I enjoy auctions, I always have and I have represented, guided and bid for hundreds of clients. The process has its pros and cons but there’s a big cloud over low price guides, which is the soft term for underquoting, which must be addressed.
Despite being a breach of the Act, underquoting is rife. Price guides are often significantly below the price a selling agent knows a property is likely to be sold at and well below the vendor’s real expectations and efforts to crack down on this practice have essentially failed.
In my experience I would say very few properties sell for fair money at auction. The majority of properties are either sold for over fair money to emotional buyers who are not prepared or they are sold at a price which is below fair money to a lucky or an astute, well researched buyer with a plan and options – which is why I love buying at auction. If you go to an auction well researched and prepared you either win and purchase a property at a price you’re happy to pay or you don’t buy, so either way it’s a good outcome.
Choosing to put your property up for auction is an effective way to sell however in a buyers' market it sends a desperate message to buyers. It’s ok to go down this road if you are actually desperate for a quick sale as I think the market appreciates honesty in an industry that is not known for it. But it simply doesn’t make a lot of sense to go to auction to sell a property without a uniqueness which makes it hard to price such as a knockout view.
Unless you have purchased at auction before you may not know that any purchase under auction conditions is unconditional. An unconditional sale means you can’t make your purchase contingent on having your finance approved, a good building and pest report or strata report, on valuation or completion of another sale. Unlike private treaty sales there is no cooling-off period so once the hammer falls and you sign the contract you can’t change your mind.
I read an article in the Sunday Telegraph on the weekend which featured a property up for auction that was riddled with termites. The story called “$800,000 for Sydney termite 'dump' with no floor” went on to describe how buyers got carried away with the bidding process to purchase this so called ‘renovators delight’ which is currently in an unliveable state.
Finally further progress is being made towards a fairer playing field in the real estate market which in my view will be beneficial to both buyers and sellers! The Review of Vendor Disclosure for Residential Property Sales in New South Wales headed up by Matt Brown MP is something I have strongly supported.
Eight months of patience and negotiation certainly pays off. We inspected a quietly-listed property earlier this year which my clients loved. We made the vendors a fair offer through their agent however we then discovered the vendor wanted a silly price, much more than the selling agent led us to initially believe so we said "we like it but not at that price".
Do you remember the old version of the Channel Nine Show ‘The Block’ with a series filmed in both Bondi and in Manly? Well, a recent article in the Daily Telegraph took a look at what happened to the sale prices of all the renovated apartments in the years since – and it’s not good news.
In the Sun-Herald the weekend before last, an article titled ‘Sellers’ touch of sadness for days gone by’ quoted a “pre-auction guide of more than $1 million”. In the very next paragraph the vendor said he “wouldn’t have let it go for under $1.1 million”. Bidders who had a budget of more than $1 million but less than $1.1 million didn’t stand a chance that day as the reserve was no less than $100k above what the agent was quoting.
Following is a copy of my submission to Matt Brown MP for the Review of Vendor Disclosure for Residential Property Sales in New South Wales:.
Dear Mr Brown,
As requested in your correspondence of 14 July 2010, please accept this letter as my submission for the Review of Vendor Disclosure for Residential Property Sales in New South Wales.
