oc | Tuesday 21st January

“Dummy Bidding” and the Current Market

3 Stirling Street Kew. Sold under the hammer $3,276,000 3 bidders

3 Stirling Street, . Sold under the hammer $3,276,000, 3 bidders. Everybody is watching you, Jeremy Desmier – did you get the quote right? Yep  Phew, On the market top of the range. Put ’em back in your holsters, thank you ladies and gentlemen.


1. Hammer Watch – Quoting / Underquoting

2. Final Word on The Block and “Dummy Bidding”

3. Inside James – Bumper 5 Stories this week:

  • Don’t buy it – better a missed opportunity than a mistake
  • Build family wealth over individual wealth
  • Handing back a fee to a client – and it hurt – hurt a lot.
  • Pricing Heritage – pricing covenants – changing rules off-markets
  • Defending a Vendor’s View (Kay & Burton)

Hammer Watch

Next week is the third and final week of our last – 100 auctions test – for 2017; so this weekend with a bit of a lull before our final fling, we thought we would revisit the Quote/Underquote test.

We randomly chose 9 auctions spread across Booroondara, Bayside and Stonnington and from what we saw, despite all the ranting and raving by Mal James about The Block; it was close enough to a perfect score; when you match the Statement of Information, to the pass-in figure or on-market figure.

That deserves congrats to the CAV – who on the quoting side of things is doing a very good job.

Hats off to the agents involved, as all quotes seemed legit and above board.

But hold on, Mal – a few of them went way over the quote?

We say good quoting and good salesmanship, as it was fair for all, in those cases.

What do you mean, Mal – the final result was way over the quote?

The agents did a fair job:

  • They would have sold at the quote range (if no further bidding) as it was on the market – that’s fair.
  • They represent sellers, not buyers and they needed to get buyers there (fairly) – they did – look at the bidder numbers – AND then they let the auction system do its work.
  • The market has eased, look below A graders v C graders – an agent needs to be very smart (maybe conservative) in price quoting to ensure a sale (if that is of prime importance to the seller).

    It’s not illegal for agents to be smart quoters, it’s illegal for them to be misleading and deceptive quoters.

    Example: At Phillip Kingston’s auction at 57 Cawkwell, Malvern (see James Rating 700/1000) – when we went there mid week, we felt the quote was low – our pricing was $3,000,000 to $3,300,000 – however the was on the market at the top end of their quote ($3,000,000) and anyway we also “underquoted” on our quote  …… At the end of the day, no qualms; if there were no other buyers, Cawkwell would have been sold for the top end of Phillip’s quote ($3,000,000) – that’s fair and legal. The fact that it sold for $3,520,000 is fair, legal and smart.

Of those that passed-in, they were passed in below the top of the quote. Three had no bidders, so seemingly no after pass-in dealings, all we can say “seems fair enough”. We weren’t privy to the inner machinations of St Georges Road after the pass-in, but prior to the pass-in, it seemed all OK on what we could see.

To be honest we were a little surprised at the near perfect score – and no ancillary fluff – the quoting seemed/was ethical, legal and good for our profession. Please keep it up.

Technically many of us would like to see a home “on the market” at the top end quote figure; however in strong auctions a little leeway is needed. It may actually be on the market at that figure, but the selling agent wasn’t asked or didn’t have time to announce it.



54 & 54a Orlando Street Hampton - Passed in $2,200,000 with 1 Bidder. Sold after auction for an undisclosed amount

54 & 54a Orlando, – Passed in $2,200,000 with 1 Bidder. Sold after within the range – Sam Gamon Quoting Tick.

54 & 54a Orlando Street, Hampton
Sam Gamon, Chisholm and Gamon.
Quote: $2,300,000 – $2,400,000
Opening Bid: $2,150,000 Vendor Bid
Result: Passed in – $2,200,000. Sold after auction – undisclosed
Bidders: 1
Hiding in the shade, the crowd of 30 stood quiet. Sam Gamon opened the bidding with a vendor bid of $2,150,000,before our lone ranger joined in for $2,200,000. With no further the bids, the home was passed in to Bidder 1.

24 Gordon Street Hampton. Passed in, vendor bid $4,500,000 0 bidders

24 Gordon Street, Hampton. Passed in, vendor bid $4,500,000, 0 bidders.

24 Gordon Street, Hampton
John Bongiorno,
Quote: $4,650,000 – $5,115,000
Opening Bid: $4,500,000 Vendor Bid
Result: Passed in – $4,500,000
Bidders: 0
Quiet auction here, the crowd of onlookers searched for some shade as auctioneer John Bongiorno, opened the auction with a vendor bid of $4,500,000. With no further bids the home was passed in.

10 Lindsay Street Brighton. Passed in vendor bid $3,300,000 0 Bidders

10 Lindsay Street, . Passed in, vendor bid $3,300,000, 0 Bidders.

10 Lindsay Street, Brighton
Steven Smith, Marshall White
Quote: $3,100,000 – $3,410,000
Opening Bid: $3,300,000 Vendor Bid
Result: Passed in – $3,300,000
Bidders: 0
Another quiet auction. A good crowd of approx. 50 people gathered however, the only bid was auctioneer Steven Smith’s vendor bid of $3,300,000. The home was passed in on a vendor bid.

12 Russell Street Toorak. Passed in, Vendor Bid $12,000,000 0 bidders

12 Russell Street, Toorak. Passed in, Vendor Bid $12,000,000, 0 bidders.

12 Russell Street, Toorak
Glen Coutinho, 
Quote: $14,500,000 – $15,950,000
Opening Bid: $12,000,000 Vendor Bid
Result: Passed in – $12,000,000
Bidders: 0
Auctioneer Glen Coutinho almost didn’t make it thanks to a faulty engine on an international flight. Ever prepared, Mr Coutinho had a backup ticket for another flight and arrived straight from the airport, luggage in hand, with time to spare.  Unfortunately, no bids were made and the property was passed in on a vendor bid of $12,000,000.

57 Cawkwell Street Malvern. Sold under the hammer $3,520,000 3 Bidders

57 Cawkwell Street, Malvern. Sold under the hammer $3,520,000, 3 Bidders. Quoting Tick Phillip Kingston.

57 Cawkwell Street, Malvern
Phillip Kingston,
Quote: $2,700,000 – $2,970,000
Opening Bid: $2,500,000 Vendor Bid
On the Market: $3,000,000
Result: Under the Hammer – $3,520,000
Bidders: 3
Thankfully, we were all invited inside to the air-conditioned home as this was a long, laugh-a-minute auction, with Auctioneer Phillip Kingston at the helm. There was no need to refer to the vendor as three bidders carried the bidding well over the reserve. The home sold to the smiling and relaxed Bidder 3 for $3,520,000. (see James Rating 700/1000)

60 St Georges Road Toorak. Passed in $6,500,000 vendor bid 0 bidders

60 St Georges Road, Toorak. Our auction report has been requested to be removed – it is now available for clients only.


19 Liddiard Street Hawthorn. Sold under the hammer $2,615,000 3 Bidders

19 Liddiard Street, . Sold under the hammer $2,615,000, 3 Bidders. Quoting Tick James Tostevin.

19 Liddiard Street Hawthorn
James Tostevin, Marshall White
Quote: $2,200,000 – $2,400,000
Opening Bid: $2,200,000 Vendor Bid
On the Market: $2,500,000
Result: Under the Hammer – $2,615,000
Bidders: 3
With Rocket Park just around the corner, auctioneer James Tostevin said “If you don’t know Rocket Park… I’m sorry, you don’t know Hawthorn!” and after a Vendor Bid to start the proceedings, it was time for blast off with three bidders fighting it out until the home sold for $2,615,000.

8 Campbell Grove Hawthorn East. Sold under the hammer $3,525,500 3 Bidders

8 Campbell Grove, Hawthorn East. Sold under the hammer $3,525,500, 3 Bidders – Quoting Tick .

8 Campbell Grove Hawthorn East
Scott Patterson, Kay & Burton
Quote: $3,000,000 – $3,300,000
Opening Bid: $3,300,000
On the Market: $3,400,000
Result: Under the Hammer – $3,525,500
Bidders: 3
Slow auction with lots of friendly banter between auctioneer Scott Patterson and one of the bidders. Bids broke down after the home was announced on the market, seeing the increments reduce to $500 rises, before the winning bidder bowed towards the crowd as she entered her new home.

3 Stirling Street Kew. Sold under the hammer $3,276,000 3 bidders

3 Stirling Street, Kew. Sold under the hammer $3,276,000, 3 bidders.

3 Stirling Street Kew
Jeremy Desmier, Fletchers
Quote: $2,750,000 – $2,950,000
Opening Bid: $2,750,000 Vendor Bid
On the Market: $3,000,000
Result: Under the Hammer – $3,276,000
Bidders: 3
A vendor bid at the lower end of the range kicked it away and three bidders proceeded to have a go. It looked like a downsizer versus young family ultimately battling one another, when announced on the market at $3,000,000. These two continued on in $10,000s until it was down to the wire at $3,260,000. A few last $1,000 bids were cast, the clincher finally seeing the young family walk away empty handed.


The Block and CAV Conclusion – near on 20,000 The Block reads – WOW!

We have no issue about a seller withdrawing a home for sale, at anytime.

  • It is their right.
  • It is read out in the auction rules every Saturday.
  • It is enshrined in legislation. (Sale and (Public Auctions) Regulations 2014 Schedule 1, Point 4).

We have an issue with the new CAV interpretation of the seller negotiating with the highest bidder at the reserve, after a pass-in.  These rules are read out every Saturday and it is also enshrined in legislation (Sale and Land (Public Auctions) Regulations 2014 Schedule 1, Point 7).

Trouble is; many sellers, agents and now Consumer Affairs have taken an unfair and dangerous interpretation of Schedule 1, point 7.

Negotiate with the Highest Bidder at the reserve – The Block and the CAV have chosen to adopt a different meaning to the word negotiate.   “In good faith” may mean nothing to some – so let’s leave that alone – but please look up the definition of at reserve – it means we have the price and we are agreeing on terms. If the reserve is agreed to, then surely the highest bidder buys – that is what they fought for when bidding at auction – that is what is read out in the rules prior to the auction.

Reserve – somehow the application of this concept is now far removed from all the norms of the dominant auction houses of the last hundred years, like Christies and Sothebys. They always set reserves BELOW their price guides (quotes) not above them.

CAV and selling agents now allow the

anywhere at anytime Clayton’s reserve, despite the quote

thus rendering the agent quote meaningless.

Effectively ‘dummy bidding’ is back in fashion this Spring of 2017 however, instead of using a tree or a mate, some deceptive sellers and agents are using the quote / reserve combo.

Bait the buyers in with a quote and then pass it in and push them up against a fictitious Clayton’s Reserve.

An agent and seller can seemingly operate with CAV immunity, by the seller declaring that they never talked to the agent about what they wanted (hello, who are you kidding?) and the agent is giving the Sergeant Schultz defence – I know nothing, I know nothing.

  • I know nothing about what the seller wants
  • I know nothing about what other buyers are prepared to pay
  • I know nothing – except my commission.

Hang on – sellers can say anything and that’s ok, what about buyers then!

Sellers and selling agents –  if we as buyers came and put in an opening bid of $3,000,000 on every $2,000,000 home and then wait around for thirty minutes for the paperwork and all other bidders to go home – and just before signing we said “you know what, we’ve changed our mind and we only want to offer $2,900,000 or $2,500,000” how would that be?

Sellers and selling agents – how many auctions could we do that before you were calling for jail time for us, yet some agents and sellers do it to buyers every week – The Block legitimised it and CAV supported it. It’s plain wrong.

Melbourne Auctions, like trams and the footy, are not owned by agents or by individual sellers or buyers, to do with them what they please.

Like Victorian road rules, government auction rules are there for everybody, not just one interest group. Being an owner does not excuse deceptive conduct (imagine if some of us decided to drive at 150kph and the defence was, we own the car and therefore we can do with it what we like.)

So please CAV and reputable sellers and agents, rethink your position. What happened on The Block pass-in was:

  • wrong in law (intention of law)
  • contrary to the rules, as read out at auction every Saturday
  • unfair on the dudded highest bidder
  • the thin edge of the wedge in destroying community credibility on bidding at auctions.



A mixed week this week, however from time to time, you can’t help but have the occasional week like this.

Don’t buy it – better a missed opportunity than a mistake.

At three meetings plus a visit to the home in question we quietly but firmly encouraged our client to rethink their possible purchase. Eventually 10 minutes before Saturday’s auction our clients decided to pull out.

We consider this a total success.

In a nutshell our client was referred to us on Monday, on Tuesday we went through the property, on Wednesday we prepared reports, on Thursday we met for coffee in South Melbourne in the evening and gave our recommendations. On Friday they reviewed in their own time and on Saturday we met before the auction and with ten minutes to go, our clients decided not to proceed.

Our mantra is always better a missed opportunity, than a mistake

and in our opinion, this was a good home for somebody else (see our James Home Rating 640/1000) – it just didn’t meet our client’s requirements on three fronts:

1. They didn’t love it – it was just a solution.

2. But in our opinion it wasn’t their best solution – baby on the way and heaps of steps and it was an interim buy, but with no real track record on resales, longer term what would they do with this and the costs involved in changing or keeping it?

3. Our clients can afford a better option (now) – which is slightly more money, longer term location and more land/house flexibility – so why not buy the better option and avoid the changeover costs? We suggested rent or something similar if they really wanted the above home’s location for the next year or two – before they moved.

Finally, we were able to advise that from our experience the way they were feeling on Saturday morning, was not normal and to proceed could be unwise.

As it turned out, they had the budget to be the buyer however, thankfully an initial post-mortem showed they felt they had dodged a bullet. Maybe now the real search begins.

Build family wealth over individual wealth

Met a lovely young couple during the week, they were the son and his fiancé of a couple we had bought for in Hampton around a dozen years ago.

The young couple was told they must come speak to us about how to buy an apartment they wanted.

I said, I was not the best person to assist them in an $800,000 apartment buy (mainly as I didn’t believe in these, for them) and maybe there were better alternatives and maybe it would be good to have a meeting with the whole family.

Almost all of the time was spent talking about what alternative strategies there were for the whole family, rather than how to buy an apartment for the young couple.

The key concept is family wealth vs individual wealth and it takes up a lot of my own personal thinking (I have kids aged 22, 18 and 16); as well as many other Melbourne family’s thinking.

Many families can to learn a lot from, for instance, bigger Jewish and Asian Aussie families and it has little to do with religion.

This young couple had saved an impressive amount of deposit and could actually afford to borrow more however, they felt very uncomfortable about how that would impact their immediate lifestyle.

So we talked through four big concepts. No answers yet – just talked through the concepts.

Inheritance now – good for the younger couple and actually good for the older couple. We totally believe in this concept and currently we are beginning the planning of the build of two new homes on our larger than normal block, out the back of two existing home(s). Older help the young now and younger help the older in the future – it’s a thousand-year-old concept.

Structure and Strategy – we used an example of the Punt Road apartment – as a buyer, an investor could go and purchase the one on Punt Road and it would cost them around $10,000 in after tax money (on no saved deposit) yet if our (young couple) purchased the apartment on Punt Road, it would cost them well in excess of $50,000 in after tax money (even allowing for them paying a 20% deposit from their savings). That is the nature of the current tax and younger people’s inequalities. So if you can’t beat them, join them.

Problems – families are very emotional and there are divorces externally and internally and some clear principles and rules should be set down to minimise it turning to custard. If it does, then there should be additional rules as to how all parties will behave in the custard.

I can say this through personal experience – family stuff can go sour – however a clear agreement can help prevent and minimise the damage. It’s sort of like a pre-nup only with your mother and father and other siblings – the thought – OMG hey!

Basics – Many younger couples come to us for advice and looking for us to give them a magic pill on how to buy a poorer performing property type.

Meaning that as a young person you work your guts out and save a deposit, buy a nice apartment. You then have some kids only to find out surprise, surprise you need a bigger home. As you begin the search, you find your poorer performing asset (apartment) is now further apart in value from your dream home, than it was 5 years ago when you bought your apartment.

Despite your diligence in the last five years, the dream has become harder, and even if you can find a home 20 kilometres from Woop Woop, then much of your saved deposit is lost in transaction costs.

You need three Basics – with sub points. 3×3 matrix to a good home life;

  • Land, Train, floor plan to give you flexibility, cash flow and growth in the future
  • You need a strategy different from the norm – you need an action plan and you need somebody other than you, whom you trust, to review
  • You need a job, financing and hopefully supportive parents/spouse (can survive without the latter, but it’s a lot harder)

Think laterally, or else you will dig the same hole that many others are currently digging.

Handed back a fee to a client this week – and it hurt – hurt a lot.

We will get over a lost fee, however our client will be upset for some time to come, on what occurred.

It’s easy to blame others and we honestly can’t see what we could have done differently; however in the end, our client was unhappy and the buck stops with us – well actually, it left us and we are sorry – sorry that buying a great home wasn’t a happy experience for them.

The key takeaway –  how sneaky behaviour compounds into really big issues, because it dissolves trust. And lack of trust then spreads like wildfire to all parties, between all parties, not just the direct ones involved.

We have seen it in the auction system, we have seen it in our profession with quoting and here we had a situation where sneaky behaviour created such angst when it was discovered post deal, that eventually a good deal we were involved in, began to fall over.

The hard to take thing was, that if it was explained openly at the beginning, quite possibly the deal would have happily gone through including accepting what others chose to hide and disguise.

We volunteered our fee refund, it was accepted and we moved on – we knocked back the client offer for compensation for our time and we agreed to review our next search together, when the dust settles.

We feel sorry for our client and feel strongly that they have every right to feel aggrieved and to take the action they see fit.

Pricing Heritage – pricing covenants – changing rules off-markets

On Monday we pulled out of an off-market purchase in Kew. In this one there was no sneakiness – it was with agent Anton Zhouk – who is an up and coming and hardworking agent in the Kew area.

The long and the short of it was, our client bought a very good property at a strong price, off market, pending paperwork.

In other words, a handshake – the agent was up front with an issue, but believed it had been resolved – it concerned two covenants. When the paperwork arrived for signing, the same agent pointed out that the issues had not been resolved and asked what we wished to do from here. Our client considered buying it, pending the expunging of the covenants.

We suggested legal advice on that matter to understand how difficult it can be to remove them. We also pointed out about time out of the market and that the price we paid was for a covenant free block.  With the covenants now on this land, in our opinion, the block was worth at least $500,000 less. As well, we advised resale would be restricted in the future.

Essentially, we were advising that this block was very different from what we hoped we were buying.

We pulled out, no hard feelings on either side and our search continues for an excellent building block in the Studley Park area.

And speaking of a Heritage/Covenants matter – Stonnington council is up to their old tricks again and this week we had two separate notifications about owners being singled out by the Council for Heritage.

Heritage is central to a community, but so are individual owner’s rights. It’s getting a balance that’s the most important.

The trouble is that fighting the good fight yourself, against council, can be very difficult (financially and emotionally) – although in fairness, as we saw with Haverbrack, Stonnington councillors do have heart.

Surely there is a smart barrister, heritage architect and town planner who can get together and represent these one-out and one-off owners and take on the council against individual heritage orders?

Heritage Precincts, yes – one-off Heritage homes in the street, no – well not without consultation, compensation and clear protections for the owners.

Defending a Vendor’s View on Value (Kay & Burton)

This week we actually did buy a property – no, we haven’t forgotten how to buy!

We thought the two agents were very professional – Zoe Ho and Andrew Sahhar of Kay & Burton.

It was a difficult negotiation within the quote, after a pass-in.

It was a win-win for both parties and it was 100% ethical, pleasant but tough all the way.

Was there some argy-bargy on both sides? Of course, but we felt there were no lies from them and no lies from us.

This interaction tied in with an agent interview meeting Gina had organised (a $6m selling job on behalf of our buying client).

What was liked about Kay & Burton’s presentation, was their stated mindset to defend a vendor’s opinion of value and how they went about it –  Nicole Gleeson/Michael Armstrong represented one of three agencies interviewed and enunciated the concept well.

Well of course you say, but it had never been so clearly spelt out to us before and it has turned our thinking a little.

So defending the vendor’s value philosophy is actually quoting where the vendor is and holding to that; rather than underquoting and then holding to an even higher figure after the quote has been exceeded by a buyer offer.

We wouldn’t say we have seen this 100% of the time but……..we agree with the philosophical concept; as opposed to cutting the best deal (which is an alternative and good philosophy for many sellers).

There are some downsides:

We have walked away from deals with K&B on price (and we were the best price or the property didn’t sell)  – that is the downside to defending a vendor’s high opinion of value …. you don’t give the seller the rocket he/she needs.

Struggles in a falling market and/or with B/C graders.

The upsides:

The process feels more ethical and builds buyer trust, not necessarily happiness (if used consistently).

You can get higher prices with patience, rather than “wham, bam thank you m’am” auctions all the time

The process works well in a rising market with A graders.

For buyers: You need a very high level and greater depth of negotiating skills, when up against this philosophy (on big ticket homes). Phone yelling, demanding, deadlines, price justification – they don’t cut the mustard as they may, lower down the food chain within an auction timeframe.

You do less phone, you do less coffee – you do more lunch. You do less Internet, you do more entertainment. You rarely do direct – you more often do indirect.

Offers, competition (real or not) are presented in more subtle, but more powerful ways.

You find yourself up against the vendor more so than other buyers – this also requires a different dealing mindset, including you maintaining a healthy view of your position, over longer periods of time.

You need patience, which fewer individuals seem to have.

You need nerve and a clear plan.

We have bought from K&B many times (although we are not on their Christmas card list, nor they on ours). No system or process in real estate is perfect, however we do respect their detailed line of thought and the actions we experienced this week from Andrew and Zoe corresponded to this.

Next Week

Next week is the last James Market News for the year as Santa has given us notice to vacate. It’s the 100 Auction test and we will finish with opinions on the State of the Melbourne Market.

Thanks for reading.

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