Big auction, big crowd and big bidder numbers: 98-100 Mont Albert, Canterbury, Alastair Craig (Jellis Craig), under the hammer, $3,380,000, 6 bidders

At 6pm on Saturday, the James Clearance Rate for $M+ was 50% on the 36 auctions we attended. Auction-wise it was only the second 100+ auction day for $M+ homes in Inner East and Bayside since Autumn – and all things considered it wasn’t a shocker. However it certainly wasn’t positive news for sellers with high expectations. You can feel the market is slipping away a little more for them. We are firmly in a downward spike (which started on Preliminary Final Day 2011) on the back of an overall downward trend since Anzac Day 2010.

The exceptions to this blanket statement are quality, well priced Top End homes – they still have some real ooomph!

Going forward, there is a fortnight of decent auction numbers to go (around 80 on each of December 3rd and December 10th) before things start to really shut down for Santa.

The Weekly Review Bidderman, our demand indicator, was 1.5 bidders per auction this weekend. But this was again very polarised around a few good auctions, with the majority having  little multiple interest.

Given all of the above, we have adjusted our James $M+ Market Indicator below Buyers Market to Cool.

The downward price spike may lead to a shortage of quality stock going forward, given that discretionary sellers don’t come into falling markets unless they cease to be discretionary sellers. There are a lot of stales (long term pass-ins) and rebadgers (unsolds from earlier in the year coming back to market) starting to clog up the machinations between buyer and seller in late 2011.

Next year’s 2012 Autumn market has little choice but to start with this anchor of overhang. How individual buyer and sellers will go depends in many ways on their goals and the skill of their buying or selling agents.

However, amongst this negativity there was a glimmer of positiveness from a mid week auction (Wednesday 23rd November) we attended.

58 Glyndon Rd, Camberwell (Jock Langley of Abercromby’s)
Private Auction only 7 people in attendance.
James Home Rating Excerpt: Big home in the ‘almost ‘burbs’ on 2100 sqm with tennis court – it’s all about the land.
James Auction Report BOUGHT over $3,300,000:  We attended this mid week private auction  just in case a bargain was to be had. No bargain, with a very healthy auction by Tim Derham of Abercromby’s. With three bidders it passed in for $3,300,000 and a bit. A deal was negotiated afterwards in excess of that figure. Strong result for outer Camberwell!

“Round the Grounds Saturday – Overall Stonnington was a shining light. Bayside’s woes are increasing due to long term auction overpricing at the Top End

• Port Phillip – In a month when no reported sale has been over $2 million, this weekend was a continuation of the weakness with a 20% Clearance Rate
• Boroondara – Under the weight of stock numbers, Boroondara continues to ease – 43%
• Bayside – High end Brighton is not happening (outside the Golden Mile) and because of the continuing number of pass-ins, buyers are increasingly nervous, asking themselves: “What is the right price – is it a bit less or a lot less?” – 35%
• Stonnington – Island in a storm. Vendors must be listening to their agents again with a surprisingly strong number – 67%.

Overall Market Summary for Spring 2011

In 4 of the previous 5 years, at this time, buyers have been keen as mustard to buy anything that was on offer – GFC 2008 being the exception.

In late 2011 buyers are simply not doing that. They are not lurching around like disaster victims looking at near empty supermarket shelves, snatching at stale stock, overpriced offerings and out of date goods. Buyers are there, but they are far more discerning than in years gone by.

There is minimal panic as most buyers feel 2012 will be better for them. Whether or not that is true remains to be seen.

As a buyer, if you can mentally cope with a falling market (and prices have fallen for most of the year on all properties except the best of the best), then it doesn’t get much better for you with the solid stock levels we’re seeing now  (as long as you can find what you want).

In this last few weeks of Spring, buyers have been able to consider purchases without having the spectre of “there will never be another” hanging over their head, because … there has always been another. That’s not to say there has been no competition for good homes, but it has been a far more civilised buyers market than for much of the last decade.

As for buying and selling agents, transactions have been steady, not at the heady levels of last year and we have all had to work harder (not a bad thing); but business has been solid enough to keep the wolf from the door.

For sellers it has been a different story. They have fallen into two categories: those that listen and want to sell and those that don’t. Or to put it another way: there are those that have a well priced quality offering and those that don’t.

Not that we’re picking on sellers. In 2011, buyers have also needed to listen. If it was good quality and well priced then you needed to compete or else you missed out.  If you bought it “cheaply without pressure” then possibly you bought what nobody else wanted and that is not a good thing going forward.

Late 2011 has in our opinion, been a watershed, one where sanity and balance has returned to the markets and it has been buyer led.

If 2008 was the year of the GFC, 2009 the year of the rebound, 2010 the bumper year then we think 2011 has been the year of the split and balanced markets.

The Inner Melbourne $M+ market is right now a real dichotomy – a market of two dimensions – there are the haves (properties with bidders) and the have-nots (properties with no solid interest).

All the data we collect supports this.

Bidderman: Look at these stats over the last 3 weeks, which highlight in our opinion exactly what has been happening to a large extent all year. Two weeks ago we reported 27 bidders on 5 homes and 14 bidders combined on the other 21 auctions. Last week the same story – 17 bidders on 4 homes auctioned and only 15 bidders combined on the other 21 homes that we reported on. This week we had 26 bidders on 7 homes and 24 bidders combined on the other 27 homes we reported on. If you are hot, you can be really hot and if you’re not then you need a panadol and a good agent.

Clearance Rates: Basically on auction day the chance of selling is 50/50. That is for every home the market judges worth buying it also judges one is not worth buying (at the asking price).

Stales: (long term pass-ins) The market is acting on properties where prices are adjusted, and continuing to pass over homes where the vendor remains committed to a price rather than a result. One month after Super Saturday a full third of the homes that went to auction still had not been sold. It is not true for agents to say they are all being cleaned up. They are not.

Expressions of Interest: No different to auctions. At the Top End last month we nominated 8 homes to monitor as having Expressions of Interest closing dates either side of the Melbourne Cup. Of those 8 – 4, or 50%, have sold around the proposed closing time and the others remain on the market. The 4 that have sold were goodies and they got exceptional prices. The other 4, well they remain unattached to a buyer.

With this being the second last Marketnews for the year (and by the way thank you for your support – we just recently achieved our 500,000th reader for the year to our james.net.au websites) we thought we would look at the Top 3 things buyers can do to take advantage of what is on offer before Christmas.

1)   Find: Off markets, stales, rebadgers and pass-ins. Many homes are being re-presented after failed campaigns early in the year. If they failed on price then, why pay it now? Off markets are back in season as many recent buyers would be keen to see a quiet sale before Christmas rather than wait till 2012 – there may be a bargain there. Stales – don’t give up. If it’s a home you like then revisit with a  written offer – even if the asking price is baloney. Rule One in this market: if you don’t ask, you don’t get. Man up and put the offer in!

2)  Assess Price: Use past sales carefully and change their meaning – sales of six months ago are now the ceiling prices, not the floor prices (as in previous years). The market is going backwards in price, not forwards (A graders excepted).

3)   Negotiate: - As buyers if you want to negotiate to your advantage while still maintaining a reasonable level of risk in terms of buying versus missing out on the home, then you need to be able to apply the Fisherman’s Friend Wet Fish Slap on overpriced homes. You know the commercial – where she gives him an uppercut with a wet fish. If the price is baloney and you are not going to pay it, don’t walk away – you may be doing yourself and the seller a disservice, as you may in fact be the best buyer. Go and hit the seller with the Fisherman’s Friend Wet Fish Slap and then apply pain relief afterwards. This is exactly what our selling agent friends have been doing for years in post auction negotiations. They hit you hard with a big number, then they offer to relieve your pain (slightly). So if you have a sensible price, go and offer it – you may well be the seller’s best deal and if you walk away because of your timidity, then both you and the seller lose. If a Fisherman’s Friend Wet Fish Slap is not your caper consider hiring a professional who can help you – it’s invigorating. And of course if it doesn’t have the desired effect – consider moving on.

The $3M+ market: After last week’s less than stellar showing at auction for $3M+, results were slightly better this weekend:

Bought

• 98-100 Mont Albert Road, Canterbury (Alastair Craig) – $3,380,000 – 6 bidders
• 25 Grange Road, Kew (James Tostevin) – Around $3,000,000 – 1 bidder
• 24 Anderson Street, Malvern East (Heather Elder) – Around $3,000,000 – 2 bidders

Passed-In

• 2 Collins Street, Brighton – $2,975,000 – 0 bidders
• 1022 Malvern Road, Armadale – $2,800,000 – 0 bidders
• 21 Wattle Road, Hawthorn – $3,050,000 – 0 bidders
• 68 Molesworth Street, Kew – $4,600,000  – 0 bidders
• 20 McGregor Street, Middle Park – $3,200,000 – 0 bidders

3 strongish results during the week:

Friday 25th November – 58 Howitt Road, Caulfield North has been bought for a record Caulfield price according to the effervescent Ross Savas of Kay and Burton. The price;  well can say they were talking $6 million and the calibre of the home leads us to conclude they would have got that, so over is definitely not out of the question. This was a truly great home, our James Home Rating of 838/1000 is one of the highest we have scored this year. The market is obviously still recognising and paying for great quality.

Thursday 24th November – 25 Montalto Avenue, Toorak ( Nicole Gleeson) – Basically land only for the area as the home requires a serious reno. Passed-in last Saturday on a lone vendor bid of $3,450,000 and bought Saturday for an undisclosed amount.

Monday 21st November – 6-8 Myrtle Street, Brighton (Barb Gregory – Marshall White Brighton). Last weekend’s biggest auction – and another private one at that, was completed at a price over the quote of $6,000,000. So another solid Golden Mile sale with land in excess of 1600 sqm plus some solid improvements and another good result for Marshall White in Brighton. While private auctions are very secretive they seem to meet the vendors’ requirements for privacy and a buyers’ liking for transparency – perhaps a way of the future for some key homes.

BRIGHTON EAST, 13 Holmhurst Crt: Mark Earle (Buxton) does his best to encourage bidding but to no avail, passed in $2,000,000, 1 bidder

Biggest Sale: 98-100 Mont Albert Rd, Canterbury, Alastair Craig (Jellis Craig); Under the hammer $3,380,000, 6 bidders
There was a real buzz before the start of this auction and the team at Jellis Craig knew it as well, as I counted at least six agents all coming along to support auctioneer Alastair Craig. The crowd size was decent too with around 70 crowding around the kitchen and family room. There was no need for a vendor bid as a confident opening bid of $2,600,000 was made and the auction was off and running. The bids came from all around the room and at times it was hard to see who was bidding because of the tightly packed crowd. But this did not impede on the flow of the auction and once Mr Craig flicked the switch and declared the property on the market a roar came from the crowd. The increased chatter and activity brought a tingle to the spine as the bidders knew things were serious and the auction moved up a gear. Six bidders were now fighting it out, each trying to outfox each other with small bids and big knockout bids; in fact all manner of tactics were brought to the table. But amongst the storm and flurry the original bidder stood firm swatting back every threat and finally emerged victorious in the end. A terrific auction and the crowd agreed who all clapped loudly and congratulated the winning bidder. (Joshua Bong)

Biggest Pass In: 68 Molesworth St, Kew, James Tostevin (Marshall White); Passed in $4,600,000, no bidders
One of the last auctions of the day and in front of around 40 people, auctioneer James Tostevin sung the praises of this fine modern home keenly (perhaps calling it a masterpiece was bit of a stretch…..). James went on to say there are many Molesworth Streets in Melbourne but there really is only one that people remember and that is this one in Kew. Fair enough I thought, good call – there are some great properties here and it is a very special part of the world. Under sprinkling rain, a vendor bid of $4,600,000 was made and after several minutes of searching for a bid and then referring to the vendor, the property passed in at that mark.  (Adam Woledge)

Bidderbuzz Auction: 14 Clyde St, Glen Iris, John Bongiorno (Marshall White); Under the hammer $1,204,000, 5 bidders
A group of 30 clutching their umbrellas scurried quickly inside this Glen Iris property.  A “simply stunning” property were the enthusiastic words of auctioneer Growling Jack Bongiorno, to the assembled group in his preamble.  An opening bid of $950,000 was promptly offered from the crowd.  With his humour, Growling Jack had those in attendance laughing at many points throughout the auction creating a more relaxed atmosphere.  With four additional bidders joining the mix, the competition for the property was obvious.  The property was announced on the market at $1,170,000 and this news sparked a flurry of bidding.  The property was bought under the hammer for $1,204,000 to the applause of all. (Kate Agnoleto)

Buyer Masterclass: Negotiating on a property is all about balancing the risks with the rewards. Find out more in this week’s Buyer Masterclass, The Risks of Chasing  a Housebuying Reward.

We Only Buy Homes

The rain didn't deter the crowds. 20 McGregor, Middle Park, Damian O'Sullivan (Marshall White), passed in $3,200,000. No bidders but a big crowd of 170.

Through the blurry eyes of wet auction watchers - this is how most of us saw today. Hawthorn, 93 Liddiard St (Lachie Fraser-Smith of Bennison Mackinnon) Bought under the hammer, $1,807,000, 3 bidders

At 6pm on Saturday, the James Clearance Rate for $M+ was 44% on the 25 auctions we attended.

The Weekly Review Bidderman, our demand indicator, was 1.3 bidders per auction. But Bidderman is very inconsistent – last week we reported 27 bidders on 5 homes and 14 bidders combined on the other 21 auctions. This week the same story – 17 bidders on 4 homes auctioned and only 15 bidders combined on the other 21 homes that we reported on. Demand is there if the home is good and priced correctly – if its not, then silence greets the auctioneer and seller come auction day.

Market Summary

The Christmas Stock Rush has really gained some momentum in the last few weeks with a large influx of private sale homes coming onto the market – especially at the Top End (see our stock graphs).  We saw around 85 $M+ auctions this weekend, and next week looks like breaking the magic 100 barrier for $M+ auctions in Inner East and Bayside. So solid auction weekends, especially for 2011.

All this has to be good for buyers. Where in recent times our main challenge has been finding quality homes – now the bulk of our work has moved to assessment and negotiation.

Spring Prices continue to fall on homes that do not meet the market.
The representation below shows clearly what is happening as Spring unfolds. New stock is coming onto the market at all price levels, particularly at the highest level. Demand is simply not there (on many homes) at the prices being asked – hence the falling Bidderman and Clearance Rates – and this is resulting in falling prices for those that don’t originally meet the market and then have to sell.

Price is such a movable beast right now so as a buyer, it is good to have an open mind and strategies (within your acceptable risk v reward parameters) that can take advantage of the lay of the land. That is not to say that all the goodies are being given away – far from it, if you have a well priced A-grader – but once a home falls into that certain category (e.g, stale, overpriced or a B grader) then significant discounts are possible if the vendor needs to sell.

But a buyer needs to know what to do, how to do it and when to do it to be successful. By example, in the last fortnight or so one property in the $3 million range was purchased for more than $700,000 off the original asking price; another was bought for  $300,000+ off the original asking price and that was a $2 million home.

Now, more so than at any other time this year, it is a true buyers’ market with Great Choice and Flexible Pricing.

Lack of auction price matching continues this weekend  – $M+ Clearance Rates.

• Bayside – 44%
• Boroondara – 55%
• Stonnington – 39%

$3M+ Segment:  Some solid mid week sales – but lousy at auction today.

• 4 Kiers Court, Caulfield North (Phillip French), one of the more distinctive homes I have seen this year, is now reported as sold at $3,475,000.
• 181 Gipps St, East Melbourne (Sarah Case), over 1000 sqm, was bought undisclosed and finally to complete the RT Edgar trifecta
• 29 Loch St, St Kilda West (Anthony Grimwade), almost 1000 sqm plus period home, was bought for $3,800,000.
• 3/61 Nepean Highway, Aspendale (Rowan Thompson),  which we reported as passed-in last weekend, has now been bought for $3,150,000.

At auction only two out of nine were reported as sold at the $3m+ level.

• 19 Florence St, Kew (Diana Healy) – Bought for over $3,600,000
• 2 Monomeath Pl, Canterbury ( Richard Earle) – Bought after for over $3,100,000

Pass-Ins at

• 47 York St, Kilda West – $3,800,000
• 24 Monaro Rd, Kooyong – $3,500,000
• 25 Montalto Ave, Toorak – $3,450,000
• 9 Berry St, East Melbourne – $3,200,000
• 11 Victor Ave, Kew – $3,000,000
• 2 Snooks Crt, Brighton – $3,000,000
• 26 Stawell St, Kew – $2,950,000

The shoe was on the other foot today – an auction experience.

An auction we covered in Inner Melbourne this weekend* had an opening bid of $2.8 million when some people may have thought $2.2 million was the right money to finish on. The auctioneer almost choked on his gavel and asked for the bid to be confirmed. The buyer confirmed the bid. After a quick consultation with the vendor the property was declared on the market and sold under the hammer for $2.8 million.

Except that the only and ‘winning’ bidder did not sign the contract when asked to do so, and the property is currently still for sale. The auction appears to have been ruined. As we see the facts and as we are told, the bidder should in our opinion face some legal action – although we are not lawyers and we have not heard the bidder’s side of the story.

In this case we have  sympathy for the seller and for the selling agent. But what about the crap buyers put up with every week?

At another auction this weekend** (coincidentally with the same agency), a bidder had gotten a building inspection done on a $1.5m-ish agent quote and turned up to the auction to find that the passed in on a reserve of $2m. Should the agency or the owner be obliged to pay the buyer’s building inspection fees that were done beforehand in good faith? Given that the seller through their agent has misrepresented their position and caused a loss to the buyer, we feel they should. We also wonder whether action should not also be taken against sellers who persist in using agents who continue to behave poorly by step quoting illegally.

So while on the face of it we think what happened today was appalling buyer behaviour, we repeat that we have not heard the buyer’s side.

We are not taking the moral high ground – we cannot afford that sort of real estate. But we are continuing to highlight step quoting and other poor behaviour instances that if left unchecked will damage the auction system that we otherwise so admire for its buyer and seller transparency.

*We have changed the details and removed the auction report to protect the seller’s position, as that is the decent thing to do – the home still needs to be sold.

** Details changed as the property has still not been sold

CANTERBURY, 2 Monomeath Place: The biggest sale of the day, Richard Earle (Jellis Craig), bought after auction above $3,000,000, 1 bidder

Biggest Sale: 2 Monomeath Pl, Canterbury, Richard Earle (Jellis Craig); After auction, in excess of $3,100,000, 1 bidder
A nice sized crowd of about 50 turned up to this auction despite the weather turning sticky and humid. Auctioneer Richard Earle was at the helm but, despite his enthusiasm, the crowd was shy and only one bidder put their hand up to bid. However, this bid was good enough for Mr Earle as he promptly passed the property in to begin negotiations with the sole bidder. Bought after for an undisclosed amount. (Joshua Bong)

Biggest Pass In: 47 York St, St Kilda West, Greg Hocking (Hocking Holdsworth Real Estate); Passed in, $3,800,000, no bidders
Auctioneer Greg Hocking brought his “A grade” preamble to the auction of this fine period family home in St Kilda West, only minutes to the beach and Fitzroy Street. After asking for and receiving no opening bids, Greg placed a vendor bid of $3,800,000, calling for rises of $25,000. Still no interest and half time was called. On returning, still no bids and the property was passed in. (Guy Angwin)

Bidderbuzz Auction: 10 Mills St, Hampton, Rowan Thompson (RT Edgar); Under the hammer $1,325,000, 5 bidders
A nice wide, quiet street, an old property on a big block within 100 metres of Hampton Street shops. What an opportunity! Auctioneer Rowan Thompson thought so too and so did the five bidders who were all anxious to buy this interesting property. Lively bidding became frantic as the auction progressed. The “on market” level of $1,200,000 was soon reached and it was obvious that three parties were particularly keen. The auctioneer would have accepted well over 50 bids in total, many down to only $1,000 at a time. He was really busy! The property was finally knocked down for $1,325,000. A good result. (David James)

Buyer Masterclass: The Risks of Chasing a Housebuying Reward – negotiating on a property is all about balancing the risks with the rewards. Find out more in this week’s Buyer Masterclass.

We Only Buy Homes

Subdued mood: Toorak, 25 Montalto Ave, Jason Scillio (Kay & Burton), passed-in $3,450,000, no bidders

Perfect day, perfect setting. 3/61 Nepean Hwy, Aspendale (Rowan Thompson, RT Edgar). Massive crowd and a picture perfect back drop - but the home still passed in at $3 million.

At 6pm on Saturday, the James Clearance Rate for $M+ was 48% on the 29 auctions we attended.

The Weekly Review Bidderman, our demand indicator, was 1.6 bidders per auction. But that average figure doesn’t tell the full story.

Market Summary

This weekend was a tale of some homes with a lot of bidders and some without any. That’s been happening a bit lately, but in this case the stats were very stark and indicative of what is happening in this market. Of the 26 auctioned homes we attended (3 had been bought before) on this weekend, 5 had a total 27 bidders and possibly more – that’s at least 5 bidders each! There was a total of 14 bidders across the other 21 $M+ auctions – so some of those had no bidders at all.

Of the five homes that had five or more bidders, two sold for over $5 million and two for over $2 million. They were in Carlton, Elsternwick, Surrey Hills, Toorak and Hawthorn

The majority of the other 21 homes had average bidding and passed in. A number of these will remain as passed-in until the would-be sellers realise that while we have a good market at market prices, it’s a very limited market above that. Your best price these days seems to be on the market early and let the bidders decide.

For sellers who have decided to stick to their guns, and let their property pass in – we thought we would go back in time and look at what’s happened to all the properties that passed in on Super Saturday (October 22).

Super Saturday Wash up: 1/3rd of all $M+ homes auctioned have not yet sold
Super Saturday, October 22, was three weeks ago. And just to remind you – the clearance rate on or before the day (October 22nd) was a disappointing and slightly surprising 43%. Of the 47 $M+ homes we reported on, 27 didn’t sell.

So what’s happened since then? Well, despite the racing distractions, a further 11 have sold, giving Super Saturday a thee week clearance rate of 64%. The market is clearly not as strong as it was two years ago when we were seeing 90% clearance rates after this length of time. However it’s nothing like the troubled times in 2008 (GFC).

Basically auction homes are falling into three categories

1. Selling on or before the day – The market priced: A graders and some well priced B graders, where the vendor has quoted conservatively and met the market. There is strong bidding – look again at this weekend’s results.
2. Selling a few weeks after the auction – The risk takers: meaning buyer and seller risk takers. Prices have generally been above the pass-in price but well short of the asking price. The risk for buyers is that someone else buys, and the risk for sellers is that they don’t sell.
3. Not selling within a few weeks – The stales: With family homes the price is either scaring off buyers from making any offers or they’re making an offer usually at a lower price than pass-ins and being rejected. The next likely scenario for the seller is withdrawing their property from the market, sitting there on the net with no action or trying to sell by significantly discounting their original price.

Bayside sellers appear to be particularly bad at pricing their homes to the market. Some of their pricing is fanciful. Looking at the results, an inexperienced onlooker might conclude that the Bayside market is shot to pieces. It’s not: we have Bayside buyers on our books. It’s just that more than a few sellers are so far from where the real market is we’re not sure why they waste their money on advertising.

$3M+ Market continues to produce some results

Non-Auction sales:

• 16 Kenley Court, Toorak, (Michael Gibson of Kay and Burton) – sold for over $12 million for nearly 2000 sqm of land and a very substantial home. James Home Rating 779/1000.
• 24-26 Balmerino Avenue, Toorak, (Justin Long of Marshall White and Hugh Hardy of Bennison Mackinnon) – 1850 sqm of land including tennis court. Passed in at the Thursday afternoon auction for $7,000,000 and bought immediately after for an undisclosed amount. As I went through this home it felt mostly about the land and the sweeping views, however I suppose that is the way with almost all Toorak homes. The end result was $3,800 per sqm approx.
• 4 Lisbuoy Court Toorak, (Nicole Gleeson and Michael Gibson) – Townhouse with some land for over $4,000,000.

Auction Sales:

• 47 Kinkora Road Hawthorn, Peter Batrouney (Jellis Craig); Under the hammer, $5,660,000, 4 bidders (see report below)
• 49 Mathoura Road Toorak, Justin Long: Under the hammer, $5,220,000, 5 bidders

‘Round the Grounds

• Boroondara – Not much better than last week and not as good as it was – 53%
• Stonnington – Reasonably Solid and 64%
• Bayside – There continues to be minimum buyer and seller price matching – 44%

HAWTHORN, 47 Kinkora Rd, Peter Batrouney and Campbell Ward (Jellis Craig). The grand old home in the Grace Park estate was bought under the hammer, $5,660,000, 4 bidders

Biggest Sale: 47 Kinkora Rd, Hawthorn, Peter Batrouney (Jellis Craig); Under the hammer, $5,660,000, 4 bidders
Grace Park, north facing rear, big land and beautiful period home. Some may say a drover’s dog could sell this on a sunny day, but that would be unfair on Peter Batrouney and Campbell Ward. This writer knows for sure we will get a first rate performance and in all likelihood a very solid result. About 120 have gathered in the back yard and we begin with a vendor bid of $5,000,000. Quickly in $50,000s between Bidder 1 and Bidder 2 we reach $5,300,000 and a half time break. 2 more bidders join in and it’s on the market at $5,500,000. A few up bids and she all stops at $5,660,000. A typical successful Peter Batrouney and Campbell Ward / Grace Park auction. (Mal James)

Biggest Pass In: 3/61 Nepean Hwy, Aspendale, Rowan Thompson (RT Edgar); Passed in $3,000,000, 1 bidder
The excitement was in the air and the house was buzzing with people enjoying the sunshine and the stunning panoramic view of the beach literally on the doorstep.  With only 500 beach front homes in Melbourne, explained auctioneer Rowan Thompson to the large crowd of 100, the “international standard resort style” property represented  a wonderful opportunity.  Mr Thompson opened proceedings with a vendor bid of $2,800,000 and sought $100,000 rises.  With Mr Thompson’s encouragement, a bidder from the crowd obliged with a bid of $2,900,000.  A vendor bid of $3,000,000 followed and despite Mr Thomson’s best efforts, there was no further bidding on the day and the property was passed in on the vendor bid.  (Kate Agnoleto)

Bidderbuzz Auction 1: 539 Canning St, Carlton North, Tom Roberts (Nelson Alexander); Under the hammer $1,300,000, 5 bidders
This auction was going to be the hottest of hot with a very conservative quote at $900,000 to $990,000 and a wonderful A grader on offer. 539 Canning was always about width and side access and at 6.5m, with lane at the side this renovatable period home was as good as is offered in this area due to the ongoing options it provides. Around 100 or so people turned up in anticipation to see what auctioneer Tom Roberts was going to extract in the end.

After the usual Robert’s spiel we were away instantaneously with a 950 then 960 then $1million bid all within 10 seconds. Twenty seconds later we were on the market at $1,050,000 and then past that to $1,080,000.

One bidder, Chris Koren of Morrell and Koren, was leading the bidding in strong style – coming back at each and every bidder quickly and assertively. It was textbook bidding and he is a master at this when he is on his game, as he so obviously was today. At $1,180,000 the fifth bidder, also an advocate, joined the battle. At this stage we had dropped to $500s and $1000s and with both advocates firmly positioned it looked like this was going to be a long and drawn out battle. And so it turned out to be – with auctioneer Tom Roberts taking a back seat, allowing Chris with his strong and firm style to battle it out with Guy Angwin (from our company). The two advocates continued past $1,200,000, then $1,240,000 and then $1,275,000 – at each milestone getting crowd applause like they were witnessing a momentous MCG event.

Eventually at $1,300,000 Chris Koren who had led the auction all the way, was declared the victor and a deserved one at that. Commiserations to the underbidders. The eventual buyers bought well and not over the top either. Our estimates at a strong auction were $1.2m to $1.3m for this prime A grader – a far cry from the 900k to 990k quote. But no complaints re underquoting as the home was on the market quickly. (Mal James)

Bidderbuzz Auction 2: 29 Guildford Rd, Surrey Hills, Jeremy Desmier (Fletchers); Under the hammer $2,185,000, 7 bidders
The auction of this property had a fractious beginning when four different parties all asked questions of auctioneer Jeremy Desmier ranging from – “are there easements?”  – “is the property subject to Heritage overlays?” -  “can I demolish?” – “what are the land tax implications?”. The tone was set – this was going to be war with seven bidders all trying to buy this rough diamond just waiting to be polished. Consistent with all the initial interest, a genuine bid of $1,500,000 started proceedings, soon followed by two other bidders looking to control the auction. Just when you thought this bidding war was losing momentum multiple bidders joined in and for the next twenty minutes strategies were put to the test.  Eventually the property was bought for $2,185,000, a very entertaining auction from beginning to end. (Guy Angwin)

The Big Issue Video: The Big Issue is back! Click on the video for the late Spring mail.

Buyer Masterclass: Negotiating on a property is all about balancing the risks with the rewards. Check out this week’s Buyer Masterclass – The Risks of Chasing a Housebuying Reward.

We Only Buy Homes

GLEN IRIS, 22 Wilson: The Abercromby's team, Rob Vickers-Willis, Andrew Harlock and Tim Derham marching out for some action. Bought after auction for an undisclosed amount above $1,900,000.

Negotiating on a property is all about balancing the risks with the rewards. In your quest for the reward of buying your dream home, you might run the risk of paying more than you needed to. But focusing purely on the reward of paying a lower price for a home might raise the risk that another buyer trumps you and you miss out on the house you love.

Let’s look at a couple of scenarios, and the risks and rewards they might raise:

Buying Before Auction

Let’s say you decide to make an offer before auction. Making an offer early gets rid of the competition that hasn’t yet made itself known to the selling agent. It can also work because selling agents are unlikely to recommend against an offer that has some grunt about it. At auction day they don’t want egg on their face.

If your offer is accepted, the reward is that you get the main prize, your new home. The risk is you may have paid more than you needed to had you waited till auction. Of course if you are successful you will never know – you can congratulate yourself and nobody can argue the toss with you.

But there is also a risk that your pre-auction offer may not be accepted, but instead be used (correctly and ethically) by the selling agent as a price floor when it comes to auction day – not only for you but for other buyers too.

Overall going early is a strategy we favour only when you have done your due diligence and you believe that the genuine expected price (not the agent quote) is at market value and close to your budget limit. Going early involves a bit of smoke and mirrors and we feel relatively comfortable in that domain. If you don’t then waiting till the auction may be your best bet.

Private Sale Negotiations

When the asking price of a quality home drops from $2 million to $1.8 million due to some tough negotiation most buyers think they are now in a better risk v reward position to buy the home. But if you offer, say, $1.7 million at this point you can put yourself at the risk of missing out on the home. That’s because other buyers may now appear who consider $1.8 million a good price and may be prepared to pay $1.85 million.

Alternatively not trying to lower the price on an overpriced home is also a risk – especially if the home is a B grader. When there is little proof of market competition – in a private sale or vendor bid pass-in – you may end up overpaying. In time that will affect your resale, adding risk to the long term financial benefits of the deal.

On the other hand in a flat and falling market it may be quite a low risk to walk away from an asking price or a pass-in figure that seems very, very high – even if you love the home – as there is little chance of another buyer.

But in other scenarios there is a risk walking away from a home you love, just because you’re reluctant to pay a few thousand dollars extra. Say a property you love has been passed in to you as the highest of three bidders at an auction – why would you refuse to budge on your last bid, even though it was only $1,000 above the other bidder? Sticking to your guns may only mean the underbidder gets a chance to buy and you miss out on a home you really wanted.

Another additional risk buyers often take for no reward is walking away from the auction on Saturday, only to pay the reserve on Monday anyway. The most common time for a deal to be done after a pass-in is that same weekend. So, if you are happy to pay the price why not just buy it on the Saturday rather than run the risk of someone else buying it that weekend if buying the home is your main goal?

At the end of the day, any homebuyer has to take risks to get rewards – unless you have a policy of only going after homes that nobody else bids on. And buying a home that nobody else wants is not a great strategy for good long term emotional and financial outcomes.

Printed each week in The Weekly Review – Melbourne’s $Million Plus property magazine.

I love you darling and thanks for buying this nice little $6 million beachfronter. 2 Mytton Grove, Brighton. Greg Costello (RT Edgar), under the hammer, $6,050,000, 2 bidders.

At 6pm on Saturday, the James Clearance Rate for $M+ was 50% on the 28 auctions we attended. What made the difference between those that sold and those that didn’t? As with most of this year’s market, quality properties priced to market sold, while those off the boil on price and quality didn’t.

The Weekly Review Bidderman, our demand indicator, was 1 bidder per auction. There was only one volcano (4+ bidders) out of the 28 auctions we attended and more than a third were duck auctions (no bidders). This has been this way for most of Spring and a clear indicator that we are now in a falling market, price-wise.

Market Summary

Timing: We know we shouldn’t raise the Santa stuff just yet, but effectively you have just three more weeks of new advertised stock and then another couple of weeks of mop ups and off markets (that are due for a February auction). And then the big hairy, bearded man is here with his unquarantined animals and pressies.

Stock Levels: So how are stock levels right now and what is the action like?

We were initially tempted to give reporting a miss this weekend as there were only 55 scheduled auctions over $1m. But upon some analysis we were able to find 30 reasonably good homes which we felt gave us a good sample.

Over the next two weeks around 80 auctions (each week) are scheduled at $1m or more. The last week in November does have closer to 100 scheduled, but effectively we have had only one Spring weekend in excess of the 100 auctions that signals a solid day in Bayside and the Inner East. So please send food parcels to your favourite selling agent – as both turnover and clearance rates are down to low lows. However we are finding there are homes to buy, there is good stock out there and more so than a month ago. For this to be the case there must also be falling demand otherwise you would not be seeing falling prices on reduced stock levels. But it is not exactly a free-fall as we are still getting beaten now and then at auctions (when we have to go there) – not by highly priced sellers, but by other buyers.

Previously Negative Sentiment: The last two solid auction weeks – Super Saturday (October 22) and then way back to Preliminary final day (September 24) – were negative for both buyers and sellers in all parts except Boroondara council. They were negative because of low clearance rates – indicating minimal price agreements between buyer and seller.

Correct Pricing: Having said that we can’t help but feel the market is a fair way off its knees. Yes prices are falling – of that there is no doubt and they’re falling quite substantially, up to 10% in the last few months on many homes, even some of the good ones. But – that’s right there’s a but – if the vendor falls in with the market then there are bidders. So the market is not toxic, it’s just in a downward phase. It is in fact a good buyers’ market if choice and falling prices are your definition of a good buyers’ market .

A classic case is 24 Roslyn St Brighton (Stephen Tickell). Bought in June 2007 for $2.3m, last year its owners tried to sell at $2.7m-ish with no takers. This weekend it was back on the market with a quote of $2m+ and, guess what, with two strong bidders it sold for exactly what was paid 4 years ago towards the end of the 2007 bull run. Which demonstrates our point that the market is operating as markets do: they correct and they go up and down.

Wormie: People keep asking how prices are going at the Top end, so we decided to bring Wormie back. This is our best effort at graphically representing where we think the Top End market has gone over the last few years. It’s not an exact science – it’s our opinion.

$3M+ Market: Has the action returned after the September excitement was followed by an early October siesta? We think yes – it is back. People do have cash and they are parting with it when they find the right home. In the last 10 days at least 9 homes over $4 million have been bought and sold. So it’s not dead at the Top End by any measure.

Some Auction Results today

• 2 Mytton Grove, Brighton, Greg Costello (RT Edgar), under the hammer $6,050,000 – 2 bidders
• 15 Dudley St, Brighton, Leigh Hallamore (Buxton), after auction $4,000,000+ (undisclosed) -0 bidders
• 15 Chastleton Ave, Toorak,  Warwick Anderson ( RT Edgar), under the hammer, $4,135,000 – 4 bidders

Pass-Ins

• 58 Kooyongkoot Road, Hawthorn – $3,400,000 – 0 bidders
• 51 Cookson Street, Camberwell – $2,850,000 – 0 bidders

Expressions of Interest: The $3M+ market is not all about auctions. In October the selling agent’s weapon of choice for selling properties above $3m and particularly above $5m moved from Auction to Expressions of Interest. Many EoIs were scheduled for completion either side of the racing carnival. Some results are in from our 8 randomly selected EoI campaigns.

We have been to the above homes. Check out our ratings on 25 Scott Grove Glen Iris (791/1000) and 33 Coppin Hawthorn (812/1000) which we have made available to the public. Just Google the address and you will see our James Home Rating.

Tennis Anyone?! Excerpt from October 15th James Marketnews: ”Want a home with a Tennis Court in Toorak? Got around $6 million dollars? In the last week we visited, assessed and rated: 11 Scotsburn Toorak (Andrew Smith), 10 Montalto Toorak (Mike Gibson) and 25 Scott Glen Iris (Rae Tomlinson). All have tennis courts.”

The $6M Question: After Super Saturday would these three not sell, sell lower or would the Mexican Wave** kick in (see explanation below) and all would sell once one had gone?

The $6M Answer: The Mexican Wave did in fact kick in with all three selling within 24 hours of each other. All three had quotes of $5m to $6m during their campaigns. Scotsburn was bought after a weekend pass-in (over $5m), Montalto was for most of its campaign a private sale, but finished in a Boardroom Auction at just over $7m. Scott Grove was an Expressions of Interest closing Wednesday (with reportedly three interested parties) and sold 2 hours after the deadline for well over $6m.

**Mexican Wave: It’s just like at the MCG: Kay and Burton brings a group of homes together and they push and prod till they get one buyer to perform and then uses that result to get other buyers to put their hands up on other homes. This is planned months beforehand. It’s totally legitimate and it’s brilliant in concept.

RT Edgar: Has had a pretty solid time with 8 properties selling over $2 million in less than a week, including an off market at 68 Walsh St believed to be around $4 million, not mentioned in above dispatches.

Auctioneers: We love a good auction and we love giving good auctioneers a rap. But this weekend we saw a number of so-so performances. Good auctioneering makes a difference to the end result, so when you see confusion and lack of excitement and dragged out ineffective begging you wonder just how much the seller is losing. It’s hard to prove, but logically if you are told the good auctioneers bring in the dollars, then the poor ones must be losing them out the other end. Auctioneering, like buyer and seller agency work, is not a 5 minute skill that anyone can do who has a loud voice.

Growling Jack - behaving well: Jack Bongiorno (Marshall White) at 50 Stuart, Armadale. Bought after auction for an undisclosed amount above $2,200,000. 2 bidders.

‘Round the Grounds

• Boroondara – Is Boroondara Moving off solid onto a Roller coaster? – 44%
• Bayside – Some strong results on the Golden Mile – 53%
• Stonnington – Was anybody still left in Malvern today or were they all at the races! – 33%
• Port Phillip – Not Much Happening

Biggest Sale: 2 Mytton Grove, Brighton, Greg Costello (RT Edgar); Under the hammer $6,050,000, 2 bidders
Brighton Golden Mile Beachfront – these are four words that mean money. In recent times that has meant $8000 to $10,000 per sqm – at least at the northern end. A question our auctioneer Greg Costello asked in his opening spiel was “is this southern part of the Golden Mile more highly regarded than the northern part due to the activity on the beachfront?” Personally, as I run past here every day I think yes, but the auction result will tell us for sure. With the blue sea as our backdrop I’m expecting an exciting auction – irrespective of the market this stuff always sells. Greg Costello is conducting proceedings in front of a small crowd of 30. We start with an opening bid of $4,850,000 from Bidder one. $5,000,000 comes in from Bidder two strongly – solid bid. $5,100,000 from a third bidder – who as it turns out was with Bidder one – so we don’t count him – strange strategy that one. Anyway with a fair bit of action we move up to $5,600,000 in various amounts and then to $5,750,000. At all times Bidder two looks in control and is bidding very well and with some intimidation without being over the top. Normally Greg Costello is in excellent form but today was not his best day with bid retention and there are a number of confusing referrals back to his penciller for clarification. At $5,900,000 the “is it on the market?” question was asked, and after a quick referral, an affirmative answer is returned. There are two more decisive bids from Bidder two and its all his at $6,050,000. Loved the winning bidder’s style – aggressive and sensible and much better than his opponent and also many so called professionals that I have witnessed recently – well done sir – we have a job for you here if you care to apply. (Mal James)

Other Brighton Golden Mile Results: 2 Mytton at $6,050,000 divided by 613 sqm = $9,869 per sqm or almost identical tor previous absolute beachfront sqm rates over the past year (which have maintained themselves in the last year and increased on previous high water marks). 8 Moule Avenue (David Hart) is a classic Golden Mile address (but not absolute beachfront) and sold this weekend for $2,310,000 or $3,510 per metre which on first glance is not expensive but in fact is not too far off previous Golden Mile sqm rates. A third Golden Mile property 15 Dudley St (Regina and Brian) sold for in excess of its pass-in figure at $4,400,000 which again considering the house was nothing other than a nice facade was a very, very solid result.

Biggest Pass In: 58 Kooyongkoot Rd, Hawthorn, Scott Patterson (Kay & Burton); passed in, $3,400,000, no bidders
Could you find a better setting for a Melbourne Spring auction? A tranquil backyard by the pool! In front of around 60 people, auctioneer Scott Patterson gave his usual professional best to attract some crowd bidding but this was to no avail. The property passed in after two vendor bids – $3,300,000 and $3,400,000 respectively – and remains for private sale. (Adam Woledge)

Bidderbuzz Auction: 15 Chastleton Ave, Toorak, Warwick Anderson (RT Edgar); Under the hammer, $4,135,000, 4 bidders
Spirited bidding after a slow start was a welcome sequence at the auction of this single level home in Toorak. A crowd of 80 neighbours chatted quietly throughout the action, eagerly anticipating the value to be determined by the market. After opening on a vendor bid of $3,400,000 and the declaration that the council had valued the property at $3,700,000, auctioneer Warwick Anderson tried to keep pace with the determined 4 bidders. After the second vendor referral, Warwick announced the property on the market at $3,800,000 but the strong bidding continued, with bidder number 4 securing the home at $4,135,000. (Gina Kantzas)

Buyer Masterclass: “Risks of Chasing a Housebuying Reward”. Read the article in The Weekly Review or our Buyer Masterclass.

We Only Buy Homes

The crowd of around 50 clamber for some shade at 8 Moule, Brighton. Leigh Hallamore (Buxton), bought after auction, $2,310,000, 2 bidders

You’re a $M+ family home buyer. Super Saturday (October 22) has been and gone and you didn’t manage to buy yourself a home from the 150 or so properties that were on offer. What now? With the Melbourne Cup break coming up, it’s time to a) assess your form b) assess your goals c) improve your decision making processes and/or d) panic.

Let’s start with d) Panic. As a homebuyer you effectively have a month to find a home or else you probably won’t be settled in a new place until at least Easter 2012. That is six months away, well into the next school year and – oh my god – the footy will have already started again. Six months more of your family unsettled and in limbo. Have you broken into a cold sweat yet?

Well stop it, right now. Take a deep breath and don’t panic. Panic only encourages one thing – poor decisions. Poor buying decisions now will give you and your family weaker long term outcomes – both financially and emotionally. Poor decisions can lead you to buy the wrong home or miss out on the home you should have bought. Panic leads to weaker negotiating stances.

With four weeks to go and with no obvious target home, the first thing to consider is an alternative home strategy. You could rent, move into a holiday house, move in with family, or buy an interim home. The key to getting temporary family shelter is not perfection but it does have to be comfortable. You want to be in a home that is not going to add stress that will encourage panic and lead to forced decisions – instead of waiting for the right 10-20 year family home.

Assess your form: If you were a racehorse would you back yourself at the next start to win after your last few months of homebuying performances? Have you missed the podium each time the auction race was on?  Was it because you didn’t get the values right, which meant you were shocked by the result every time. Even if you knew how much you needed to pay, did you miss out because you just didn’t perform when it counted? Truthfully assess your skills and your shortcomings and plug the holes either with alternative strategies or some professional assistance – otherwise you will get the same result.

Assess your goals: It’s possible you may not have actually found a home you have wanted to buy yet. You are not alone. We have been in a low quality stock environment all year and even as professionals we have found it hard sometimes to find good homes to buy. That’s not the case right now, but it has been. However your goals still may need some tweaking – especially if money seems to be front and centre of almost every family discussion. You may have $3 million tastes with a $2 million budget. You may have bought into what the papers have been saying about the world coming to end, yet the homes you like have 3 or 4 bidders and your buy cheap policy is not working. Whatever it is – take a look at what it is you really want. Write down your three Ps – Price, Property and Position – and then get a suburb report of the last 12 months sales and see if there are any homes within your price range. This will give you a clear idea of how realistic your current goals are.

Finally, improve your decision making processes: This can be in the form of DIY improvements or by getting some professional help. A process that will lead to informed and good decisions is 1) Clarity of Purpose – know what it is you want and match the home to your goals not the other way around. 2) Accurate Assessment of a home as to value and whether it meets your needs and 3) Planned and Professional Negotiation to maximise your chance of success within acceptable risk and reward parameters.

You have four weeks after Melbourne Cup to do some things that will make your life better for the next decade. Whatever those actions are base them on good decisions and on clear goals that will result in your family’s best long term emotional and financial outcomes –  and get on with it!

Printed each week in The Weekly Review – Melbourne’s $Million Plus property magazine

Sums up the day really: Andrew Summons (Hocking Stuart) at 16 Closeburn, Prahran, passed in $1,800,000, 1 bidder.

At 6pm on Saturday, the James Clearance Rate for $M+ was 43% on the 46 auctions we attended.

The Weekly Review Bidderman, our demand indicator, was 1.3 bidders per auction.

As we have the horses stopping most auctions next weekend, this is another bumper edition to last you for two weeks. We covered 46 auctions this weekend to bring you the real news on what is happening in Melbourne’s $M+ market place.  This market news is all about the flavour!

Market Summary

This Saturday was Super Saturday – with more than 150 scheduled auctions expected to go over a million dollars in Inner East and Bayside. And the Saturday Night Scoreboard showed a win to the buyers.

The Scoreboard
Boroondara Big Tick – vendors meeting buyers market – 65% clearance rate
Stonnington – Fail – buyers and sellers not matching – 36%
Port Phillip – Fail – buyers and sellers not matching –  22%
Bayside – Fail – buyers and sellers not matching –45%

We are now back in an ideal Buyers Market with plenty of choice and adjusted vendors. The price spiking in September that was created by pent up Winter demand and some choice offerings has been replaced by a market with good supply and adjusted vendors. Prices are falling and supply seems solid for a while – all good buyer news.

Overall prices have been falling substantially in recent times on all but the best of the best – but this weekend we had the first signs that even A-graders may have to respond to price discounting between now and Christmas.

During 2011 the $3M+ market has been as fickle as we can remember: it disappeared for most of the year, came back with a  vengeance in September and has now seemingly run away lost again. The collection of Expressions of Interest campaigns finishing in late October will be watched by many: there are some great homes, but the results this weekend indicate they may not sell as strongly as September results suggested they might.

To demonstrate the point, only two homes out of 150+ scheduled $M+ auctions reported a sale price over $3 million today.  Yes two – that’s not many.

They were 34 Stevenson St, Kew with James Tostevin, which sold after auction and 7 Barrington Ave, also in Kew, with Scott Patterson, which sold before auction.

Some areas were weaker than others, with Bayside particularly lacklustre today. There was just one sale out of nine auction attempts in Brighton and Brighton East today. At 6 of these auctions, there was just one bidder.

However there were some very exciting auctions. Here is a ripper – read about the other 45 in our auction results section today:

1a Laurel Court Hawthorn East: Hamish Tostevin: 4 bidders. Sold under the

hammer for $1,672,500

An interesting contrast at my first auction of the day. The magpies are warbling while the weather is threatening. It’s good to be alive. I’m sure I will be in for a treat with hammerer Hamish Tostevin, the good looking one of the Tostevin brothers, launching into the crowd of 70 who have gathered in front of this quaint, little, but tired 60s offering on small land. Well, the man is fired up today – loud voice with some good pitch and enthusiasm. Hamish is getting better with age. And so we are away with a solid $1,300,000 bid from the crowd. That seemed to shake the crowd a little – good bid. Bidder 2 at $1,320,000. Hamish is working the bidders well and with Mark Dayman shouting bids in behind, the atmosphere is building. This is powerful auctioning – good bid suggestion, good pace, good pitch and good begging. Two bidders in $10,000 to $1,400,000. There are other bidders here you can feel it. Nobody asking the on the market question but Hamish takes a half-time break anyway. Back he strides purposefully and the property is on the market, well done Hamish – none of this pass-in garbage today. This is going to be a real auction. And guess what the bidding begins to fly with the confidence that it’s on the market. Bidder 3 in $1,480,000. Absolutely brilliant urging and bid retention by Hamish and we are at $1,550,000 in tens and still with the starter. Bidder 4 couldn’t get in at $1,560,000, now he’s in at $1,590,000. Hamish is at his brilliant best, sure he has got bidders but he is working the crowd so well – this is a ripper auction and the auctioneer is putting dollars into the seller’s pockets with a shovel. Bidder 1 back in at $1,600,000. Hamish gives us his golden rule of never leaving on an even number and it gets a good crowd laugh; he then leans over to the nervous bidder and says I can be persuasive. Now we are down to $2,500s. At $1,672,500 and Hamish is still saying please. Bought at that price. Who says Marshall White can’t put a property on the market and get a great result. You can when you have a great auctioneer and a well priced home. $272,500 over reserve – WOW! (Mal James)

Selling Agency Director Comments:

Richard Winneke – If I was a $2 million seller in Boroondara this weekend I was happy.

Michael Gibson – Each week depends on the headlines and Super Saturdays are not good business practice in this market. Quality is selling well.

Scott Patterson – Quality is selling but the rest must be priced well.

James Connell – Vendors have made their price adjustments and the market will kick in again.

Townhouse and Apartment Tales from our Advocates work this week.
Under  $1 million:
14-18 Howitt St South Yarra (Will Walton): A 2 bedroom, 2 bathroom flat. 3 bidders at auction and bought for $735,000 – similar to last sale in the block in August 2010 for $725,000 on a similar $620,000 to $680,000 quote with the same agent.
Why did it sell? This price point has some strength in right areas and this agent specializes in this block.
Price: Same as last year

$1-$2 million:
72a Wilson St Brighton (Sam Paynter) – 3 bedroom townhouse bought before auction due today. Quoted $1.55m and sold for $1.56m last Sunday with one bidder. No real changes to when we went through it last time in May 2007 when it sold for $1,310,000.
Why did it sell? Location and Good Agent
Price: 20% improvement in 4 years

33 Halifax St, Brighton (Regina Schmidt) – 4 bedroom townhouse, quoting $1.55m to $1.7m – brilliantly located, but south side one of a pair – on the market for a week and 5 people went through. Pre-auction offer submitted at $1.6m – offers called for from other four Open For Inspection visitors by 5.00pm. Sells for $1.71m to second offer. Its better twin sold during the GFC for $1,550,000.
Why did it sell? Location and good floorplan. Good Agent.
Price: 10% improvement since GFC

$2-$3million
31 Derby St, Camberwell (Daniel Bradd) – absolute ripper townhouse – see our rating. Quoting $2m+
James Auction Report: Indoor auction with Richard James overseeing proceedings. Opening bid at $2,000,000, Bidder 2 at $2,025,000. Bidder 3 at $2,125,000. On the market at $2,200,000. Bought under the hammer at $2,355,000 – well bid. Good price, good home, good buying.
Why did it sell? Demand exceeding supply for quality townhouses that are priced sensibly at this level. Floorplan and quality really worked as did a great location and the agent, Daniel Bradd is very good at marketing these sorts of homes.
Price: Very solid, but warranted for this quality.

$3 million plus
3002/368 St Kilda Road (Marcus Chiminello) – Thursday night auction @ 7.00 pm. A similar property in the same building on the same side, same square metres, same décor, sold for $3.3m a short time ago. Quoting $3.3m plus then $3.5m plus. Surprising to have an auction in St Kilda Road but Marcus Chiminello and Nicole French (the new Batman and Robin) lined up auctioneer Growling Jack Bongiorno and 3 bidders fought it out past the last sale sales, past the first quote and the last quote and all the way up to $3,800,000.
Why did it sell so well? Demand exceeding Supply for North orientation; 315 sqm size with car parking on the 1^st floor (no dizziness getting in and getting out) and Shrine views. Well marketed by one of the best in the business at this stuff.
Price: Has been gently improving in some key blocks on some key apartments – but it’s all about the apartment characteristics. There are literally hundreds of apartments above a million that have no buyers at all, because they have nothing unique to offer except a very cheap price.

Phillip Kingston - 3 Yarra St Kew. Bought After $1,915,000. 3 bidders. Is he the best auctioneer going around? Well, with Growling Jack Bongiorno, right now they are the form pair!

When the s… hits the fan at auctions – nobody is a winner. We all need to look at our behaviour.

The Age reported widely on a court case this week that concluded successfully for the buyer in that they were awarded $200,000 for agent statements made during the post auction negotiations. The Age quoted Judge Ginnane that: “An estate agent must not engage in misleading or deceitful conduct”.

Step Quoting and Clayton’s Reserves happen every Saturday and in great numbers. In this week’s court case it showed that the buyers, Dr Moss and Ms John, were brave enough and, equally importantly, had the resources to stand up for what they believe was deceitful conduct. We take our hats off to them for simply having a go.

We are not making specific comment on the case  as we feel it asks as many questions about the buying side (identity revelation, strategy, recording conversations, professional representation, valuations, agent confusion, direct negotiation contact with agent, paying higher than the reserve) as it does the selling side (misleading or deceitful conduct, quoting practises, reserve prices, post auction argy bargy, splitting properties). No for us the significance of the court case was that it introduced to sellers the notion that they can be held to account for the behaviour of their agents.

Sellers appear increasingly at risk for the consequences of illegal auction behaviour, such as illegal Step Quoting (where the agents never tell the buyer the correct price) and Clayton’s Reserve behaviour (where the agent tells you a false reserve post auction). The case highlighted that sellers may be vicariously liable for damages with regards to agents behaviour.

Most buyers would not expect selling agents to be anything less than 100% for their clients (the sellers). And we are not saying that an unprepared Top End homebuyer should be given extra protection because they are plain dumb or lazy. Homebuyers who go into a $1 million plus deal thinking they can represent themselves well without extensive, diligent research or professional representation, and by just playing games, in part deserve what they get.

However there is line on what is right and what is wrong and that doesn’t mean even naïve buyers should get zero duty of care from selling agents or sellers.

This week’s court case, through the judgment, showed that society doesn’t want to go back to the wild west days.

However, we are not on the moral high ground, simply because we represent buyers. Buyers should also have a duty of care to sellers. We should not be able to put in buyer offers we know to be false. For instance, is it ok for a buyer or their agent to go to a $2 million Inner East auction and open the bidding at $2.4 million knowing the agents will pass it in (because they are agents who always pass it in), then drop your bid immediately to $1.7 million in post auction negotiations? The buyer agent, who never even had $2.1 million, ruins the auction. They then orchestrate another “unrelated” buyer to come in two weeks later and deal is done at $1.85m, with the seller losing hundreds of thousands of dollars. Is that kind of behaviour okay when you are a buyer? Or do we buyers also need some guidelines?

We think Ms John’s quote from The Age article finishes this point well and sums up how both buying and selling agents should conduct themselves in the market place. Maybe it’s also good advice for buyers and sellers.

“There are some really great real estate agents out there but you just have to be very careful. When you’re buying your home or an investment property, it’s a lot of money and property prices are very high; you have to be very careful because money’s very hard to earn.”

The long and the short of it: Hamish Tostevin and Matthew Elder (Marshall White) at 1a Laurel, Hawthorn East, bought under the hammer, $1,627,500, 4 bidders.

Biggest Sale: 38 Kerferd St, Malvern East, Glen Coutinho (Hocking Stuart); Under hammer, $2,862,000, 4 bidders
Wow what an auction! This is as intense as it gets. Glen Coutinho has firmed as one of the best auctioneers in Melbourne in my humble opinion. What started out with meek interest from a lively crowd of around 70 people turned into the most hotly contested auction I’ve ever seen. A modest opening bid of $2,350,000 was announced from one party in the crowd and was quickly overtaken by another for $2,355,000.  The two went back and forth in increments of $5,000, then $2,000, then $10,000. Once the price reached $2,501,000 it seemed as though the action had come to a head, and Mr Coutinho retreated to his vendors to discuss the situation. Confident of reaching the price he and his vendors desired, Mr Coutinho continued unabated, knowing full well there were several other parties very interested in the property. As the property was being called down for a fourth time a third party entered the fray, bidding $2,540,000. This guy was ready for a showdown, but the original bidder stuck to it and was relentless in his pursuit of the Glen Iris home. Unable to continue, the young lion who made a worthy challenge correctly backed off, leaving the fight wounded but not insulted. At this point the crowd was able to breathe momentarily, but it wasn’t over! A fourth man entered the mix, and began his challenge. He proceeded to walk across the road towards the original bidder attempting to eye him down, but the original bidder was having none of it. As those who play enough poker know, when someone shows aggression towards you, it is generally a sign of weakness. Fortunately, the original bidder (who probably doesn’t play poker) picked up on the bluff and showed no signs of folding. Once the figure reached $2,862,000, the new combatant gave up announcing: ‘he can have it,’ and the auction ended with a standing ovation from the crowd, although it may have only been an ovation as they were already standing. (Daniel Ehrenreich)

Biggest Pass In: 11 Scotsburn Grove, Toorak, Jeremy Fox (RT Edgar); Passed in, $5,000,000, 1 bidder
A small crowd of around 40 and half are Toorak agents just looking. Jeremy Fox gives us a good solid spiel and we are away. Or are we? Jeremy calls for a $5,000,000 opening bid and gets nothing but silence. He goes inside for his half time break and leaves us all in the rain – actually he was pretty quick to return. I’m typing in Passed in on my Ipad and – whoops no – there was a genuine bid and $5,000,000 is taken up. Then it is passed in to the lone bidder. We await the outcome. (Mal James)

Bidding Buzz Auction: 31 Avondale St, Hampton, Julian Augustini (Hodges); Under the hammer $1,785,000, 5 bidders
This auction had it all – good sized crowd, fierce competitive bidding from five parties, a little controversy thrown in and plenty of entertainment for those who had just gathered to watch! Julian Augustini led proceedings and after he was met with the initial, and all too common silence, was forced to open on a vendor bid of $1,650,000. After a rather slow start, a genuine offer came from the crowd and that’s where things really heated up. Just seconds before he was about to pass the property in a second bidder entered the fray. This was accepted just in time, although the first bidder challenged whether his offer had come too late. The crowd and Hodges team disagreed and the auction continued with more robust competition and three more bidders battling it out to the very end. Mr Augustini handled the pressure beautifully and remained calm and professional throughout. The initial bidder was the victor in the end, becoming the new owner for $1,785,000. (Jen Milligan)

Buyer Masterclass: Heading for the Home Stretch.

No market news next week as the horses are more important than the auctions.

We Only Buy Homes:

CAMBERWELL, 155 Through Rd, Doug McLauchlan (Marshall White) passed in, no bidders but a big crowd of 130.

Best caption suggestions in by next week please! Karl Gillon (Buxton), at 37 Dalgety St Kilda, passed in at $3,500,000, in front of a quiet crowd.

Market Summary:
Three weeks ago when we left the auction market it was a negative auction day. Have things changed?

Some things have and some haven’t. But for buyers – it’s almost all good news!

While there weren’t quite enough auctions this weekend to tell us anything for certain (which is why we haven’t supplied a James Clearance Rate or Bidderman), the results do give us an indication of where this market is at now – in between the end of the AFL season and next weekend’s Super Saturday, October 22nd.

Of the 17 auctions we reported on this weekend, there were 8 ducks (no bidders) and 5 volcanoes (4+ bidders). In our opinion that is a very meaningful stat on exactly what has been happening in our markets all of 2011.

For sellers it means:

1. If you are priced right and of a quality the market is seeking, then you will be well supported by buyers.
2. If you are not listening to the market or your selling agent, or your home is a C grader then the market has little interest in your home until you realign your price thoughts.

To say the $M+ Inner Melbourne market is uniformly dead is completely incorrect.

Certainly not if you look at two auctions we went to on Saturday:

7 Station St Kew with Richard Winneke – Average block of land in an average part of Kew East. 6  bidders, well priced to market (skilled agent work) and it flew along – sold at $1.305M. Was that a big price? No. Did the market show some demand strength? Yes.

1 Elaroo Camberwell with Damian Davis - the quote was $1.3m plus and it sold for $1.54m – 6 bidders. We loved this home but was that because of its quirkiness or its fundamentals? To be honest Adam and I struggled to decipher whether it was an A grade or B grade home. Answer: With 6 bidders – it was an A grader! Was the price big? Against the quote, it certainly was – but not against recent market comparables. It was good but not huge.

To say the $M+ Inner Melbourne market has uniform strength is equally wrong.

Half of the auctions we attended this weekend had no bidders.

Super Saturday
Next weekend is a biggie, a Super Saturday and a real market test with over 150 $M+ auctions scheduled for Bayside and Inner East.

When we say market test, we mean you will be able to look up at the scoreboard ($M+ Clearance Rates and Bidderman) and see exactly what the market is doing.

To give you some perspective of size, next weekend will have three times the number of auctions we saw this weekend, and at least twice the number of most of the $M+ auction weekends since Autumn. The 22nd is the only Saturday of this month that sellers and agents want to go to market en masse and it is possibly 2011′s biggest $M+ auction day!

So where has the market changed in three weeks!

Quality Stock Levels have improved for Buyers:
Good levels of good stock came into the market late September and buyers began to take deeper breaths and relax a little.  Angst dissipated somewhat as quality buyer saw more quality homes they could buy, diminishing the spectre of missing out on a home, leading to a drop in buyer urgency and ultimately price.

This Quality Supply Increase is best demonstrated at the Top End.

Want a home with a Tennis Court in Toorak? Got around $6 million dollars?

In the last week we visited, assessed and rated: 11 Scotsburn Toorak (Andrew Smith), 10 Montalto Toorak (Mike Gibson) and 25 Scott Glen Iris (Rae Tomlinson). All have tennis courts. So even if there are 10 buyers for tennis courts at this price level, there’s a fair bit a choice there. If normal market forces prevail and the buyers have good representation, then the prices on all three could be lower than if there was only one of these homes on offer. That’s unless, of course, one home is more strongly favoured than the others by a significant number of those 10 buyers – or if the Mexican Wave effect happens (see below).

Similarly in the last week we have been through some really good new home offerings at over $6 million, including 14 Kilsyth Toorak (Michael Armstrong); 15 Vista Toorak (Nicole Gleeson) and 33 Coppin Grove Hawthorn ( Scott Patterson) – see our ratings over the coming week.

These are just some examples. And in fact, quality stock levels have improved at all price levels. This is good news for Top End buyers and the reason we think October 2011 and hopefully November 2011 will be better months for buyers than were Winter 2011 and September 2011 in terms of:

1. More choice
2. Less chance of the runaway prices.

Editor Note: The almost weekly $3M+ plus market report has not been produced to date in October for one reason – very limited news to report. This price segment is all about either side of the Melbourne Cup – as a number of Expressions of Interest, Private Sale and Auction campaigns are scheduled for some sort of conclusion at that time. We anticipate publicly reporting in  early November as to market movements since September’s price and activity spiking.

K&B’s Mexican Wave:
It is possible that the above marketing campaigns could in fact produce higher results if we see more marketing campaigns in the style of Kay and Burton’s Mexican Wave effect. It’s just like at the MCG: Kay and Burton brings a group of homes together and push and prod till they get one buyer to perform and then uses that result to get other buyers to put their hands up on other homes. This is planned months beforehand, it’s totally legitimate, it’s brilliant in concept and it’s why people like Ross Savas and Mike Gibson are worth their fees and then some. Other Mexican Wave agents who plan and execute well are Marcus Chiminello, Rae Tomlinson, Heather Elder, Justin Long and Peter Bennison of Marshall White to name a few. However K&B are the absolute masters at the Mexican Wave.

Price:
The market has had its hand on the handbrake for most of the year, but right now it is pulling on it as  hard as it ever has in terms of price.

But is this bad news? Does this make it a negative or does it make it a buyers’ market?

The big plus right now for buyers is that many sellers have been conditioned by their skilled agents on price, therefore right now you have improved choice and falling prices. How is that a completely negative market for buyers?

As a seller,  you probably shouldn’t head into next weekend’s Super Saturday with massive overconfidence – unless you have a market priced A grade home. However, it is not necessarily one you need fear either, as long as you are priced to sell.

Quiet:
The market appears calmer and quieter over the last 3 weeks. Why is it so quiet right now?

Timing and lost momentum:
Although there are 5 Saturdays in October 2011, the market has had some significant sporting interruptions. The Grand Final stopped all action in the first week and seems to have a flow on effect of flattening activity last weekend and this weekend as well. All three weeks had minimal auction numbers. At the other end October 29th also has minimal auctions with the Melbourne Cup taking priority in the minds of most that weekend.

However the quiet of October 2011 is not just about sporting interruptions.

Buyer Attitude:
It’s hard to quantify specifically, as turnover is still low, but the last fortnight or so has seen an increasing lack of urgency in the market, a sense of  I couldn’t be bothered right now from many buyers. At a number of mid week opens we turned up to this week, we wondered if we had the right inspection times it was so quiet.

Why? Partly it’s the sustained negative press on all things share market and global related. BUT it’s also could be partly due to a positive thing for buyers – Spring stock levels are improving.

Buyer Cockiness:
An issue for some buyers on good homes is Buyer Cockiness. As prices lower to meet the market, many buyers who have done the hard negotiating yards become so focused on the vendor and the agent that they become blindsided by a left field hit from another buyer at the new lower price levels, and – bang – it’s gone to somebody else.

There is Opportunity:
In every market there is opportunity both good and bad. If you are mentally unable to buy a home with prices falling and quality choice improving then this is not the market for you. But if you able to act and buy well at lower prices and better stock, then the next six or so weeks before Christmas may be a very positive time (that’s right, there are only about 6 weeks left of new stock).

Don’t Believe Us!
Go and have a look at some of the properties going to auction next Saturday, Super Saturday – October 22, and make your own assessment of the $M+ Inner Melbourne market.

Step Quoting – An Opinion:

Agents use Step Quoting because they believe it works. We are not supporters of it. It can be deliberately misleading, which harms overall credibility, which in turn reduces the effectiveness of the auction and private sale system. But if you can’t beat it, then at least understand it.

How does it work? Week one quote $2.2m plus. Week two quote $2.4m plus. Week three quote $2.6m plus. Auction Pass-in at $2.8m and the Clayton’s (false) reserve is $3m. All this irrespective of buyer interest. That’s Step Quoting and Clayton’s Reserves – where the selling agent never tells you the price and never tells you the reserve.

17 Neville St Albert Park (Oliver Bruce of Marshall White) – Last year another agent with another company quoted $1.75m and achieved $1.55m at private sale. Last weekend  Oliver quoted $1.25m plus and achieved $1.805m at auction. Note: Oliver put it on the market very early in the auction (so no real complaints from us and obviously no complaints from his vendor). As a seller which result would you have wanted? As a buyer which result would you have liked? Oliver works for the seller.

In our opinion to think the above results were all about Step Quoting is simplistic thinking as Oliver is also a very good and well drilled agent and brings many other skills to the table. We would recommend him to sellers as somebody you should consider. So although the property was supported by four bidders (three between $1.75m and $1.805m) it will be marketed to sellers to show them Step Quoting is a winner, and so this increasing issue will further infiltrate the Bayside auction market and perhaps gain a stranglehold as it has in Melbourne’s Inner East $M+ market.

Step Quoting and Clayton’s Reserves look good for the agent and the seller when there are willing bidder(s) and the home sells. But in this market, it is high risk and a public relations disaster for the seller and the agent (and ultimately the auction and private sale system) when it all fails!

Finally, as a buyer, if you are the only bidder, do you have a negotiation strategy to manage and minimise your damage in a Step Quoting campaign?

Spring is in the air! Campbell Cooney (Hodges) at 48 Cochrane, Brighton. Under the hammer, $2,015,000, 4 bidders.

Biggest Sale (we covered): 17 Devorgilla Ave, Toorak, Iain Carmichael (Bennison Mackinnon); Under the hammer, $2,400,000, 6 bidders
Over 75 people witnessed more than 75 bids fielded by 6 bidders at the auction of this Toorak property. Whilst the crowd enjoyed the warmth of the northern sun in the backyard of this smaller home, auctioneer Iain Carmichael used all his powers of concentration to manage the pace of this auction – even noticing a bidder inside the home! The crowd clapped in appreciation of the stamina displayed by both the auctioneer and the bidders, particularly bidders 5 and 6 who fought it out to the end. A genuine bid of $1,850,000 opened the bidding, it was on the market at $2,030,000 and eventually bought under the hammer at $2,400,000. Another great auction I was lucky enough to witness today but this time it was fast paced and intense. (Gina Kantzas)

Biggest Sale (reported to us): 17 Riversdale Road, Hawthorn, Scott Patterson (Kay and Burton); Under the hammer, $3,175,000, 4 bidders
Mal – I didn’t see any of your crew yesterday at the auction we had at 17 Riversdale Rd, Hawthorn so I thought I should drop you an email to give you a bit of a run down of events. The auction started at $2m, 4 bidders became involved, it passed the $2.7m reserve and eventually sold for $3,185,000 – a strong result in today’s market – Scott Patterson Kay and Burton.

Biggest Pass In: 37 Dalgety St, St Kilda, Karl Gillon (Buxton); Passed in, $3,500,000, no bidders
Auctioneer Karl Gillon was quick to point out in his preamble that this property was one of the area’s finest. You would have to go to St Vincents Place in Albert Park to find anything comparable to this fine home. Yet the good thing is, the price of a comparable property in Albert Park/Middle Park, if you could find one, could easily cost you $6m to $7m. Those fine words did little to excite the medium crowd, however, and it was necessary for a vendor bid of $3,500,000 to be placed. Still no interest and, somewhat expectantly for homes at this level in this area, the property was passed in. Let the negotiations begin. (Guy Angwin)

Bidderbuzz Auction: 21 White St, Glen Iris, John Bongiorno (Marshall White); Under the hammer, $1,860,000, 7 bidders
Auctioneer Jack Bongiorno skillfully teased out 7 bidders from the 100 plus crowd in a performance that was timed to perfection. He commenced on time  despite the constant latecomers; he outlined the rules of negotiating with the highest bidder only; he called a quick half time break at what turned out to be quarter time; he fended off two “Is it on the market?” questions by growling assurances that the vendors wanted to sell today; and he wholeheartedly encouraged further participation by maintaining the complete focus of the entire crowd! He was in fine form and persuasive voice. After opening on a vendor bid of $1,500,000, Jack brought down the hammer at $1,860,000 in what felt like a perfectly paced auction.  Exclamations of “What a great auction!” could be heard from the large crowd – surely a testament to a professional campaign run by Rae Tomlinson and her friendly team – bringing 7 bidders to this home! As the crowd quickly dispersed however, I imagined they were hoping to catch the excitement at another auction today – after all, seeking the thrill of a great auction can become addictive. (Gina Kantzas)

Buyer Masterclass: Truth and Emotion – find out more in this week’s Buyer Masterclass.

We Only Buy Homes:

Good sized crowd, but not a lot of action. Mark Earle at 9A Summerhill, Beaumaris, passed in on a vendor bid of $1,125,000, no bidders

None of us like to be lied to or feel we’ve been fooled – and very few of us want to be beaten in a deal.

Buying a home is a significant emotional experience – and for many buyers there’s an extra emotional stress when we start dealing with agents and negotiating.

Selling agents are masters at managing buyer emotions. They’re quite capable of bending the truth when it’s in the interests of their client – the seller. As a buyer though, being at the other end of that manipulation can be incredibly unsettling.

When it happens – or rather, when we perceive it is happening – we feel a charge of emotion. We feel we are losing balance and self interest and ego comes into play. Emotion literally builds up inside us and we change chemically. Our decision making processes alter – not necessarily to our benefit.

Feeling that we’re being lied to undermines our trust in the salesperson and in the whole buying process. I’m not dealing with that lying salesperson, we think. I’m not buying my home through an auction because it’s unfair.

That’s what you feel. However misdirected emotion can cause intolerable stress, leading to poor decisions which can result in missing what should have been bought, paying way too much or buying the wrong home just to get rid of that stress.

As buyer advocates, the technique we use to help buyers maintain their equilibrium while knee deep in difficult negotiations is to ask themselves some questions about how they are responding to the process. Only by being a master of your own responses can you remain in a balanced state to have the best opportunity to make the right decisions.

Ask yourself: Is it the action of the agent or your reaction to it that is causing you angst? The way you react to an agent’s manipulations may well be what is creating the emotion, increasing your stress and potentially lessening your outcome.

And if you are feeling outraged by what you believe are an agent’s lies, consider whether you as a buyer, haggler or negotiator are not also capable of the same when it suits your own interests.   Is your role as a buyer really more noble than the role of a selling agent?

For instance, if a selling agent asks me if my client has any more money to give in this deal, I don’t say yes, not if I feel the deal can be done there and then at that price. Is me telling the agent ‘no that’s the absolute limit’ a mis-truth, acceptable salesman’s puffery or a straight out deceitful lie?

From the other side, if as a buyer agent I knew I could buy this home at $2,000,000 but instead answered truthfully when asked the more money question as yes actually I have $2,080,000 or $2,340,000 have I committed a greater sin of deceit?

Should you even presume that your relationship with a selling agent will be based on trust? After all the deeper the relationship, the greater the emotional effect of the lie. But why would you try to form a normal trusting relationship with the specific people whose allegiance is completely to their client and whose role is to create conflict amongst buyers (auctions) and to minimise buyers’ interests where that benefits their client, the seller? (That role has legitimacy according to the Estate Agents Act and Common Law).

Why not form those relationships with people whose role is to minimise your conflict and to maximise your interests!

Selling agents are not bad people. They engage in techniques to maximise the interests of their client (the seller), most of which are legal and that you yourself would engage in, if you were skilled enough to do so.

Feeling aggrieved about being manipulated or feeling that you have been lied to by an agent rarely helps you.  All it does is make you emotional, alters your chemical balance and changes your decision making processes generally for the worse.

You can minimise the “lying effect” and the emotional roller coaster responses by engaging professional buyer representation, acquiring a deeper understanding of your main goals and good questioning technique when you hit the bumps along the way. All of this hopefully leads to a different, more beneficial perspective of what it’s all about – buying the right home not about “getting the agent”.

Printed each week in The Weekly Review – Melbourne’s $Million Plus property magazine

Ladies and gentlemen we're gathered here today for the union of house and buyer. Hope they live happily ever after. Pastor Gowan Stubbings of the Kay & Burton Church at 23 Ferrars, South Melbourne. Jilted at the Alter - no bidders - Passed In for $1,600,000

At 6pm on Saturday, the James Clearance Rate for $M+ was 43% on the 37 auctions we attended. Our Market Heat Indicator is now leaning back towards a buyers market. Considering the lack of stock on offer, this weekend’s results were a bit of a blow for those hoping for a positive late Spring market.

The Weekly Review Bidderman, our demand indicator, was 1.3 bidders per auction. This weekend we made a real effort to cover more than just the really good homes, hence we have reported on 37 auctions. The results were not great. For several months we have seen an up and down Bidderman, however this weekend just on half the auctions we covered had no bidding at all – i.e. the duck rate (no bids) was 50%. You could argue that it was because of low quality stock, but it wasn’t that bad overall. There were only 3 Volcanoes (4+ bidders) out of the 37 auctions we covered – around 10%.

In our opinion these two measurements indicate a significant fall in demand for properties between $1M and $2M.

On the flip side, so far in September more than one home per day at $3m+ has been bought/sold in Melbourne. This number says this part of the market has some ooomph. See our $3M+ commentary and the three key auction reports below.

This is our last issue of Marketnews for 3 weeks (footy and school holidays) so it’s a Bumper Issue.

Market Summary
Buyers seem in general to have lost interest in the market. But it’s not as boring out there as you might think. Just as some new AFL coaches bobbed up, so have a few interesting homes and you should revisit your contacts to see what new offerings are on the horizon. The internet portals are showing a few more homes in the Upper End than they have for a while and this is due to the selling agents planning an extended campaign around the Grand Final while still trying to get the home done and dusted prior to the Melbourne Cup.

As we leave you for a few weeks, we reinforce the market’s five key themes:

1. Very Low New Stock Levels for family homes. Stock Levels have been below average for months (e.g. not one >100 $M+ auction weekend in late Winter or Early Spring for Bayside and Inner East) and it seems this will continue until at least after the Melbourne Cup.
2. Upper End has some strength. More than one $3M+ a day has been sold in Melbourne during September. Yes, we are still down on last year in terms of activity, but last year was a bumper year. So far it has been pretty much a normal September at this price level in terms of activity and price.
3. Lower End of the $M+ market is getting weaker – increasing pass-ins, longer time on the market and less bidders.
4. Well priced A graders are selling – whereas poorly priced B and C graders don’t sell, unless they are discounted.
5. Bayside appears considerably weaker than Inner East in the $1m to $2m price range.

Step Quoting – Done Brilliantly
It’s not often we highlight our misses but 25 Campbell Rd Balwyn (Peter Mitchell) is a practical Masterclass to show how Step Quoting works when executed brilliantly by a high quality selling agent. 25 Campbell Road Balwyn (see our rating) is on a quality block of land (1090 sqm) in a quality position – however the home itself needs a serious reno to bring it up to being a WOW home in line with its other two “P” characteristics: Price and Position. It was never a cast-iron “runaway” auction, but it had the potential to be.

The initial quote on the home was $2.2M plus and, given the quality of the offering in terms of the land, this was conservative. However, due to the work needed on the home and what was happening on the share market etc., this price could be taken as a professional opening quote in this market. Our initial advice to our client was that the conservative value was probably more like $2.58M. We believed in fact that there was a 50/50 chance that the property would sell for $2.73M at auction, and a 90% chance a hot auction would bring $2.88M. Given the $2.2M quote we had a dabble beforehand (nothing in writing) around the $2.6M mark, but we couldn’t get the two sides together pre auction, mainly due to our budgetary limitations we think, and because the agent Peter wanted to protect his client (he knew more than us about their aspirations and about other buyers, while trying to fish out our position).

Anyway after the argy-bargy Peter progressively lifted the quote to those who had expressed interest, first to $2.4M, and then to $2.6M. Come auction day there was excitement and the home was “on the market” under $2.7M (in our opinion he had educated his client fairly and correctly). With further competition it eventually sold under the hammer for $3M. This was text book, professional Step Quoting (moving buyers and sellers to the advantage of the seller) and despite not being successful from where we sit, we take our hats off to Peter Mitchell for a brilliantly executed Step Quoting campaign. In our opinion, he delivered additional $100,000s to his client, as a high quote could have killed the selling campaign.

Please Note:

1. While we are not privy to Peter’s client communications and we think the quoting was edgy, we think it was in Peter’s client’s best interests, and took into account the volatile market and the nature of the offering (it wasn’t a sure thing at any price). Peter’s actions with us were fair and he communicated openly with us right through the campaign.
2. There is however some appalling Step Quoting going on at the moment and we believe that those agents who actively engage in the under-quoting deception should be prosecuted. Our comments above should not be interpreted as support for illegal and unprofessional Step Quoting. However we do acknowledge the Step Quoting process and we do support the right for sellers to engage in legal and ethical Step Quoting providing they communicate clearly throughout the campaign with registered buyers.
3. If an agent is quoting $2.2M all through the campaign, and then at auction they pass the home in at $2.6M – and the reserve turns out to be $2.9M (which is what we call a Clayton’s Reserve), that is illegal Step Quoting (underquoting). Moving buyers through the gears during a campaign saying $2.2M first week, then $2.4M second week, then $2.6M in the last week, with the house declared “on the market” under $2.7M and finally selling for $3M – sure it is not a pleasant experience for buyers, but it is hard to fault from the seller’s or indeed the wider community’s point of view. It’s a valid strategy given the seller’s main aim was firstly to sell and then secondly to maximise his/her financial position.

If you have been the victim of illegal Step Quoting please contact the CAV on 1300 558 181 or alternatively consider engaging professional buyer representation next time you try to buy a home.

The Business of Auctions
Over the weeks since the Winter break, as a buyer advocate group we have found business to be steady, if not quite as brisk as last year. Below is what James Buyer Advocates have bought and what we missed out on in early Spring. These are the results of auction campaigns only (before, under the hammer and after), and do not include our off market, Expressions of Interest and Private Sale misses and purchases.

What we’ve bought: Fernhill Rd, Caulfield South (bought after – 1 bidder – $1M+); Watson St, Armadale (bought before – 1 bidder – $1Mish); Winter St, Malvern (bought under the hammer – 3 bidders – $2.5M+); Vincent St, Glen Iris (bought after pass-in – 1 bidder – $1.5M+); Karma Ave, Malvern East (bought after – 1 bidder – $1M+); Bates St, Malvern East (bought after pass-in -3 bidders – $3.5M+); Walter St, South Yarra (bought after pass-in -1 bidder – $2M+); Hawthorn Gve, Hawthorn (bought after pass-in -1 bidder – $3.5M+); Fraser St, Richmond (bought under the hammer- 2 bidders – $1M+); Morgan St, Carnegie (bought after pass-in -2 bidders – $1M+); Donna Buang St, Camberwell (bought after pass-in -1 bidder – $2M+)

What we missed out on: Campbell Rd, Balwyn (bought under the hammer – 5 bidders- $3M); Asling St, Brighton (bought under the hammer – 5 bidders – $2M+); Brandon Rd, Glen Iris (hammer – 3 bidders – $1.5M+); Lambeth St, Armadale (bought after – 2 bidders – $1.5 M+); Iris Rd Glen Iris (hammer -4 bidders – $1.5 M+).

What’s happening to the Longer Term Pass-Ins (Stales)?
When the home is good and it’s a price matching issue (between buyer and seller) then a number of homes are selling once the price matching issue is fixed. Below are two tables. One shows the last ten auctions I attended in late Winter that did not sell on the day. The second table is 10 randomly selected auctions that we attended in May 2011 that did not sell on the day. We mainly attend auctions of good $M+ homes, so this is not completely representative of the wider market.

Last 10 Auction Pass-Ins late Winter (mainly August)  – 6 have been bought – 3 remain unsold (one on price, one on price and difficult reno and one on price and C grade position) and one withdrawn.

10 Randomly selected May 2011 Pass-Ins – 6 have since been bought while 4 still remain for sale.

Land Sales – where is the market?
So how are prices going for land? Are developers and new home builders buying? How much are they prepared to pay compared to last year? This weekend there were a number of land auctions and Marketnews covered 5 normal block size auctions in different locations. 1 sold before, 1 under the hammer – 3 Passed-in. See Auction reports for full details.

The renovation and new build market has been hard hit this year – particularly if the floorplan is weak, the land has issues and the price is in the low $1ms as evidenced by our quick little straw poll below. However the two (land plus reno) homes in the $3m+ market (25 Campbell Balwyn and 2 Albert Brighton) went very well. This is because the market is currently paying strong land prices in Early Spring for correctly priced offerings at the higher end.

$3M+ Top End
Tight stock – solid interest – holding, even slightly lifting prices for the real A graders. This weekend we monitored 3 homes at $3m+ with one bought under the hammer, one bought after and one passed-in. See our Biggest and Bidderbuzz Auctions below for full reports

Plus here are some result clean ups to end the month.

• Balwyn North 34 Tormey St - James Tostevin – after auction for around $3,000,000
• Brighton 12 North Road – Jonathan Dixon – off market – over $5,000,000
• Toorak 67 Lansell Road – Andrew Harlock – after auction – over $3,500,000
• Toorak 1 Sargood – Lachlan and Paul Castran – Expressions of Interest – new home – undisclosed
• Balwyn 49 Metung St – John Bradbury – Expressions of Interest – new home – undisclosed
• Kew 26 Dean St – James and Hamish Tostevin – Expressions of Interest – new home – over $4,000,000

GLEN IRIS, 2 Rosedale, Paul Williamson (Jellis Craig) under the hammer $2,120,000, 2 bidders and big crowd of 100 people

‘Round the Grounds

• Boorondara – A bad day on the auction streets going into a mini break – 44%
• Bayside – As it’s been all winter – the higher the price, the better the result – 47%
• Port Phillip – Very chilly out there this weekend – 25%
• Stonnington – Is there anybody home this weekend? – 40%

Biggest Sale: 2 Albert St, Brighton, Leigh Hallamore (Buxton); after auction, in excess of $3,100,000, 3 bidders
With a relatively big crowd of 60 lining both sides of Albert St, there was a feeling in the air that this auction would be an exciting one. And, although he had to open on a vendor bid of $2,500,000 to kick-start proceedings, auctioneer Leigh Hallamore soon had a tightly contested battle between three parties on his hands. Bidding was strong and constant with bidder 3 eventually earning the right to negotiate after the property was passed in at $3,120,000. Bought after for an undisclosed amount. (Jen Milligan)

Biggest Pass In: 324 Beaconsfield Pde, St Kilda West, Andrew Stuart (Hocking Stuart); Passed in, $5,000,000, no bidders
Auctioneer Andrew Stuart took great pleasure in explaining to the crowd how the under-ground car lift and turning circle worked – with a  practical demonstration. Demonstrations over, Andrew asked for a bid somewhere near the lower end of the quoted range. No one offered a bid and  a vendor bid of $5,000,000 was made – still no interest and half time was called. Half time was short and sweet. The property was reoffered again and surprise, surprise – no bids and the property was passed in at $5,000,000. It has been a long time since a property on Beaonsfield Parade has sold under the hammer. Sales are being transacted, its just taking a some time for vendor and buyer to reach that all important middle ground. (Guy Angwin)

Bidderbuzz Auction: 25 Campbell Rd, Balwyn, Antony Woodley (Marhsall White); under the hammer, $3,000,000, 5 bidders
Strong auction here and, on reflection, a real stand-out one for the Boroondara $2m+ market. This property had one massive plus – its land content. At around 1100m2 with western rear, no heritage overlay and in one of Balwyn’s best streets it was hard to go wrong here as this property offered a myriad of options. In front of around 70 people, proceedings opened quickly with a crowd bid of $2,300,000, yet things were a little slow to get going and at the half-time break bidding was with Antony Woodley (the auctioneer) on a vendor bid of $2,400,000. Things got going pretty swiftly after this, with bidders 1,3 and 4 going tit-for-tat and the property was called on the market at $2,695,000. At $2,730,000 Bidder 5 entered the fray and the story of the auction seemed to enter into a new chapter. Bidding crept slowly yet consistently between bidders 3 and 5 up to the magical number of $3,000,000 and the hammer came down – with Bidder 5 winning the day. Entertaining auction by Antony Woodley and well ran campaign headed by Peter Mitchell – vendors would have to be very happy with the result here.(Adam Woledge)

Buyer Masterclass: This Week Our Weekly Review Article and Buyer Masterclass is on Valuing Top End Homes – it’s an eye opening article and nothing like what you may have thought.

Hope you enjoyed our Bumper Issue and We Only Buy Homes – see you in 3 weeks!

MIDDLE PARK, 90 Park Rd, Michael Szulc (Cayzer), passed in $2,050,000, no bidders

In this market, something's gotta give. Tony Pride (Pride Real Estate) at 65 Dickens St, Elwood, bought under the hammer, 3 bidders

At 6pm on Saturday, the James Clearance Rate for $M+ was 54% on the 28 auctions we attended. Yes it was down and in our opinion that was again due to lack of exciting stock rather than lack of demand for good homes.

The Weekly Review Bidderman, our demand indicator, was 1.5 bidders per auction. You can always tell when it’s a low quality weekend: the ducks (no bidder auctions) increase dramatically. This weekend around 1 in 3 auctions had no bidders at all.

Given the lack of action today in Auction land, we have a reduced market summary and instead conclude our series on Step Quoting by offering some solutions.

Market Summary: The market continues to send the same clear messages – we are seemingly in a period of some stability even if prices are falling on all but the best.

1)      Good quality Top End (around $3m and above) continues to change hands in strong numbers.

• 40 Balwyn Rd, Canterbury Peter Dixon – sold for over $3,000,000
• 37 Fairview St, Hawthorn Jeff Gole – sold for just under $3,000,000
• 3 Gardiner Rd, Hawthorn Hamish and James Tostevin – 5 bidders sold for $3,580,500
• 41 Drummond St, Carlton James Keenan – sold for $3,160,000
• There were $3m pass-ins at 111 Walsh St, South Yarra and 2-4 Sandown St in Brighton.

During the week these $3M+ were bought

• 48 Hampden Road Armadale Andrew Baines – sold for over $6,500,000
• 45 Martin St, Brighton Ian Jackson – sold for just under $4,000,000
• 42 Matlock St Canterbury Sam Wilkinson – Just over $3,000,000
• 198 The Esplanade Stewart Lopez – had been quoting in excess of $6,000,000 – sold undisclosed

This September, to date, we are aware of 26+ sales in the $3m and above price range – see our $3Million Plus report. If you look at our $3Million Plus market report for last year, September 2010, we got to 46 boughts by months end – http://marketnews.com.au/2010/09/two-9-million-homes-bought-on-monday/ and that was pretty much a solid activity time in the market. The top of the Top End has some ooomph just now – but September has always been regarded by the key selling agents as a very good time to sell, due to a general market combination of post winter buyer positivity and a lack of supply competition. For buyers it’s not ideal as logically this means lack of choice and higher prices.

Michael Gibson and Justin Follett of Kay and Burton were both a bit chipper when I spoke to them this weekend (aren’t we buyer and seller agents shallow – deals we smile – no deals we don’t) and assured me that while the market may seem a little boring until the end of the school holidays, some good homes have changed hands this last fortnight and there are some good homes coming on before Melbourne Cup. Michael added that vendor moods have improved with the Top End good news of recent times. We hope he is right, as that will mean more choice for buyers.

2)  B and C graders are continuing to fall in demand and also in price. This weekend, despite the stock shortages, it was a pretty average weekend. Buyers did not buy what they perceived to be less than the best.

3)  The further away from the CBD the harder it is to buy/sell right at the top.

4)  Bayside appears to be more subdued than the Inner East $M+; this is the reverse of earlier in 2011. And this is particularly so in that $1m to $2m price range.

5)  We still have significant stock shortages of quality stock and it will be interesting to see what happens to demand if the market is tested before Christmas with a run of 100+ $M+ Auction weekends. That’s something we have not seen since Autumn.

Why is the above happening?

It’s all about bidder numbers. As we pointed out last week, at the lower end it’s a vicious circle of low bidder demand resulting in poor results, making sellers reluctant to put their houses on the market. Which means there’s just not that much good stock around, so buyers who are already feeling cautious about the economy anyway aren’t bothering to go out there and bid on the little that’s on offer.

Meanwhile, at that upper level, where buyers aren’t so concerned about the economy, they’re snapping up whatever good quality stock is coming on to the market. All you need is couple of bidders at this level to push the price up, and we’re seeing auctions with three or more. And those good results are emboldening more sellers to put their homes on the market.

So is it a good time to buy or to trade up?

An extract from Gina’s Weekly Stonnington Wrap: This week we had higher than average enquiry levels and we had multiple new enquiries on one property. My discussions with clients have been around saving money on A grade homes in the middle to late Spring after the Winter of Waiting. There is a growing underlying demand from buyers who have been waiting for the right home whilst anticipating continued price drops. In this low quality stock market, finding the right home is one hurdle (being able to identify the right home or the opportunity is another, and something we often discuss with clients – our Ratings tool helps). The other is that when you have found that A grade property, chances are that others have found it too and you will have competition. Which puts into question the expectation that now is a good time in the market to save money. Perhaps not so much on a good quality home.

Some solutions to Illegal Step Quoting – our final article in this series

We love auctions just as much as the next Melburnian; in fact, quite possibly more. Having travelled to many parts of the world, we find our auctions to be a unique and fair way to exchange homes. While we represent buyers, therefore we have a bias, we recognise sellers make up 50 per cent of the market and have every right to want whatever they want for their homes.

We love a transparent auction system and have no issues with sellers getting great prices. In fact, this series of articles is not about getting cheaper prices; it’s about preserving a unique way of life.

So, if you have been reading our series, you can see there is a problem (some may use more aggressive words) that is growing within our Saturday spectacles, that, if left unchecked, will eventually choke the life out of this great “sport” and destroy what many buyers, sellers and ethical agents love to watch and participate in.

That problem is Underquoting and/or Clayton’s Reserves. But, please, before you switch off and say “It doesn’t affect me” or “I can’t do anything about it”, this is a good news story and one that you really should care about (be it buyer or seller). There are solutions.

Definitions of Problem

Step Quoting: This is the process by which selling agents nudge buyers up the staircase towards a price their clients are hoping for. Done badly, it can make buyers feel cheated and manipulated and invite accusations of under-quoting. Done well, it’s a legitimate haggling process agents use to get a buyer and a seller to meet at a price point they’re both comfortable with.

Clayton’s Reserve: This is when the auctioneer won’t tell the highest bidder the correct reserve (in fact they tell them a far higher one) when they have won the right to negotiate at the vendor’s reserve, and despite the fact the highest bidder won the moral and contractual right to hear the true reserve.

In our office, we have three meetings a week to discuss each particular Step Quoting negotiation we are involved in:

1. A general negotiation meeting – who is backing up who, etc;
2. A specific property negotiation workshop; and
3. A client pre-negotiation meeting.

Quality selling agents do the same but, of course, from a different perspective. Digressing slightly, how do you as an individual prepare, workshop and research your Step Quoting negotiation options?

Over the years, our group has developed a number of key strategies to deal with and manage Step Quoting and Clayton’s Reserves as best we can. Here are three of them:

1. Layering
2. Drawbridge
3. Wombatting

When executed correctly, they vary in effectiveness from limited to very substantial. While we prepare for them on every deal, we only use them when an agent strays outside the bounds of what our clients consider equitable dealing and then only within acceptable risk v reward parameters as deemed by our clients. After all, our focus is good decisions and buying the home if appropriate – not playing games.

Publicly, what can you do as an individual buyer or spectator when you witness bad auction behaviour as a result of Illegal Step Quoting? Here are three ideas!

It has been great to see the big improvement in auctions in recent times with the “On the Market” question being asked more and more and with greater confidence and effectiveness. So, we thought that perhaps we could throw a few more ideas out there for comment. You may disagree with these initial concepts, you may think they’re good but need some tweaking, or you may think of alternative workable suggestions to sensibly combat Illegal (not legal) Step Quoting and Clayton’s Reserves. We welcome your feedback.

1)      Idea One: You the public. How many brilliant auctions have you been to where there has been ferocious bidding and, when the hammer falls, there is rapturous applause? It’s great theatre and great excitement. But what about when the agent has been quoting $2,100,000 and, when at $2,600,000, the question is asked “Is it on the market, Mr Auctioneer?” and the buyer and the crowd gets some smart alec reply such as “Nearly there” or “I’ll tell you when it is”? What can you do? How about you, as a crowd member, think about registering your protest at their illegal behaviour? Perhaps a gentle boo, or simply walk away or blog about it or put it on Facebook.  Perhaps when you are a seller, you think about what’s important to you. Do you want to run your life condoning this behaviour? There are agents out there who get great prices without resorting to unethical and illegal behaviour.

2)      Idea Two: Consumer Affairs Victoria. We have independent reporters and advocates reporting on around 50 homes a week and we attend 30 auctions. We publish our results. All up, it costs our company $250,000 p.a. to maintain this coverage for you and our clients. There’s no reason why CAV officers couldn’t do something similar and cover 30 open for inspections on a random basis the week before auction and physically record (covertly, after a warning had been given) the quote given them by the agent on the door. On the weekend, they could attend 30 auctions and write out simple reports of bidding sequences and the price at which it was announced the property was on the market.

On the Monday, they could collate and follow up any dodgy results by requesting the selling agent’s authority. They could then match the Thursday quote against the auction result against the agent’s authority and publish on a freely accessed website hanging off the CAV website.

Of course, there will be some innocent instances of major disparities – auctioning is not a perfect science. What you are interested in is trends of corrupt behaviour.

It really is pretty simple – we support that the CAV and the REIV have an important role to play.

3)      Idea Three: James Buyer Advocates. This is a blatant plug so you can switch off now if you like. If you are a buyer and agree to definitely backward bid during the pass-in process, then we will act for you at a significant discount to our normal fee (if we have spots available in our booking schedule). Of course, if you are unsuccessful, then there is no charge. Please, you need to understand that backward bidding is a considerably higher risk strategy (you may not get the home), but, if that is what you ask us to execute, then we are up for it. That is the risk you are prepared to take for the reward on offer.

Illegal underquoting and Clayton’s reserves are very different from when you, the buyer, think the price is high. A vendor can ask whatever they like, just so long as their agents are not deliberately misleading real buyers during the campaign. A seller can change their mind on a reserve during the campaign – that’s fair enough just so long as real buyers are updated along the way. But corrupt quoting practices waste time; they cost real buyers’ money (due diligence) and they damage the health of an inherently fair and loved system – which ultimately lowers activity for sellers.

This is the last in a series on Auction Step Quoting Issues. As with any article we publish, we welcome constructive feedback.

Desiree Wakim, Hamish Tostevin (centre) and his brother James (Marshall White) at 3 Gardiner Rd, Hawthorn, bought under the hammer, $3,580,500, 5 bidders

“Round the Grounds:
Boroondara – Another pretty solid day despite the lack of exciting stock – 68%
Stonnington – Most people are focused on the footy – Mike Gibson says some good stuff coming on after the holidays.
Bayside – Lacklustre in terms of offering and results
Port Phillip – Couple of Biggies Next Week

Biggest Sale: 3 Gardiner Rd, Hawthorn, James Tostevin (Marshall White); Under the hammer $3,580,500, 5 bidders
The sizeable crowd crammed into the terraced yard of this property to see things quickly get under-way with an opening bid of $3,000,000. Auctioneer James Tostevin then fielded a crossfire of bids from an impressive five bidders. It was a good natured exchange between the last duo, with one party exclaiming “this feels like I’m playing table tennis!”. This brought a smile to the face of the winning bidder, whose strategy of countering bids with mere $500 rises eventually paid off. The property sold under the hammer for $3,580,500. (Doug Paget)

Biggest Pass In: 111 Walsh St, South Yarra, Justin Long (Marshall White); Passed in $3,250,000, no bidders
On a warm sunny day, auctioneer Justin Long looked in fine form along with his running man Peter Bennison. The main theme that Mr Long ran with during his preamble was the wonderful location of the house and, with that, he invited the crowd of about 30 to dip their toes in the water and make a bid. Despite the nice weather, the water might have been too cold as no one was willing to offer a bid. Seeing this, Mr Long declared a vendor bid of $3,250,000 which at this point made the crowd even more not willing in taking the plunge as they were deathly silent. Not even Mr Long’s musings in picking out a crowd member scratching their face for a bid could move the crowd and the property was subsequently passed in on the same vendor bid made earlier. (Joshua Bong)

Bidderbuzz Auction: 36 Matlock St, Canterbury, Steve Burke (Jellis Craig); Under the hammer $1,860,000, 4 bidders
A well attended auction this one. While we felt the house was just OK, Matlock Street is a great Canterbury position – walking distance to Maling Road, local parks and schools. Auctioneer Steve Burke gave a solid introduction to the property, pointing out that the property just up the road recently sold for over $3,000,000 before auction (it was scheduled to be auctioned today) – a very different offering of course, but nonetheless a point worth mentioning. Bidding commenced pretty quickly with crowd bid of $1,500,000 being called out. This was swiftly countered by Steve with a $1,600,000 vendor bid, and then a second vendor bid shortly after at $1,625,000. It took some time, but Bidder 2 came into the fray at $1,635,000 and this was countered by Bidder 3. The property was called on the market at $1,770,000 and it looked as though this auction was running out of steam with Bidder 2 stopping around this mark. Enter Bidder 4 (just behind Bidder 2 – how often does this happen !) – and the pace of the auction picked up again with a string of quick-fire bidder nods and the property eventually sells under the hammer for $1,860,000. Good result for the vendor here. (Adam Woledge)

Kristen Hatt: It is with sadness that we announce that Kristen (Klarity Kris) has been given a fantastic opportunity with Marshall White Brighton and has accepted it. Kristen has been a brilliant advocate for many buying clients and she will be sadly missed by them and all of us at James Buyer Advocates. Ours is a tough business and long hours, however with this opportunity Kristen will be closer to home and family.  Good Luck Kris we really enjoyed working with you and who knows the future.

The Big Issue Video: A new market dynamic or is this just a bit of fluff at the Top?

We Only Buy Homes:

On to our next adventure Tam, no bidders here! Peter Kennett and Tamara Whelan (Hocking Stuart) at 19 Louise St, Brighton, passed in $1,175,000, no bidders

What goes on behind closed doors? Profile of Hot Auctioneer Jack Bongiorno (Marshall White): 78 Blessington St, St Kilda: Under the Hammer $3,400,000, 6 bidders

At 6pm on Saturday, the James Clearance Rate for $M+ was 68% on the 28 auctions we attended. Another solid weekend, especially for A grade homes. We feel the market is now back to a balanced state and should remain so with these current very low stock levels.

The Weekly Review Bidderman, our demand indicator, was 1.7 bidders per auction. Of note: 22 of the 28 (78%) auctions we attended had at least one bidder this weekend. In other words there were only 6 ducks, indicating a wider spread of bidder demand.

Market Summary
With the third week in a row of significant competition on A grade Top End homes (homes we rate with hats or homes we rate over 600/1000) there is little doubt we are now in the midst of an activity spike due to significant stock shortages of “ready to move in family period and new homes” in the $2m to $6m range.

On top of what we saw 2 weeks ago (11 sales at $55m with an average of 2 bidders each) and last week (7 from 8 over $3m) there were solid results this weekend at:

1. Kew 20 Barry St – Peter Batrouney 3 bidders, under the hammer, $3,850,000
2. St Kilda 78 Blessington St – John Bongiorno $3,400,000, 6 bidders (see report below)
3. Armadale 46 Stuart St – Andrew Hayne 2 bidders, after auction, over $3,300,000
4. Malvern East 58 Kerferd St – John Bongiorno, 1 bidder after auction, $3,075,000
5. Malvern East – Little Como – 50 Finch – Gowan Stubbings – Expressions of Interest – It was a long battle but there is a Sold sticker on the board.
6. Toorak 8 Ultimo Crt – Justin Long – After Auction – 3 bidders – $2,900,000

Whilst the market is giving a big tick to those it likes (well priced A graders); it is marking very harshly those it doesn’t – the  B or C grade homes that have issues. Some examples below:

1. Toorak 32 Canberra Rd – old and tired (big land though).
2. Kew 2-4 Heather Grove – no backyard, no garage and no real interest.
3. Malvern East 4-6 Finch St – 0 bidders – a big reno required and only a few metres from Dandenong Road

And then there is 22 Surrey Road, Toorak – an Auction was scheduled for Saturday, but was converted to Expressions of Interest at the last minute. What does this mean?

Yes our focus in Marketnews seems to be all at the top of Top End ($3M+). Right now that is where the real action is. There has been an unequivocal mood change that does not seem to have been shared by the market at the lower dollar values.

Buyers are now having to answer some very real questions:

What is the real price? – i.e. What is the highest other bidder prepared to pay, if indeed there is one? As a buyer am I trying to buy an A grader or a C grader? Am I $300,000 below the other bidder or $300,000 above nobody?

What should my new strategy be in trying to purchase a Top End home? How will you manage a negotiation situation under extreme pressure? That is not the time to work out a plan. After the event is not a time to say I could have done it a lot better. The market has changed at this level, and may well change again. As a buyer have you moved with the times?

Consider this extract from an MW St Kilda auction report “This market now plays to MW’s (Marshall White’s) great little system and strength – shake the buyers up, show ‘em their competition, work out who is the strongest, then pass it into them and mentally torture them in post auction dealings by referring to those outside. It’s very hard to argue with its effectiveness, for if you don’t play the game, on a good home in this market, then there is a high chance somebody else will. This market is now spiking in the direction that will enhance MW’s reputation amongst sellers but …  um how do I say un-enhance their reputation amongst buyers.”

This applies not only to Marshall White, but Jellis Craig, Kay and Burton, RT Edgar, Benmac and many of the Bayside agents. The main question for buyers is not its legitimacy (the sellers absolutely want this); it is how do I best manage it and achieve my main goal within my buyer risk profile?

$M+ Market – two general rules for right now

• The further you go out, the tougher the market at the High End
• Inner Melbourne only: the higher the price, the stronger the demand (if they are good).

$M+ Supply

• Low stock on good homes right now and little coming on
• Plenty of stock on homes that have low land content (e.g. apartments), poor characteristics (weak or old floor plans) and/or priced above market.

$M+ Demand

• Strong underlying demand for good ready to move in family homes with around 4 bedrooms in inner Melbourne (A graders)
• Weak demand for homes that are perceived as less than perfect in terms of land content, position, price or floor plan. (B/C graders)
• Demand is weaker at the lower parts of the $M market than at the top.

$M+ Price
Price was rocketing in 2007 – then dipped around 20% in 2008 – roared back to life from May till December 2009 (20%) and then roared again (10%) in early 2010. Since then the price rocket has fizzed and instead price has been like a gently falling leaf until late Winter 2011 when it gathered some real negative momentum. However the last fortnight (even a bit longer) things have definitely been more positive around the traps. But price is now clearly two faced, with good stuff going up and the bad stuff continuing to fall.

How long will this spike last? Who knows! Our comments are predicated on the continuing extremely low stock levels with not one solid Saturday (over 100 auctions > $M) between now and the hoped for Grand Final win of the Pies.

Future Stock Levels
So what are stock levels looking like Post Melbourne Cup? Will we see the market tested with supply depth and greater buyer choice? We asked three of Melbourne’s leading agents:

Port Phillip: (Andrew Stuart of Hocking Stuart) Generally  stock levels increase at this time of year, however at this stage it doesn’t seem to happening to the same extent!

Bayside: (David Hart of Buxton) Traditionally, there is a busy final run after Melbourne Cup. Looking at our listings so far, we expect this will probably be the case again, albeit in reduced numbers compared with the last couple of years. Good family homes are rarely in oversupply, and I’m sure the demand for these will outstrip the supply.

Inner East: (Gowan Stubbings of Kay and Burton) We have seen a distinct shortage of good quality family homes of recent times. What we don’t have is the supply to meet the demand. We are getting a sense that the traditional spring market will come later than usual this year as people are watching to see how the market is performing. We believe the stock levels will increase and more family homes will become available after the spring racing carnival.

Steve Tickell (Hocking Stuart) in action: 83 Orlando St, Hampton, bought under the hammer, $1,652,500, 2 bidders

‘Round the Grounds (see our weekly wraps for results over $M)
Boroondara - Not a good a day to be selling between $1M and $2M – 38% Reported Clearance Rate.
Stonnington – Around a $M – less than 50/50 Clearance Rate on low numbers
Bayside – 31 Asling St, Brighton – Quote Over $1.65M – Opening Bid $2M – On the Market – 5 bidders – $2,090,000!
Port Phillip – Basically the little that was put up – all SOLD.

Biggest Sale: 20 Barry St, Kew, Peter Batrouney (Jellis Craig); Under the hammer, $3,850,000, 3 bidders
An entertaining auction this one, set in the front yard of one of Kew’s more historical homes (And wow! What an amazing collection of antique furniture inside  – The Clendinnen collection will be separately auctioned later this month). Auctioneer Peter Batrouney gave an insightful introduction to the property (claiming it last sold for 20,000 pounds back in 1965) and with rain threatening, got straight down to business. He didn’t have to search too hard for bids with a crowd bid of $3,410,000 immediately kicking this auction off. Bidder No. 2 entered the fray just as quick and then a third bidder got into the action. The property was on the market at $3,800,000 and sold smartly under the hammer for $3,850,000. Good result for buyer and seller alike here. (Adam Woledge)

Biggest Pass In: 32 Canberra Rd, Toorak, Jeremy Fox (RT Edgar); Passed In, $5,500,000; no bidders
Not sure how this offering will go – it’s a little tired but it is a big land offering and this end of the market has today, so far,  continued to show a little heat. A small crowd of around 40 are here in attendance to see Jeremy Fox do his stuff. Doesn’t seem like it’s going to fly. He starts on time, gives us a quick spiel and we are down to business. Jeremy asks for a $5.7m start but no replies, so he asks “can I see $5.5m?” – at this pace it will be free by tea-time I think. A half-time break is called and you get the feeling this will be a non-result and over quickly. Back Jeremy comes and announces a $5,500,000 vendor bid then gives us another burst on how good this all is. Zippo happens and it’s passed in.(Mal James)

Bidderbuzz Auction: 78 Blessington St, St Kilda, John Bongiorno (Marshall White); Under the hammer, $3,400,000, 6 bidders
Wow! What a home, what a rear living area and what a crowd (120) – this is celebrity junction! Much to my chagrin, the auction is being held out in the spitting rain due to John “Growling Jack” Bongiorno’s stubbornness on wanting it to be on the street. His spiel was confident and befitting for what lay ahead. An opening vendor bid of $2,850,000 surprised me in that I thought he would have gone for the jugular a bit higher. However, two bidders quickly took it to $3,000,000 and then we had a half time break.  After half-time a third bidder joined in at $3,025,000 and then a fourth and fifth bidder arrived between then and $3,125,000. Bidder 6 knew what he was doing and joined in at $3,200,000, just as the sun came out. It was announced “on the market” in response to a good question from Bidder 6 at $3,300,000, and Bidders 2 and 6 fought it out by hitting each other with a $5,000 wet sponge (perhaps instead of a more solid bid) until Bidder two gave up at $3,400,000. (Mal James)

Buyer Masterclass: Is “Step Quoting” a black or noble art? Find out in this week’s Buyer Masterclass.

We Only Buy Homes

Biggest auction of the day: 20 Barry St, Kew, Peter Batrouney (Jellis Craig), under the hammer, $3,850,000, 3 bidders

Hey, right now things aren't all bad at The Top! Scott Patterson (Kay & Burton), sells 19 Henrietta St, Hawthorn under the hammer for $1,827,000, 3 bidders

At 6pm on Saturday, the James Clearance Rate for $M+ was 65% on the 26 auctions we attended. Solid result on low numbers. At these stock levels we have moved our market indicator back to balanced, however prices are continuing to ease on a number of lesser quality homes.

The Weekly Review Bidderman, our demand indicator, was 2.2 bidders per auction and although this was inflated by a huge volcano at 29 Rose St, Armadale (9 bidders) there were 2 or more bidders at 50% of the auctions we attended. That figure is more indicative of stock shortages than of surging demand.

The demand hasn’t suddenly appeared, it was always there (at the right price on the right home). The current market is all about the increasing shortage of new family home stock right now and in the foreseeable future.

Market Summary: Stock shortages of attractive stock
The market has moved from an overall nothing Winter market to a two-faced low-stock Spring one and during this transition it has dropped in price (with a few exceptions) – courtesy of the sharemarket malaise). If you have an A grade home, something we would rate at over 700/1000, and you are priced to market then you are selling strongly and even slightly better than a month ago. Look at the $3M+ results today. On the other hand, if you have a home that has issues with position, land content or floor plan, then your end sale result is continuing to ease and doesn’t look like getting any better this side of Christmas.

It’s not really good news for buyers as the Early Spring (Pre Melbourne Cup) market is going to be one of the leanest for $M+ transactions in many a long year.

Let’s look at some of our data. We talk often about 100 (in number) $M+ weekend auctions being a solid benchmark for Inner East and Bayside. As we move into Spring, when you would expect several weekends to be above that number, we are not seeing any 100+ weekends, let alone Super Saturdays (over say 150). Instead we are looking at around 60 this weekend, 80+ next weekend for the first week of footy finals, and 70+ the next. Preliminary final day, on first blush, is looking OK but it’s not quite a hoped for or expected Super Saturday.

After that there will be only 3 weeks between the Grand Final and the Melbourne Cup, which is throwing a googly at the traditional 4 week campaign (you can’t have one), thus delaying more would-be vendors going to market.

And finally this leaves about 6 weeks after the Melbourne Cup for much of the Spring market to get on, get bought and get in/out before Christmas – not a lot of time.

As we said not all great news for buyers. For those without professional help we are suggesting hard work instead of patience as the solution to managing the stock shortage especially if you “need” to be in a family home before Christmas.

Trading Up
But while the market is weaker on many homes generally, it’s not weaker on good family “trade up” homes. These homes are far removed from the newspaper doom and gloom headlines and we expect this will continue until more quality stock comes on; hopefully easing prices on these homes and also improving buyer choice. Trading up is a good idea if you can find the one you want and are then able to beat off the hordes of similar thinkers.

$3M+ Market: Again the standout – although on very low numbers ( 6 from 8 )
Yes there were some big pass-ins like 67 Lansell Road Toorak ($3,200,000 vb) but it has some challenges. Also passed-in was 2 Iona Toorak ($5,000,000 vb).  However the ones that were bought this week showed, in the main, multiple interest.

• Armadale 29 Rose St – see report below 9 bidders $3,030,000
• Malvern East 7 Bates St – Heather Elder and Rae Tomlinson – 3 bidders – bought after for $3,500,000+
• Hawthorn 34 Coppin Grove Jack Bongiorno – 3 bidders – under the hammer – $4,110,000
• South Melbourne 210 Nelson Rd – Anthony Grimwade – 3 bidders – under the hammer – $4,215,000
• Toorak 19 Sargood St – Jeremy Fox – 2 bidders – bought after – $4,700,000.
• Balwyn 12 Creswick St – William Chen – Bought Before – Undisclosed – around $3,000,000 . This was after a failed auction earlier in the year.
• Canterbury 52 Mont Albert Rd – Karen Gornalle – Private Sale – over $3,800,000.

Step Quoting: Under/Over + Skilled quoting:

Agent Step Quoting is a contentious part of our industry: It’s how selling agents nudge buyers up the staircase towards a price their clients are hoping for. Done badly it can make buyers feel cheated and manipulated and invite accusations of under-quoting. Done well it’s a legitimate haggling process agents use to get a buyer and a seller to meet at a price point they’re both comfortable with.

For the first Special Report on Step Quoting go to Buyer Masterclass – found on the home page to the right of this Market Insight article.

Step Quoting when involving illegal under/over quoting is a significant problem within our industry.  This is typical of the letters we receive on the subject.

Editor Note:

1)      From the outset this Step Quoting series is not designed to be an attack on selling agents per se; it’s an attack on the parts of Step Quoting which are unethical, unprofessional and illegal.

2)      For buyers (like the one above) who are seemingly deceived into spending money on pre-purchase due diligence there needs to be statutory remedies considered. However for some buyers who repeatedly miss their dream home – your real estate idiom should become  “Fool me once, shame on you; fool me twice, shame on me”. You can manage Step Quoting and if you can’t, then consider engaging a professional who can.

3)      Step Quoting can work for sellers and can work very well. But it can also fail very badly for sellers and certain sellers get far less for their home than they should because the buying public simply does not trust that agent. Why did your house fail? It may not have simply been the market! Step Quoting is not just a “buyer problem”.

4)      Illegal, unprofessional Step Quoting like any mass deceit can weaken a dynamic capitalist market, as proven in the American financial markets. Removal of an unethical practice, even if it is successful, does not guarantee a weakening of the dynamic Melbourne $M+ market; as evidenced by the significant reduction in Auction Dummy Bidding with the 2005 legislative changes and the bull markets that followed in 2006/2007.

And finally we are not calling for the removal of ethical, legal Step Quoting- it is legitimate highly skilled haggling and much wanted by sellers who are 50% of the voters and 50% of the market.

Next week we will be looking at ways of managing Step Quoting from a buyers point of view and possible solutions that the industry and/or government can implement for the protection of both buyers and sellers.

We always welcome constructive, supportive or alternative opinions on anything we publish (emotion is fine, just no threats thanks, we don’t finish reading them).

In this crowd of 125 there were 9 bidders. 29 Rose St, Armadale (Heather Elder and Rae Tomlinson) bought under the hammer for $3,030,000.

‘Round the Grounds:
Boroondara – We covered 8 auctions – 7 sold. Overall another 70+% Clearance Rate – the market has moved back to balanced in Boroondara on low numbers.
Stonnington – The higher you went the better they sold
Bayside – Quiet Day with 4 from 7 over a $M selling – no real standouts
Port Phillip – Still relatively quiet, although $4M+ sale in Nelson Road

Biggest Sale: 19 Sargood St, Toorak, Jeremy Fox (RT Edgar); After auction, $4,700,000, 1 bidder
Well it’s always a nice day when you run into Jeremy Fox at an auction – I have to say that or else he rings me up and complains. Anyway here we are at 19 Sargood – it’s a classic Toorak auction, murmurings, some people who are important trying to look not and others who are not important trying to look so. Sunglasses, knowing nods and hopefully a raised hand will be today’s tools of the trade at this auction. And so Jeremy begins in front of a crowd of around 70 and gives us a croaky but confident opening spiel. Jeremy correctly states that when I’m asked to buy the best type of home, I say 1920s home, Toorak, good land, good street and northern orientation. No disagreement from us there. And to the opening bid – Jeremy asks for $4,500,000 and there is silence. After a gap $4,200,000 is offered and $20,000 rises requested. Bidder Two chimes in at $4,300,000. Two bids later and we are at $4,400,000. A few more bids and we are rocking along to $4,550,000. The auction loses some momentum and a 1/2 time break is called, taken; and upon his return Jeremy launches into a short speech on surprise, surprise – how close we are to the point of it becoming unreserved. Back to the crowd – a bit of stalling, no more action and it’s passed in for……. whoops another bid comes from Bidder Two – a quick reply, counter and we are $4,600,000 with Bidder One. The second half-time break as the “on the market” question is re asked and an answer is requested. Jeremy says he is about 1.5% away from it being on the market. And so the countdown comes and it’s passed-in at $4,600,000.  Jeremy was telling us the truth – bought after for $4,700,000.

Biggest Pass In: 67 Lansell Rd, Toorak; Passed in $3,200,000, 1 bidder
A backyard poolside auction education under the tutelage of one of our favourite auctioneers: Tim Derham in front of hopefully 40 keen students. As usual, we start on time and get a concise and professional opening. And now down to the bidding – “our instructions are to sell ladies and gentleman – where are we starting?” No reply and a vendor bid comes quickly at $3,100,000 – looking for $50,000. And after a third and final call we get bidder one at $3,150,000. A half time break comes and goes and trademark Tim Derham longish hand-slapping process begins and ends – however instead of passing in to the $3,150,00 bidder a vendor bid is taken at $3,200,000 and the property is passed in quickly to the “street”. Mmmmmm a bit unusual, and some may say a strange tactical bid. I would be surprised if this was sold this week-end.

Bidderbuzz Auction: 29 Rose St, Armadale, John Bongiorno (Marshall White); Under the hammer $3,030,000, 9 bidders
Well here we are with the MW trifecta – Jack, Rae and Heather. The monkey and the two organ grinders some unkind people may say. The crowd is big, but not unexpected (125) and they are here to watch the theatrics and possible fireworks as this home was only bought and sold 3 years ago for a tad under $2,500,000. There is talk the current owners want a fair bit more than their money back. We get the usual start from Jack – solid and professional and then to the real theatre. $2,000,000 bid from Bidder One is refused/half taken and a vendor bid at $2,250,000 is slammed back – geez Jack is in an aggressive mood. A second bidder chimes in at $2,275,000 and a 1/2 time break is taken. That was a surprise. “Get on with it” Jack barks out at the crowd upon his return. Bidder Three tries $10,000 – “No” screams back Jack. He has obviously been well prepped about big interest by Heather and Rae, but nonetheless it’s still very aggressive bid refusals. Two more bidders take it up to $2,425,000 and we have some momentum – some real momentum. Jack says there is no reserve – and he issues the challenge bid or you’ll  “get overrun” at the pass-in. Boy, is he sticking it up the crowd – Jack is at his petulant best and it seems to be paying off. Please this is not gay abandon – Heather and Rae must have briefed him there were multiple bidders. Bidder 5 – $2,500,000. Bidder 6 – $2,600,000. Jack has won the crowd over with his self deprecating humor intertwined with a certain downright arrogance that he has in spades today. Lots of bidding and we are at $2,800,000  – Bidder 7. $2,875,000 and a couple of bidders rightfully push hard for an answer to the question.  “Is it on the market Jack?” they repeatedly ask and belatedly and smartly Jack retreats back inside for an answer – this was a time for concession, empathy, not bravado and Jack read it perfectly. On his return – wait for it “Yes it’s on the market” he fires into the main “on the market” enquirer and Jack adds “now bid – no pressure but we’re all watching you”. $2,925,000 – Bidder 8. Straight through $3m with a new bidder – that’s 9 in total. Bought under the hammer for $3,030,000. Wow! And the market is dead for all homes – NOT. Not sure who should take a bow for this – certainly Rae and Heather – and the home, the sellers, the market, Jack, the bidders. Why don’t you all take a bow. Bloody ripper auction.

We Only Buy Homes

But at the lower end of the Top End, things aren't all rosy. Campbell Cooney (Hodges), 66 Male St, Brighton, Passed-In $1,600,000

Agent Step Quoting is a contentious part of our industry: It’s how selling agents nudge buyers up the staircase towards a price their clients are hoping for. Done badly it can make buyers feel cheated and manipulated and invite accusations of under-quoting. Done well it’s a legitimate haggling process agents use to get a buyer and a seller to meet at a price point they’re both comfortable with.

We usually only hear of Step Quoting when it’s done badly as it highlights the low skilled, unethical agents almost immediately. When highly skilled agents use step quoting successfully it goes unnoticed except through careful examination at a later date. Yet within the Inner East and Bayside $M+ Markets it is a particularly common practiced black or noble art depending on your point of view.

How does it work? Well at the top of the stairs in Step Quoting you have a seller, a mum or dad just like you and they think their home is worth $4 million. At the bottom of the stairs in step quoting is you, the buyer and you think the home is worth early three’s, but your dream price is $2,950,000 – you don’t want to admit to a 3 in front of it at this stage.

Both you and the seller are interested in the transaction because the seller feels it’s time to move on and you hoping it’s time to move in.

You’ve seen the home in The Weekly Review and you’ve rolled up to the first open for inspection. The selling agent at the door says $3,200,000+ when you ask the “how much” question, while not in any way looking interested under your recently purchased “anti-agent” dark sunglasses.

“Mmmmm $3,200,000 – a bit more than the $2,950,000” you thought it was worth and maybe you will have to concede it’s going to have a 3 in front of it. You’ve moved a step to Step Two – not that painful.

But hold on, wasn’t that $3.2 million quote underquoting by the agent? Hasn’t the agent committed an offence by quoting at this stage a price much lower than they said the property may sell for?

Let’s press rewind for a minute.

OK Mal, how can the owner realistically think the home is worth $4,000,000? Trust me, this for many is not a dream figure, this is a cast in stone, almost religious belief and it comes from one of four sources: the agent told them, their mate told them, another agent told them or the tea-leaves told them – but they believe right now their home is worth $4,000,000 when quite possibly in this falling market the home is considered low $3m’s by most serious buyers and even the agent currently trying to sell the home.

How come? Time lag and the well known leap of faith valuing technique. 10 weeks ago the owner met with a number of agents – some competent, some not so competent and some downright rascals and the average of what the seller was told seemed to be $3,400,000 to on a really good day $3,700,000. One rascal agent did say $4,300,000 but the two other competent agents said mid $3,000,000’s. With each of the two “mid $3m’s quote” competent agents the seller asked “do you think I can get more, could I get $4,000,000” Each agent, who still wanted to get the job replied “it’s possible but unlikely”. Luckily for the seller one of the competent agents was engaged, even though they were not the highest in value estimate.

That was 10 weeks ago, this is now.

The vendor, who is now getting more emotional, is convinced more than ever that the news of the world doesn’t apply to him – when in fact it does and his $4,000,000 was always $3,700,000 on a good day – yet the market has dropped 10% in 10 weeks and his home is now worth $3,400,000 – on a good day with plenty of bidders. The selling agent doesn’t know yet if the home will have plenty of bidders as this is the first open for inspection and so being professional and with an obligation to the seller’s interest first and foremost they are quoting $3,200,000 plus. You tell me – are they dealing morally, legally or ethically?

The first open actually went pretty well and the selling agent put 7 names onto their list. As one of my favourite agents and master of the Step Quote once explained there are 3 lists: the door list (everybody who goes through is on that), then there is the engaged list and finally there is the buyers list.

But that’s another story, back to the steps and Step Quoting. It’s Week two and you notice in the papers the home is quoted at $3,400,000+. “Mmmm you think they must have interest”. Well they may and quite possibly they may not. Think about it – the $3,400,000+ quote would have gone in before the first open to meet printing deadlines, the new quote is not a response to the first Open For Inspection(OFI) but part of a well planned Step Quoting process.

You are back at the second OFI and you ask about the quote – of course in a manner behind your “anti-agent” dark sunglasses so as the agent knows you’re not interested. A reply comes either “that was a printing mistake” (one of my favourites if the campaign hasn’t leaped out of the blocks in the first week) or “yes we’ve had a lot or interest and so we put the quote up”.

At this point a number of things have happened – you the buyer have made it onto the second list – the engaged list – as you are a “repeat inspector”. Second time round you really like this home and you, the buyer, have now gone to Step 4 begrudgingly. Step 1 was your dream price $2,950,000 and you blew past Step 2 ($3,000,000) and Step 3($3,200,000) and your teetering around Step 4 ($3,400,000).

Meanwhile back at the ranch the selling agent is also doing all they can to pull the vendor back down from their top step of $4 million – talking about clearance rates, and falling prices and global recessions. The vendor won’t budge. “You said I could get $4million,” they say.

Week 3 and you are back at another open for inspection – you are now being considered a serious prospect. But the price has gone up again: “We have had some interest at around $3.7 million. How do you feel about that? “ the agent asks you.

Actually you feel sick, but behind your special “anti-agent” sunglasses you trot out “Mmmm  guess that puts me out” $3,700,000 – you think – OMG. What – I’m not paying over $3,600,000 and so welcome you’ve arrived at Step 5 in the Step Quoting process.

The agent has deliberately not asked the vendor for a reserve as he/she is aware of what they “may” want and also aware of the law. Meanwhile the agent is pummelling the seller with reports of how the serious buyers have either fainted or been abusive when they hinted at a price of $3.5 to $3.6 million.

So come auction day; you the buyer are at Step 5 with a lean and our vendor is at Step 7 with a lean.

The home is naturally passed-in and the selling agent runs up and down the stairs until a result either happens or the vendor sticks to their guns, and the home is listed for private sale the following week.

So, has the agent acted unethically or illegally?

They would have if they had told the seller that they could get “$4 million, no worries, I promise, maybe even $5 million”, and then once they had “bought the job” given the buyers a quote of $3 million at every open for inspection and never made any effort to work (explain to) the buyer or the seller along the steps.

Such agents are unethical and lazy and unfortunately they are too plentiful in supply through deliberate training or poor supervision.

But are agents who work to bring the buyer up to maximise the vendor’s price, and the vendor down towards what the market will pay, which ultimately achieves what the vendor wants (a sale), doing their job ethically and professionally? In these cases it’s a fine line, but if you are a buyer that moves up the steps and you have been informed along the way then well………… are these quality agents not just doing their job very well?

Why you as a buyer may need some professional help? In this market what happens if you are the only buyer on the engaged and buyers list since the first quote of $3,200,000+?

You mightn’t like being run up the Step Quoting stair, but that’s how the property market works, and the highly skilled selling agent’s job is to get the best price for their client, which by the way is not you.

The Block was great entertainment – but for me it was also the best reality TV show in a decade because it showed the harsh reality of what happens when you break all the rules in the property investment book.

I took the opportunity to go through each property a few weeks before the auctions and assessed them according to our James Home Ratings criteria. What stood out most, apart from the fact that it was a hugely popular show that captured everyone’s imagination, was how many rules were broken. Breaking those rules has led almost inevitably to the end result, where only one of the properties sold under the hammer at auction. Sorry guys, but this was always going to a disaster in the making. For us though as viewers, it was an invaluable lesson in how not to make money through property.

So what did we learn from the show apart from the fact that Josh is getting married to Jenna?

Rule No 1: You make your money when you buy

If you’re buying property as an investment and you’re hoping to make a profit on the resale, what really matters is not the selling price but how much you pay for the original property. Okay we understand that Channel 9 was more interested in the show’s ratings than the profit they’d make on reselling the properties. But the price they paid for the initial properties was way too much. Sure it was a big block, and it had four houses on it, but at an average of around $900,000 per site, plus stamp duties of around $50,000 each, plus holding costs of 6% (another $50,000+ each), plus the selling agent fees…Well each home was priced at well over a million dollars before the first contestant even showed up and the first nail was hammered.

Rule No 2: Buy the best position you can

This for me was the real killer – the position was a shocker. Yes the properties were close to all amenities but anything in Richmond is close to all amenities. Have you been down that street at night? It’s scary. Stand in the street or look on Google streetview and do a 360 degree turn – what do you see? Industrial sites, multi storey car parks.  And who knows what is going there in the future? What if it’s a panel beater shop and you end up with the smell of paint thinners in the morning? There’s a vacant block of land to the west of No 37 that has recently changed hands for just over a $1million: who knows what will go in there?

Rule No 3: Consider your target market – before you start!

The properties themselves had some real positives in terms of the land. The north orientation will bring light and winter warmth into those back living areas. So sure, that’s a tick. They all had good street appeal (tick) and the block widths were above average for the area, meaning the homes could give that feeling of space which is very important in a home (tick). However they all had another huge negative: on top of the scary street there was no car-parking. Which means that your future buyers or renters are going to have park their car at night somewhere in the street. So that is going to knock single women, young married couples, and older couples out of your target market. In fact, just about anybody except students and local lads would have concerns about living here.

Rule No 4:  Don’t overcapitalize.

If you are about to spend $1million or so even before one sod of earth is turned or one nail is hammered AND you want to make a profit, you need to know whether you’re likely to recoup the costs of your renovation – and hopefully more. Otherwise you’re going to end up overcapitalising. How can you work that out? Well, look around you. What sales evidence was there in The Block area for $1.5million homes? Zippo. We can tell you this because coincidentally on the same day of the Block auction we bought a property at auction for a client in Richmond only a few hundred metres away. It was on bigger land,  it had car parking and good period features – and we got it for just over $1.2million. So if $1.5million is the minimum amount you need to make serious money, but there is little or no sales evidence of properties selling for that amount in the area – DON’T BUY.

Rule No 5: Amateurs don’t make money on renos – they make money because they are lucky that the market happens to be in an upwards phase.

Whenever someone tells me they made money on a renovation, I think, well, no you didn’t, you made money by buying the right home in the first place. They would have made the same, and maybe even more, by doing nothing. It’s the market that makes you money. If the market is not in your favour, most amateur renovators lose money and the Block confirmed this. The bloke at 35 Cameron St Richmond (the vacant block) made more money than all the renovators combined by doing little.

Rule No 6: Don’t think short term with property unless you like excessive risk

The Block also highlighted the risks of short term flipping. Besides the fundamental error in the initial choice, the market was also unkind to the contestants. Which again highlights the short term risks in property. To buy this year, tart up and flip next year is a strategy fraught with danger and can cost you a packet. Each of these homes lost at least $200,000 if you factor in all costs – and they probably lost a lot more.

Rule No 7: Choose local selling agents, who are experienced at your price range – and choose the best not the cheapest.

The four auctioneers chosen to sell The Block properties are all very good at their job. But it was interesting to note that the only home that sold under the hammer was sold by a local agent, Russell Cambridge. He is a good operator, as is his partner Sam Davenport, who got the buyers there. Glen Coutinho is a really good auctioneer but his patch is Hawthorn, which may be close but it is quite a different market to Richmond. Ruth Roberts is a top female auctioneer from whom we bought a property less than a fortnight ago – but she is well known in Carnegie, and that’s a long way from Richmond. And again, while Clayton Smith is a strong local agent, he was always up against it having to market the weakest home in terms of floorplan. There can’t be that many people wanting to buy in Cameron St and he was always going to get the leftovers. Tough gig. (By the way: well done to Jellis Craig and Biggin and Scott for their very generous donations to charity.)

Rule No 8: Good Buyer Agents are of value.

Apart from Frank Valentic who is a smart operator with Advantage, the buyers agents who showed up to The Block auctions were just embarrassing. Our apologies – this is not how normal quality buyer agents represent the clients and just shows that when you put a camera in front of an idiot, they are still an idiot. Notice how you didn’t see quality buyer agents like Morrell and Koren there trying to buy rubbish or making a fool of themselves – they simply didn’t recommend The Block homes to their clients.

Rule No 9:  Substance v Puffery

In homebuying, digital TVs, paint colours, furniture etc come and go. If you view our online ratings you will notice that we give a total of 1 point out of 1000 for stuff like cabling and shower screens etc. The other 999 points are for land, position and floorplan. And if you’ve learnt one thing off The Block then hopefully it’s that it is the price, property, and positional fundamentals that really count.

Unfortunately on all those three counts the contestants were doomed even before they started.

Printed each week in The Weekly Review, Melbourne’s million plus property magazine.

At 6pm on Saturday, the James Clearance Rate for $M+ was 62% on the 26 auctions we attended.

The Weekly Review Bidderman, our demand indicator, was 1.5 bidders per auction – still indicative of price falls.

As it has been for the last few weeks, so it will be for the next few weeks. We are in a low new stock environment with no auction weekend getting anywhere near the magic 100 $M+ auctions (the signal for a strong weekend). This means a continued lack of buyer choice, and buyer frustration may well build. A by-product of this may be that impatient and needy buyers may buy more of the B and C grade homes (thus reducing winter overhang) and continue to fight over the A graders with some real gusto. Normally these are conditions for an improving market, however currently prices are generally falling. Most buyers should be happy with the Top End results below (unless you’re the specific under-bidders) as it may mean that some quality home owners, who up until now have been turned off by market negativity, will revisit the idea of selling in later Spring. That will mean an improvement in choice and will help hold buy prices should the market turn around.

This weekend the Big News is all about the $3M+ segment.

$3M+ Market Summary: Activity in this $3M+ segment has been building most of this month of August but there has been little to show for it until this past week, which has been a stellar performance by any measure. Bidderman was over 2 on the $3M+ homes purchased.

Agents are reporting that buyers have started to change their attitudes – and for once we don’t think this is spin. The interest is at least partly because the market has been starved of interesting offerings like the property at 4 Mernda Rd, Kooyong (Ross Savas and Michael Armstrong), which was a beauty and had at least 3 bidders over $6million (and would possibly have had a few more if circumstances hadn’t pushed for an early finish to the Expressions of Interest campaign).

Last week’s powerhouse result for Paul Keane and Peter Batrouney at 9 Salisbury Balwyn, where 4 bidders produced another result over $6 million, indicates that some buyers have waited long enough and are saying: “OK if it’s good, it’s priced right and it meets my needs then I’m interested.” There was another one of these on Saturday over $6 million at 25 Kent Ave, Brighton (see full auction report below).

But before you think we’ve been sent a case of Moet by our new found friends on the other side – it’s all about the price and quality of specific properties. The market is definitely not in an upward phase in terms of price. In fact unless your property is an A grader, and “correctly priced”, it’s likely the price is falling every day you ponder over the signed offer on the table (if you can get one). Smart sellers realise this.

Just to get some balance on what’s happening in terms of price:

• The Mont Albert property sold by Michael Ebeling that we report on below, was a good result. But it sold last year for basically the same price.

• The selling price of St Georges Road, Toorak property represented a greater than 10% discount on the initial asking price. It was a great result in that sub $9million range, but it had no takers for 6 months at $10million.

So what’s to account for this past week’s activity? Partly it’s because buyers can see less choice coming on the near future, due to the Grand Final being on later this year (thus preventing a normal 4 week auction campaign between Grand Final and Melbourne Cup). Partly it’s due to some good $3M+ homes on offer right now. And partly it’s due to underlying demand that has been there for some time. A lot though is because of correct price matching.

No doubt the next few months will see an increased number of stales (long term unsolds) – repackaged, rebadged and remarketed. If they are also repriced then who knows, maybe we will be off again and back to a more normal balanced market (which is what most buyers also want).

Of course, it could all just be a dream and we will all wake up again soon.

There were some good Private Sales through the week and we saw a return to off market transactions, as well as two successful Expressions of Interest:

• Ross Savas and Michael Armstrong of Kay and Burton held a Boardroom Auction last Thursday for 4 Mernda Rd, Kooyong. (This had brought forward the original Expressions of Interest deadline for Tuesday of next week.) Its “on the market” price was around $6,000,000, and it sold for between $6,000,000 and $6,500,000 with 3 bidders. See our ratings below.
• Michael Ebeling of RT Edgar got 12 Stanhope St, Mont Albert away for towards $3million – off market. This was around what it reportedly sold for last year. Not all bad news in that.
• Rob Vickers Willis and Tim Derham of Abercromby’s sold 10 William St, South Yarra under the hammer for over $5,000,000 at a Wednesday private auction. See our ratings and report below.
• Michael Cooney of Hodges sold 50 Ebden Ave, Black Rock (a two hatter with a 700+ rating) for over $3,400,000. This modern home was a goodie, but it’s been rare to see homes sold for more than $2 million in this area since 2009. So this was a good result and the best sale in Bayside we can report for the week.
• Expressions of Interest – 333 Glenferrie Rd, Malvern with Gerald Delany and Nicole Gleeson – sold for over $3,500,000.
• Post Last Week Auction Pass In 24 Hawthorn Grove, Hawthorn – Paul Keane – sold for an undisclosed amount above $3,000,000
• Off Market:4 Mathoura Rd, Toorak – Peter Bennison of Marshall White. This went to auction last year (or maybe earlier), and has now been traded for more than $3,000,000
• Off Market:10 St Georges Rd, Toorak – Marcus Chiminello – This home has been through a few agents and while it did not achieve what we thought was an incredible asking price of $10,000,000 earlier in the year, it did actually get close to $9,000,000 in the last week or so – still an incredible price. See our home rating
• Off Market: 3 Murray St, Armadale also Marcus Chiminello. It also sold for just shy of $4,000,000 recently.

These sales represent the best or close to best numbers in this Top End $ segment this year.

Agent Survey: Why is this week’s $3M+ improved performance happening?

Marcus Chiminello: We are currently seeing improved activity in the upper end and I believe discreet off-market transactions will continue as way of doing business for the rest of the year.

Paul Keane: With the stock-market on what appears a roller-coaster ride over the past month or so, people are retreating from it and investing that money in the good old “bricks and mortar”. I have spoken to several people over the past week and they believe the real estate market is off by about 10% from last year (some claim more) so if you are looking to upgrade your real estate portfolio there is so much upside….why not buy a $6m home that may have been worth $7m this time last year…..nothing much has really changed… only people’s mindsets are different.

Michael Armstrong: Some buyers are no longer getting burnt by the share market (they’re out). Some buyers have got sick of waiting. Some buyer attitudes have changed.  (Second tier homes though are continuing to drop in price.)

Mike Gibson: Definitely gained some traction in the last few weeks.

The Top End is looking up hey Leigh! 25 Kent Ave, Brighton: 4 bidders: Bought for $6,400,000

Today the $6M noise continued – the Top End of the Top End produced another strong result below. That is now 4 homes sold for over $6,000,000 in 8 days – with around a dozen bidders between them.

Biggest Sale: 25 Kent Ave, Brighton, Leigh Hallamore (Buxton); After auction, $6,400,000, 4 bidders
Crowd numbers were high to witness the auction of this rare absolute beachfront property.   Auctioneer Leigh Hallamore cleverly positioned himself along the back fence in front of the beach to maximise the emotional impact of the uninterrupted beach views of the (as it turned out) 4 bidders.  With at least three beachfront properties selling recently at $6m, $7m then resold for $8m and an undisclosed price, 25 Kent  was – as expected – strong.  An opening bid of $4m was a ‘dream price’.  A second bidder quickly upped the price to $5.9m and the bidding was on, stopping at $6.35m where the property was passed in to see if there was a bit more.  And there was: a final sale price of $6,400,000 or not too far off $10,000 per sqm if you saw no value in the home. (Kristen Hatt)

Biggest Pass In: 34 Tormey St, Balwyn North, James Tostevin (Marshall White); Passed in, $2,650,000, no bidders
A large of crowd of about 150 turned up at this auction, all interested to see how much this impressive house would sell for. James Tostevin was auctioneer and, despite all the buzz before the auction, when it came down to the crunch all the excitement fizzled out as no one offered any bids. Despite offering two vendor bids the auction never took off and Mr Tostevin had no choice but to pass the property in. (Joshua Bong)

Bidderbuzz Auction: 5 Packington Pl, Prahran, Andrew James (Hocking Stuart); Under the hammer, $1,325,000, 4 bidders
This was the first Andrew James auction I have had the pleasure of reporting on and what a cracker! An opening bid from the crowd of $1,040,000 kicked off proceedings and, while on the low side, was accepted by Mr James before he put forward a vendor bid of $1,100,000. Two initial bidders kept things moving at a constant rate with increments ranging from $500 to $5000 – definitely keeping Mr James on his toes! At $1,160,000 Mr James and his Hocking Stuart team retreated inside, announcing upon his return that the house was on the market as this was an unreserved sale. Enter two more bidders and Mr James had a real battle on his hands. Bidding quickly escalated until it reached a sale price of $1,325,000; the successful buyer congratulated with a round of applause from the enthusiastic crowd. (Jen Milligan)

Buyer Masterclass: More on The Block this week. With only one of the four homes on the popular TV show selling under the hammer, viewers witnessed the harsh reality of what happens when you break all the rules in the property investment book. Check out the article, which also appeared in this week’s Weekly Review - “The Block faces up to a harsh reality”

Underquoting: We will hold over our article on underquoting for a fortnight as the big news is the Top End this week. However, there were some less than professional or ethical approaches to buyer communication with regards to quoting out there today. Selling Agents can’t blame the vendor every time – after a while the same agents begin to smell of incompetence or illegality. We will be running an in-depth story from a buyer’s and a seller’s perspective soon.

We Only Buy Homes

BALWYN NORTH, 34 Tormey St: James Tostevin (Marshall White) fronted a massive crowd of 160 people - but not one bidder in the mix. Passed in, $2,650,000.