It’s time to address the buyers who haven’t been deterred from the market with reports in the dailies banging the drum of impending doom After all, as the saying goes – you’ve got to be in it, to win it -and we’re in the stage of the market cycle where there’s a window of opportunity for buyers to really ‘win’ out.
However if you don’t know how to negotiate, you’re not going to be a winner – in fact you may even find yourself un wittingly paying top dollar. We’re in a negotiators domain! Out of the 9 auctions we attended today 8 passed in, with only one selling under the hammer, and even then, there were only two bidders!
Many of those ’pass ins’ were on genuine bids – yet check the results post sale, and you’ll– find bidders still being cajoled into paying top dollar. I’m assuming most vendor’s who find themselves selling in a flat market have a reason to do so. After all, the headlines have hardly been bullish and the emphasis is on doom rather than boom.
Therefore in this market, when a property passes in, the selling agent is going to work hard (if he has to) to secure a sale and avoid potentially losing the listing to another agency – it’s also fair to assume, after four weekends disturbed by open for inspections and the stress that naturally accompanies every auction sale, the vendor will have a degree of motivation to do a deal also.
However if you don’t know how to make the selling agent work hard on your behalf, and push the vendor towards ‘meeting the market’, you’re potentially doing no better than you would be in a boom market cycle. Auctioneers are experienced negotiators. It’s not hard for them to convince a buyer they’re securing a bargain, whilst at the same time getting the vendor’s ‘wish price’.
Passed in and sold via negotiation
Take for example 12 King St, Glen Iris
Marketed as a renovator’s dream – perfect for an entry level buyer who can’t stretch the budget to afford the higher prices generally commanded in Glen Iris – this was a dream opportunity. Not the best location, so not likely to attract huge competition especially at this point in the market cycle. (In fact only 20 people turned up – mostly the neighbours no doubt.)
The property had been marketed at 800-850K, however the auction opened on a vendor bid of 750K. (Just to set the scene – when the auctioneer makes his initial vendor bid, it’s the last indication you’ll get into the vendor’s reserve. He isn’t going to open too low if he feels he has a long way to climb to get to the reserve price. For example – if the reserve had been 850K, I’d have expected the auctioneer to open at $790K or $800K, however with a low opening bid of 750K – a good way below the quoted range – and it’s fair to assume the reserve was somewhere in the low 800K.)
Needless to say there was only one bidder who stepped up to the plate with a bid of 775K, however with no competition, the auctioneer took the liberty of making a second vendor bid of $800K. Not to be put off, the bidder came back with 810K and won the right to negotiate at the vendor’s reserve.
The post auction result was recorded at 880K – the auctioneer had managed to coax another 70K out of the bidder achieving a ‘wish price’ especially in this market! I feel certain a better deal could have been achieved had the buyer had more experience and knowledge.
9 Chaucer Street Malvern East –was another positive result achieved by the vendor despite no competition at auction. Another renovator’s dream – in a nicer location this time – and attracting a crowd of around 50 people. One bidder was brave enough to open at 750K, however the auctioneer – aware he wasn’t close to reserve – swiftly made up for lack of competition with a vendor bid of 1Mil. The same buyer readily offered another 10K to take the price to 1.010Mil, however not to be put off, and with no other buyers interested, the auctioneer tried his luck again by throwing in a second vendor bid of 1.050M. (It’s important to remember never to get into a competition with ‘vendor bids.’ In essence this is no different from bidding against a ‘dummy bidder’ – the auctioneer is simply trying to drive the price higher. Therefore all you’ll end up doing is showing the agent there’s more depth to your pockets!)
Not to be deterred the same buyer did exactly what the auctioneer wanted, and bid above his second VB with another 10K taking the price to 1.060Mil. The property was then negotiated post sale for a price I imagine the vendor’s would have been pleased to achieve considering the obvious lack of competition, of 1.1Mil.
31 Chusan St Balaclava was another house to sell via post auction negotiation. Performing to a crowd of around 50 people, the auction opened on a vendor bid of 670K. It took a while, but eventually two bidders were brave enough to compete. However the auctioneer didn’t get the 10K increments he was initially asking for, he was instead forced to accept 5K increments to push the price higher. It didn’t take long to climb to 700K, and passed in shortly after for 710K. Post negotiations were successful, however I’m unable to disclose the result in this instance.
And then there was 27 Hunter St, Abbotsford. Abbotsford has seen one of the highest clearance rates so far this year at 83.3%, and therefore it wasn’t surprising to see three bidders in contention. Opening on a genuine bid of 600K, the price climbed in steady 10K increments all the way to 700K before passing in. It was subsequently negotiated post auction for 730K.
Un-successful post auction negotiation.
One unsuccessful post auction negotiation was conducted at 48 Murray St, Elsternwick. A huge crowd of around 200 people attended, and the old Melbourne auction buzz was palatable in the air. Surely there would be competitive bidding at this property? As the agent pointed out – this house was one of a kind. The location and design of the renovated luxury period home stood it head and shoulders above others, and not only that, but it had recently been featured in House and Garden magazine! After such a magnificent effort to inspire potential bidders, only one bidder decided to follow his opening plea for a bid. Offering a bid of 2Mil, well below the quoted range, the agent promptly eclipsed this with a vendor bid of 2.2 Mil. 20 minutes of subsequent effort didn’t inspire anyone else to jump in – or the initial bidder to raise the stake – and the agent was forced to place another vendor bid of 2.3 Mil before passing the property in. Subsequent negotiation was conducted with the buyer, however to no successful result has yet been achieved.
Passed in vendor bid
(Neighbour disrupts auction)
15 Coling Avenue Carnegie looked like it was going to turn into a super auction – that was until the neighbour residing opposite decided to throw a spanner in the works! A few doors away a luxury townhouse had sold only last weekend for 1.490M. On a similar land size, the ‘roughy’ at 15 Coling Ave promised the potential to create a similar return for any buyer who had a little vision and wasn’t afraid to take the challenge of a re-build. However during his very passionate and upbeat pre-amble, just as he was raving about the location being the ‘best this side of Melbourne’ a neighbour opposite- who was not overly keen on having the crowd lean against her garden wall – decided to ruin any idea a potential buyer may have of creating their home owners dream, by shouting that the agent was not only lying, but following this with more expletives about how awful the neighbourhood was! The agent handled the situation extremely well, and after some frantic courteous pleading, finally managed to calm the lady down and progress with the auction. However the atmosphere had gone dead, some buyers had already started to walk away, and needed less to say, the auction passed in on a vendor bid of 680K.
23 Fern Ave, Prahran also had a disappointing result. This time there were no disruptions from the crowd, however it didn’t stop the auctioneer taking a good 20 mins before admitting defeat. With seemingly no interest, the property passed in on a vendor bid of 725K.
67 O Grady St, Clifton hill didn’t fare much better. Offered at ‘land value’ only a healthy crowd of around 60 turned up, and for a while there it looked promising, However two vendor bids later – the first at 740K and then a second at 780K, the property passed still a good way from the reserve of 850K.
Sold under the hammer
Amidst all the post auction negotiating, it was almost refreshing to see one that bucked the trend – and the award went to 2 Austin St, Hawthorn. Dream buying for a buyer who relishes the thought of renovating a period beauty, this home offered heaps of potential. Located on over 600 sqm of land, and a corner block to boot, the crowd wasn’t huge, but the bidding was strong. Opening on a vendor bid of 1.350Mil, 2 bidders battled it out – testosterone flying – in 25K increments. Announced on the market at 1.450Mil, the battle continued, and 18 bids later, 320K above reserve, the property sold for 1.770Mil!