep rise in the past six months of anything between 10 and 20 per cent. In the case of Boroonadara, that represents a return to the peak; in Stonnington, a return to near the peak; and, in Bayside, a return towards the peak but nowhere near as strong as in Boroondara.

As stock levels increase – and they have dramatically in the past two weeks, as sellers seem to need to get their home auctioned  before the Grand Final, when all Melbourne stops to witness a Collingwood victory. Whoops! Got sidetracked – sorry! Stock level increases in the past few weeks are, in our opinion, the biggest this year, and this is having a significant effect on crowd numbers per property. We have recently been below (but above today) two bidders per auction on our 20 Auction Basket we review each Saturday. In July, we were above three bidders per auction average. By way of comparison, in late 2008, we were below one bidder per auction on average.

We need to see how the increased stock levels are taken up before the Grand Final (the last Saturday in September) and what happens immediately afterwards before we can say the market has altered course (if indeed it has). We may be just having a slight breather in bidder numbers as bidders assess the lay of the land and they may return to average more than three per auction, thus pushing up prices.

It was bidder depth that first alerted our clients to a possible market change in February 2009 and it was a significant increase in bidder depth that led us to push harder for our clients in May. It became clear the market was about to explode and it did.

There are two slides in The Million Dollar Price Worm to the right of this article that hopefully explain bidder depth a bit more of, as we say, Market DNA.

The first slide shows where we think the market has gone most recently. The gyration at the pointy end in August is meant to represent a possibly changing market. It may also represent a false point, as there is so much stock on the market and buyers are there, but are more neutral in their actions at present because they can see more stock coming on. However, they may go back to stronger bidding once stock levels are clear, take up all that stock and then demand more.

Slide 2 shows the MARKET DNA. This example is our Saturday Key Auction basket (the 20 auctions that we report on each weekend). A stronger market’s DNA in July 2009 is at the top and a weaker market’s DNA in November 2008 is below. What does this tell us? It tells the trained observer plenty and selling agents also keep records on numbers through opens, contracts sent out, second inspections etc. All are pointers as to whether to take an early offer, to run to auction, to adjust price etc. Similarly, accurate bidder depth number on markets, on specific parts of markets – eg Kew land or Malvern period homes or inner city apartments – and on agencies really help cement negotiation strategies going forward. But this information needs to be up to the minute. The line, in our opinion, is market balance. It’s very approximate but when we average between one and two, or around 30 bidders per 20 auctions, we think the market will remain even over the next short period. Above the line of, say, more than two bidders, the market is strengthening and prices should go up. Below the line, on average, the market seems to be weakening and prices should ease.

PRICE INCREASE

When there is good bidder depth, the market is strong because, if one or two bidders drop out, then the bidding is taken up by others and almost all homes sell and some sell well above market.

PRICE VOLATILITY

When the bidder depth starts to wane, there are spasmodic results as some homes simply do not have the bidder depth to push the top bidder higher or, in fact, get a deal done but some homes still sell incredibly well even with one bidder because that one bidder didn’t know the market is changing or had changed and they were the only bidder – a good selling agent was also involved.

PRICE DECREASE

And, finally, the market starts to fall across the board when everybody knows the bidder depth is simply not there.

Quoting

The heat has gone out of the issue of quoting. Why? Because there are properties to buy and lots of them – buyers have more important things to do! We acknowledge that we have changed our views during this debate. We no longer support mandatory declared reserves, just as we would not support mandatory declared maximum buyer offers (it was Iain Carmichael and Jeremy Desmier who turned us on this issue). But we are seeing a few publicly declared reserves now and we definitely think that voluntarily declared reserves is a plus. We acknowledge that there is a selling agent mindset of conservatism, which we still find hard to fathom. Why can’t an agent say something along the following: the land size of this home is 720 sqm and land goes for around $2300 per sq metre, so that says around $1.6 to $1.7 million for the land. We think this building is worth around $400,000, because people do keep these buildings, and it would cost around $600,000 to renovate to bring it up to a million-dollar building. There are renovated homes (building + land) selling in this area for $2.6 to $3 million and therefore we think that $2 to $2.2 million is a good basis to start your thinking on this particular home if you are going to renovate this building.

But, with a bit of tongue in cheek and hopefully some humour, here is a representation of what some buyers are hearing more of lately. It is a compilation of things and I have exaggerated it a little to get a point across, but it is not without some validity:

Set the scene at 12 Great Street Canterbury: picture yourself walking in the front door at a quiet midweek open-for-inspection a few weeks into the campaign and being greeted at the door by an impeccably groomed and badged agent. Below is all the agent speaking – like in a Bob Newhart or Monty Python skit.

“Hello, my name is John from agents Conti and Bostock. Can I take your name and number? Thank you, here is a brochure. Sooorry I didn’t hear the question. You want to know pppprice? Mmmm, that’s a tough question. It is company policy to not declare that. Sorry, what was that? You’d like to buy and you want to know the price? Yes, well, we are not allowed to say price. You want to offer. Are you sure? You don’t want to go away and think about it, talk to another agent? Oh, you want to offer now? Oh, great. $1,630,000 – that’s your offer? No, it’s too low. Yep, too low. You’re telling me you would like to know what offer would be satisfactory? Can’t tell you that – I don’t know it. Sorry, you want to know how I can refuse the offer of $1,630,000 if I don’t know what is an acceptable offer? Sorry, I mean I do know the price and that offer is too low – it’s just that I can’t tell you. Madam, this is unfair to ask me these tough questions. After all, I’m just the agent selling the home. I have other people to hand out brochures to and calls to make. Look, I’ll be honest, lady, this is how it is. I don’t know the price and, even if I did, I can’t tell you and that is why your offer is not enough. I’m sorry, I can’t talk to you anymore. You’re a buyer and I’m just not authorised to discuss price or buying this home with buyers. Now, next person. Hi, my name is John, here is a brochure, can I take your phone number …”

It’s like going to a coffee shop but you can’t get a coffee as the barista only makes sandwiches. The uproar was not that agents quoted – no, buyers want agents to quote – it’s just buyers would like agents to quote professionally. And, yes, buyers need to understand that selling agents represent sellers and that price is a a living, breathing thing and price quoting, even with experts who are genuine, is not an exact science. Let’s continue to ask questions of those that have gone missing, that have become so estranged from dealmaking that they can’t TALK PRICE TO A BUYER (PROFESSIONALLY).

Late, Disputed and Non-Bidding

In our Negotiation Section below, we have an interesting discussion on late and no auction bidding with expert auctioneer Phil de Fegely. This topic has had some ongoing interest, especially with Marika Dobbin’s page 3 article mid-week in The Age and I got the “interesting Market Insight Mal” comment  from Peter Bennison of JP Dixon when I was through one of his opens recently. I didn’t read this as a compliment. I read it as code for “You’re wrong on late bidding, Mal”. So I thought I’d better investigate further and, while it’s not that common at auctions (perhaps one or two deals out of 1000 have late bidding), we thought it would be good to hear the issues from an expert. Phil de Fegely coaches a number of Melbourne’s best auctioneers, as well as those who are up-and-coming. Yep, that’s right, auctioneers have coaches, go to training sessions and do courses, and yet many buyers still think they can just rock up at auction and they are taking on somebody akin to a first-day cab driver. Occasionally you are, but if it is an auctioneer from Marshall White or Kay and Burton or Jellis Craig or Bennison Mackinnon or a Phil de Fegely-trained auctioneer, you are taking on somebody akin to a skilled league footballer (granted, with a physical fitness cloud). But we digress. Phil’s Q&A and audio is below in Negotiation Corner.

Buy Well and Make Good Decisions

Mal

Marshall is a quiet achiever in the Caulfield area. A decent man who communicates well and honestly, we have always enjoyed our dealings with Marshall. But that does not mean in any way that he is nothing but difficult on price shifting. We have had a number of pre-auction negotiations where we have made solid offers and Marshall has bravely continued, only to be proven right more often than not.

Mal: Family status and where do you live?
Marshall: Married with two children, a boy and a girl, ages 12 and 10, in South Caulfield.

How long have you been in real estate and what is the company you work for?
In real estate 18 years. Hocking Stuart opened the office at 622 Glenhuntly Road some 10 years ago.

Where do you mainly work (area) and what types of homes do you specialise in?
Elsternwick, Caulfield South, Caulfield North, Caulfield East ,Caulfield ,Glenhuntly and Carnegie.

What makes a good investment?
Time. Property, as a rule, doubles in value every 10 years.  Buy in a good street and generally something with potential.

What makes a good family home?
A decent block size and good accommodation.  You need something that you won’t grow out of in a hurry. The stamp duty is a killer.

What makes a good buying decision?
It just feels right. It ticks most of the boxes. Don’t be too picky.  No house/apartment will EVER be 100% right.

Best investment decision you made?
Not selling anything.

Worst investment decision you made?
IT shares.

What are the top three precincts in your area, how big is an average block, what type/style of home, what is the dirt price and how much for a renovated home today?
Elsternwick 500-600 sq m. About $1200 per sqm. Expect to pay $1-1.2 million.  Caulfield South 700sq m. A real blend of homes, some ultra-modern, some period. Prices vary between $800,000 and $1.5 million.

Three underrated streets in your area for family home buying (where, price, type and style, would they have to renovate)?
Trevelyan Street Elsternwick and Caulfield South Carlingford Street. Buy a big block or a new home.
Note: Marshall provides more indepth views in audio (see link above).

What would you say to a young couple with $800,000 looking for a family home specifically in your area – eg (where, type and style, would they have to renovate)?
Get a decent size block. Something with potential.

What would you say to  a downsizing couple with $1.5m specifically in your area (where, type and style, would they have to renovate)?
Elsternwick or Caulfield South/North, single level or something on one level. Don’t make the mistake of doing it to save money or to decrease your mortgage. It should be a lifestyle decision. Enjoy yourselves!

Buyer agents: yes or no?
Yes.  But if you do use them, trust them and let them do their job.

Apartments or houses?
Depends on your needs.  For investment with return, an apartment.  If you want growth, go for a decent land component.

Auction or Private Sale?
I prefer auction.  It’s out in the open.

How can a seller maximise their value at sale?
Let the agent quote it appropriately. Let them guide you.

What are the dos and don’ts for buyers when dealing with selling agents?
Be open to a certain extent. We find it all out eventually anyway.

What do you think are the opportunities now with us?
Great buying, if you know what you are looking for.  Make sure you pick the right properties with realistic vendors. VERY IMPORTANT.
Note: Marshall provides more indepth views in audio.

Where is the market going in 2009 in your area?
At the moment very strong from $400-$800,000.  Trend will continue with interest rates the trigger.
Note: Marshall provides more indepth views in audio.

Who will win this year’s premiership and why?
Collingwood. If the market can improve then, so can the Pies win a flag.

If a potential seller would like an appraisal or wishes to sell their home how is it best to contact you and what are your details? 0418396981 or mrushford@hockingstuart.com.au

Next week: Madeline Kennedy from Marshall White.