How to buy in Melbourne

Our ongoing series of articles on property buying in Melbourne. Be sure to check back regularly for the next installment!

We have categorized these articles according to the various steps of the property buying process.
Feel free to browse through the articles in any order as each is a self-contained chapter full of
relevant information.

Ask a question Service

We welcome your questions and feedback. If you would like to ask a question or leave a comment, please email [email protected]. Answers will be published in future how-to articles.

Your Needs

Property Selection – Location and Style

Your home is one of the last remaining appreciating assets where Capital Gains are not taxed. Capital growth in plain and simple terms is how much profit there is between buying your property and selling it. We need to take into account all sorts of different things, but the main criteria comes down to what people will pay for your property in the future and what you need to pay to own it now.

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Searching for Property

Searching the market for Property

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Inspecting a Property

Whilst I would suggest any prospective purchaser organise a building inspection, there are plenty of properties that you can look at and discount before paying for an inspection.

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Property Assessment

Before the Negotiation

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Negotiation: A Buyer’s Perspective, Part 1

Most real estate agents that you speak to have a reasonable amount of experience but very little theory knowledge when it comes to legislation that surrounds their industry. The vast majority of agents the public deals with are Agents Representatives. This represents a six day course at the REIV. Most of their ongoing training is based on their company’s mentor and internal training programs. Some of these are very good and others are sadly lacking in structure and content.

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When is a Property “ON THE MARKET”

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The Auction process

Having not been successful prior to auction, or it was your preference to go to auction…

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Case Study – When Auctions Go Bad

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After Purchase


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Your Questions Answered

Friedl Writes:

Hi there.

First of all let me say I find your website both informative and entertaining and look forward to your regular updates.

I was interested in particular in regards to you case study titled When Auctions Go Bad as I have friends and relatives who have had bad experiences using vendor advocates at auction in particular.

It appears from this case study that you have recently been involved in such an auction yourself buying a home on behalf of a client in good faith only to be told later by the advocate that the reserve price was not met at auction or in fact as you state the vendor was not aware that the home was for sale.

This seems quite bizarre to the layman like myself as I would have thought the auctioneer would have known the reserve price on the property before placing the house on the market.

Its a big difference between $627,500 and $690,000 for your client and the vendor I am sure you would agree.

The fact it took some three and a half hours to obtain a vendor signature on the contract after the auction had finished suggests that there was a massive piece of miscommunication between the vendor the vendor advocate and the auctioneer on the day.

Can you please give me your thoughts on whether a sale should or in fact must proceed if the vendor has not given permission to the auctioneer to place the house on the market and he/she does so in any case?

Can you also kindly elaborate to the uninformed like myself whether a vendor should sign a contract of sale under such circumstances especially if they are told by the selling agent and the vendor advocate that legal action will be undertaken against them to ensure they honour the conditions of sale if they do not sign the contract of sale.

It seems to me that while you were acting in the best interests on your client in this case study the selling agent and the advocate were not in the case of their client.

Finally do you believe vendor advocates add value to the sale price from your experience or rather just add to the commission a vendor pays.

Kind Regards,


Our Response:

Thanks for your input Friedl,

Firstly, I think it is ludicrous that neither the vendor advocate nor the auctioneer would proceed without some type of written authority to do so. If they have this, then they will not be liable, if they do not then they most likely will be sued by the vendor. However, the vendor did not have to sign on the day. Her agent, solicitor and her brother were apparently telling her to sign. And she did. This sale should go through.

I see two different issues here. Firstly, if the ‘Vendor Advocate’ who is not a licensed agent has cajoled the vendor into putting the property on the market, as he is not licensed, the vendor will not be suing him. She would most likely go after the agent. I am assuming the vendor advocate was thinking with his ‘wallet’ not his clients best interest in mind. If indeed the vendor gave the indication that she was happy to sell, the agents should have changed their authority and then it will be the vendor that is in the wrong. Either way, it should be no problem for the purchaser if it ever gets to court. (Apart from the fact that they may need to go to court to get what is rightfully theirs).

After speaking with at least ten different Estate Agents who have recently handled Vendor Advocates jobs, all have said they were offered the job on substantially higher commission than normal. Most commissions up to 1% or more higher than normal allowing to pay the vendor advocate up to 40% of the full
commission and still making their normal fees. On top of that the average advertising campaign is huge, as long as the vendor advocate’s signage is on all advertising. In other words, two agents get paid good money for one person’s job. The only people benefiting are the vendor advocates. And the vendor is footing the bill.

How could the sale price be altered by engaging a vendor advocate? If the vendor advocate gets the commission lowered from the normal amount then they have been useful. However this lowers their own fee!
If the vendor advocate sets the reserve because he knows better than the expert agent he has just chosen in the area. Then that would improve the deal for the vendor. But why would you use the local agent if he didn’t know how to appraise the property in the first place. If the vendor advocate does the negotiations, again, why would you engage the local agent?

Use a local agent who is an expert in the area you wish to sell in. Look for someone with a proven history, who has been in the area for at least 3 years. Get three different appraisals from different agents and check out the going rate of commission and advertising.

The excuse, you don’t want to deal with a real estate agent, doesn’t wash if you are going to hire a real estate agent to oversee another real estate agent.


Ian James

Michelle Writes:

Hi there.

I am a 28yr old who does not understand the property market or the legal side of things and am trying to educate myself along the way. I have found a property that needs full renovations and is on the market for public auction.. The real estate agent has told us that the vendor will take offers prior to auction but only offers on the high end. That will be out of our budget but we would like to put an offer in around the middle of the price range with a clause subject to a building/pest inspection. The agent has told us that we can not put that clause in when the property is for public auction. Is this true??? Can you give advice that explains these sorts of things…

Inexperienced and scared potential home owner…

Our Response:

Hi Michelle,

Ask the agent if the Vendor’s Statement (section 32) is available. Once he has given you this then you can put an offer forward. You can put forward any offer you want to. The agent is obliged to pass on any offer that is genuine. A genuine offer would be something in writing, which has a name, price, settlement terms, deposit amount and date. An agent will pass any offer forward. No matter what the amount. The vendor does not have to accept, but they will see it.

To specifically answer your question: If the offer is in writing, with the prescribed amount of information, regardless of price or conditions, the agent must put this offer in front of the vendor. What the agent is really saying is that is very unlikely to be accepted.

As far as conditions go: any offer in the last week of the auction campaign that is conditional where the condition time runs past the auction time will almost always be turned down. Even during an auction campaign most conditional offers are not accepted. But it all depends on the time frame and what your offer is. Look at it from the vendors’ perspective. The agent has said ‘I’ll get about $400k for your property. In the middle week of the campaign he brings an offer to you of $370k subject to Pest and building within five days. If the vendor accepts he is taking a lower figure than that which the agent said he would get, it is not guaranteed and even worse he won’t be able to take a better offer if one comes along until this offer expires. It is the conditional offer that is highly unlikely to be accepted during an auction campaign, not a lower price offer.

Whenever you are negotiating real estate, before you put an offer forward, think about it from the vendors’ perspective. ‘What would I do if I received this offer?’

With your specific situation: You have said the property needs a lot of work. Have you looked at similar properties in the area? What did they sell for? Not what the asking price is, what they sold for.

Once you have calculated the approximate market value then you can think about negotiation. Be aware, the vendor may need to fail at auction in order to come down to a realistic price. You may think the property is worth $400k but the vendor may be thinking $450. If it passes in at auction then you may be right, if it is sold under the hammer for $450 then the vendor’s agent was probably right.

It is the market appraisal that is the key here. A good offer close to the bottom of the vendors reserve will usually secure the property before auction, if the vendor is realistic. If you are too low, you will be unsuccessful: if you are too high, you may not be successful and you may have raised the expectation of the vendor.

Ian James

Jessy Writes:

Hi there.

First of all, I’d like to say what a great website this is. It has so much useful information. My question is “Is a mortgagee auction any different to a regular auction other than having stricter conditions such as 10% deposit and 30 day settlement period, and would you approach such auctions any differently?”



Our Response:

Hi Jessy,

A mortgagee sale usually means that the finance company has taken possession and are selling the property to recoup their money that the initial owner has not repaid.

You need to be extremely careful regarding the paperwork. I would never sign anything to do with a mortgagee sale unless my solicitor (not unlicensed conveyancer) had checked every word of the contract.

There can be much greater risks involved with a mortgagee sale than a normal sale. Chattels are not generally included in a mortgagee sale. This means carpets, light fittings and window furnishings can be removed. If there are any legal entanglements at settlement with the finance company they can sometimes defer settlement whilst these are worked out. They can usually do this without your agreement or any compensation to you. It may be possible for you to be locked into a deal for up to 6 months and then not secure the property. Whilst your deposit is not at risk, your time is.

If you are buying at mortgagee sale you want to make sure you get a bargain to offset the very obvious risks. If you pay ‘fair’ price you are taking a much greater risk with no reward.

Ian James

Leisa Writes:

Hi there.

Just after some information please. My husband and I have our heart set on an Edwardian property up in Country Victoria. Beautiful home, but, the vendor whilst putting it up for sale, after it sitting empty for 9 months, decided to rent it out…on an annual lease rather than a six monthly. Long and the short of it is it is now tenanted until May 2014. We are first time home buyers, though not entitled to first home buyers grant due to my husband having a home in the past with his ex.

The bank will not loan the amount we require if there are tenants in it house, it will be deemed an investment loan, we would have to put in $60,000 to get to the sale price and we just don’t have that sort of money.

The real estate have advised they’ve had a bit of interest in the property but once people find out there are tenants in the house for the next 10 months, they move on, no doubt like us, want to live in it immediately not take out an investment loan.

Is it possible to see if the vendor would entertain the idea of a 10 month settlement? Is there a timeframe by law one has to abide by for a settlement period? I figured if this was a possibility, the vendor will continue to earn rent, knowing there is a definite sale at the end of the lease period, we then would be able to have a normal home loan based on the property being our principal place of residence, win win in theory. Though it raises another question, where would we stand in regards to the bank, does this have an influence on settlement timeframes?



Our Response:

Hi Leisa,

It is perfectly normal to have a ten month settlement. The longest settlement I have negotiated was 14 months.

However, your biggest issue may not be getting the deal. Most banks will not give you more than a three month loan pre approval. If your circumstances changed during the settlement period, your bank may not give you a loan at time of settlement even though they are happy to do so now.

Whenever I have anyone looking for a long settlement I remind them they do so, usually without a pre-approval safety net.


Ian James

Geoff and Katrina Write:

Dear JPP Buyer Advocates,

Your online articles are both very useful, and good reads. Thanks very much.

Our questions relate to the common practice of vendors remaining out of sight during the conduct of a house auction (usually tucked away within the house).

What is the reason? Is it simply protocol, or is there some perceived advantage for the real estate agent in the conduct of the auction?

What about relatives or friends of the vendors? Is there some benefit in the vendors knowing immediately what has transpired at the auction (rather than just hearing what the estate agent might pass on to them)?


Geoff and Katrina

Our Response:

Care will always be taken by a selling agent to keep their clients “buffered” from the prospective purchasers. If the vendors were in the audience and I knew, I would be watching them like a hawk for changes in expression when each bid was made. The vendors will hear what is going on at auction by simply leaving a window open. It is the same in a negotiation. When an agent throws a wild number at a prospective purchaser he is looking for an emotional response in order to get a handle on where their budget really is. In saying this, when a property is passed in to me after an auction I always have my clients remain outside away from the agent. When the agent gives me a ridiculous reserve, he is not going to get an emotional response from me. He will get the same response no matter whether it was lower or higher or exactly as I expected; “You want how much?” It is always delivered deadpan and with plenty of sarcasm!

You should always put a buffer between yourself and the agent. This is simply what the agent is doing by sequestering the vendor during the auction and any post auction negotiations.


Ian James