Buying a property at auction

[tech/a]

1. A successful trader will have statistics to confirm whether they have an edge over a period of time. How on earth can you work out whether a property owner/investor has an edge if they are only make a couple of transactions a decade (or lifetime)? Property owning/investing is part luck and part skill

In my case
$s in the bank and properties freehold.

Personally-----Property Owning and making a killing is definitely opportunistic.

For me it was a no brainer.
I could buy positively geared with no $s down IMMEDIATELY and it got better year in year out!.
I just kept buying until I was told I couldn't get any more.

Then started selling those which weren't performing as well as others and free holding the best performers.
From 1996 to Now.

Not hard.---Changed my life.

Built my PPOR with most of GB's wish list.

 

[pavilion103]

A good example of capitalizing on golden opportunity.

I remember reading books like Steve McKnight's back in 2004 and getting excited only to realize that those calculations and yields were well gone.

If I was 10 years older I'd be financially free already.

 

[skc]

Um, no, that would be around 11.6% per annum, a good return!

Sorry. I expressed it wrong. It's 40% higher, not 140%.

My current home was bought in 2005 and if I was to sell it now it would be ~40% higher than I bought it.

 

[Snagglepuss]

Sorry. I expressed it wrong. It's 40% higher, not 140%.

Ah, OK. That pretty much matches my home too, probably up around 40% or 50% since we moved in eight years ago.

 

[skc]

Yes although I am not going to do this unless I know I want to really go for it at auction. I am going to sound out a bit with a pre-auction offer (which is conditional on building inspection). If I get the feeling that the vendor is expecting too much, the auction will most likely pass in and I won't do an inspection before the auction. I think spending money before the auction causes some people to lose their cool during the bidding. I know it sounds silly as $1000 spent in solicitors / inspections is nothing compared to the sale price - but it's amazing what a tiny sunk cost can do to some people.

I've been to 2 auctions over the last 2 weekends in a nearby suburb. Both auctions had no registered bidders and the acuction was over before it started. Chatting with an auctioneer, he said that auction in Brisbane is not necessarily used to achieve the sale on the day, but to set an action deadline for potential buyers and get market feedback. Things tend to move quite fast after the property is passed in, and there can be a quicker outcome than going through the non-auction sale process from the started.

The average auction campaign is ~4 weeks while the average house is on the market for something like 85 days for Brisbane, so if a house is sold within 2 weeks after passing in at auction, it is still a quicker outcome than average.

Anyhow, the agent has told me the house I am interested in has no registered bidders yet, and no one has done a building/pest inspection. So I'd say there's a very good chance the property will also have no bidders at the auction. From then the seller will likely list the property at a certain price and I'd be happier to negotiate from there. If saves me from making the first move.

I've seen quite a lot of houses in recent times... one house that was passed in last weekend is now listed at ~10% below what I thought was a reasonable price. Another house I thought was listed at 10% higher than it should, ended up selling at that price. Both surprised me a fair bit as I have seen really quite a few houses in those areas and price ranges. This leads me to think that, while there's a "underlying value" for each property, the actual sale price can vary +/- 10% just on how informed and desperate are the buyers and sellers.

For example, looking at sold price history, a property was listed at "Offers above $XXXk+" tend to sell within $2-5k of that price (either above or below), while at property listed at $XXXk could sell 5-10% below that price (and rarely above). Perhaps that's because some buyers were naive enough to think that their offer won't be presented unless it meets the $XXX+ tag? It's amazing how that little "+" makes such a lot of difference.

 

[CanOz]

Interesting SKC, is there a particular web site that you use for Brisbane properties?

 

[skc]

Interesting SKC, is there a particular web site that you use for Brisbane properties?

realestate.com.au obviously for current listing but also some sold prices.

Auction clearance from prior weekend on http://apm.domain.com.au/Research/AuctionResults/

onthehouse.com.au is good for sold prices and historical listing price.

http://suburbprice.com is good for overall suburb inventory and price trends.

Lastly a friend has access to a paid service called Price Finder which can give you as much historical sold prices as you'd ever need.

 

[ROE]

I am looking to upgrade thanks to Mr Market last couple of years
but I made an informed decision not to buy well after the election end.

Despite what other people said I am convinced house price will slide after the election.
the factors drive last price surge are no longer there apart from low interest
but low interest doesn’t help when people jobs and economy are on the slide...

once election are out of the way, the new government don’t have to deal with voters for
another three years and this is where they going to do some serious policy work.

people are max out with debt this time not much room to grow the debt pile...
government debt growing and facing structure deficit, mining go into volume production phase,

investment taper off so wage grow won’t be there...more likely wage drop and freeze on pay rise...
so that where I am stand and that where my conviction lies and I stick with my conviction
in Properties and Shares

 

[CanOz]

realestate.com.au obviously for current listing but also some sold prices.

Auction clearance from prior weekend on http://apm.domain.com.au/Research/AuctionResults/

onthehouse.com.au is good for sold prices and historical listing price.

http://suburbprice.com is good for overall suburb inventory and price trends.

Lastly a friend has access to a paid service called Price Finder which can give you as much historical sold prices as you'd ever need.

You're a legend SKC, thanks!

 

[skc]

I am looking to upgrade thanks to Mr Market last couple of years
but I made an informed decision not to buy well after the election end.

Quite possible and imo it's an eachway bet at the moment. Normally with such low interest rates you should see house price spike already... there's some evidence supporting that in terms of auction clearance rate in Sydney etc, but the overall price level and credit growth are certainly moving as fast as the fall in interest rate.

So given how little price has moved on favourable conditions one would suspect opposing forces at work and those are the ones that you talked about. A price spike up is still a distinct possibility but who knows.

For me personally, I will be looking to sell my current house after buying the new one. So the net increase in my exposure to property is well under control. Plus I'd back myself making better return on capital putting those money in shares...

 

[payday]

It's funny how markets differ in capital cities. In Melbourne, where I am, auctions are de rigueur. Speaking from personal experience (we sold our house about 2 months ago through auction) valuations are hit and miss. We interviewed 4 local realestate agents and they all gave us different values in what they thought our property was worth. From top to bottom the price range was about $100k - mid 6's was the lowest valuation and mid 7's was the highest. My feeling is that some real estate agents will tell you what they think you want to hear so they will give you the highest valuation and others want to try to milk as much commission as possible so they will give a low valuation and then say something along the lines of "but if we sell it over $xxx then I will get a bonus".
Where I am it is not necessary to register to bid, although the agents often have a good grasp of who is potentially interested based on call backs and the like. After saying that, our agents identified 3 interested parties, but come auction day there were 7 bidders and the last 2 standing showed very little interest in the property - only came to 1 open for inspection and didn't request the contracts for sale etc.
Also, even though there were 7 bidders, not one person requested a building or pest inspection ( the house is 7 years old) and only 1 party had a valuation done through the bank. So I don't know how strong these indicators are for the market down here anyway.
And yes - the house sold under the hammer for well above the highest valuation

 

[skc]

It's funny how markets differ in capital cities. In Melbourne, where I am, auctions are de rigueur.

Yes indeed. Like if you said de rigueur in Brisbane you will get a blank look...

And yes - the house sold under the hammer for well above the highest valuation

Nice... definitely agree that the motivations of the real estate agent may not always be aligned with the motivations of those whom they work for.

 

[skc]

Just an update... the auction came and went last weekend and as expected the property was passed in. It received no actual bids but there were 2 registered bidders (of which I was one). I wasn't going to register but after arriving at the auction I was told there's a bidder registered already. So I did register last minute just in case something funny should happen and I'd be in a position to act.

The auctioneer gave his spiel and made 3 vendor bids. The crowd stayed silent. I was slightly nervous through the process (as I didn't expect any bidders and so was slightly flustered) but my plan was not to bid unless the house is on the market within my valuation limit. But obviously the vendor bids were below the reserve price so the property was never on the market during the auction. The highest vendor bid was already slightly above my valuation limit, so I didn't bother putting in a highest bid to get an exclusive negotiation right.

That same afternoon I put in an offer 2.5% below the last vendor bid. After a bit of discussion around terms and conditions, the agent informed me that there's another offer coming in, and asked me to put my best foot forward. I increased the offer by ~1%. But by this time I have already mentally moved on. I liked the house but the location (in terms of access to amenities, parks etc) is at best 4/10. So I wasn't willing the increase my offer anymore.

The agent later informed me that the seller has rejected my offer as well as the other offer, and he told me that the other offer was 3-4% higher than mine. That higher offer was not a price that I am willing to pay, so we are not going to be buying this property. I wished both the agent and the seller good luck and that's the end of that.

The property has only been on the market for 5 weeks so I think the seller is looking for something that's 7-10% higher than what I've offered. I don't think I've under-valued the house, nor do I think the seller is being overly optimistic. House valuation is an art and the difference between my offer and the seller's asking price is probably the range that a few different property valuers would come up with. The way I see it was... having looked at some of the sold prices in arguably better locations for comparable houses, I'd rather have those houses than this one at that price. So I simply have to wait for the right house to turn up...

P.S. I think it would be nice to see more threads/posts on the ASF sharing house buying/selling/building experiences. I think they are interesting stories to read and I must admit I learned a fair bit about the process and people's thinking in some of the other forums just in the last few days. Much of the other information I've seen are from bodies with somewhat vested interests (like REIQ) and just doesn't have that personal touch to it.

 

[burglar]

... I think they are interesting stories to read ...

I love an auction, but it is not everyday that I want to buy a property.

I was at a house auction in the seventies.
The National Australia Bank had just raised the interest rate to an all time high of 17%
It was headline news in that morning's Advertiser.

A few people turned up.
Among them was my Father-in-law.
He stood behind me.

At the end of the proceedings, he tapped me on the shoulder.
Then he said, "You've just bought a house!"

 

[noirua]

Now here we are in the big time. Time to buy a town. However, it is a Real Estate purchase: https://www.sfgate.com/bayarea/article/california-town-listed-for-sale-19455219.php

California town for sale for $6.6 million​

May 13, 2024.