Chances are you will not buy under the hammer at auction

Print This Post Print This Post

Well that’s it then! 66% clearance rate means the entire Melbourne property market has turned around and prices will begin to climb. Over 6 out of 10 properties sold at auction on Saturday! If I am buying a home now I better get ready to simply out bid the next guy!

Nothing could be further from the truth. Looking at the statistics offered by the REIV this week, 56 properties sold before auction out of 516 homes. That is over 10%. We know anecdotally that about 60% of the total properties that go to auction do not sell under the hammer. Many of them do sell in post auction negotiation and these results still go down in the sold at auction percentage.

If we add this to the 473 private sales for the week we can see that having to outbid somebody else to purchase a house might only be 1 or 2 out of ten properties. It is much more likely that you are going to have to deal one on one with the vendor or their selling agent. Once the vendors’ statement (section 32) is available, a legally binding agreement on both parties can be negotiated.

If you have no plan, if you do not understand the rules, if you have not purchased 20 or 30 properties in the last few years, then you are going to be at a distinct disadvantage when the negotiations start. The selling agent, assuming the vendor has made a good choice, will be an excellent negotiator. As a licensed real estate agent they are required to understand the laws surrounding the sale of a property. The selling agent is also trained in the arts of negotiation. But most importantly the selling agent is creating a buffer between you and the decision maker. This is absolutely critical when negotiating.

An agent is paid to solely represent the vendor. It is his or her job to make a deal and get the best possible outcome for the vendor. In a two horse race that means they are trying to organise the worst possible outcome for the purchaser. If you need to add a finance clause to an offer, if you need to add a pest inspection clause, if you are unsure how long the vendor has to respond to your offer, there is no use asking the agent for advice.

Your solicitor will be able to assist you with looking over the documentation, but they will not be able to give pertinent advice as to what to offer. A financier may tell you he knows what the property is worth, but it is unlikely he has negotiated as many properties as the selling agent. And, by law, unless he has a real estate license or is a valuer, he cannot have access to private sale data. If you have paid $200 on the internet to buy data, read the fine print regarding Victoria. No reselling company can identify private sale data. It would be in violation of our privacy laws.

If you need help to put an offer on the table or you are going to bid at an auction this weekend, think about calling JPP Buyer Advocates to see if we can assist you.

Ian James
JPP Buyer Advocates

Share this Market Comment

About the author

Ian has been operating his own businesses for more than 25 years. During this time the self taught lessons of building the business, dealing with staff, suppliers, clients and economic woes have been invaluable. Ian is a fully licensed Real estate Agent, a member of the REIV and registered with the Business Licensing Authority.

Buying property is not just sticking up your hand and outbidding your rival. It is an emotional, fiscal and psychological decision that needs to be planned and well executed. Ian is usually involved in over three hundred property negotiations per year; ranging from the $250,000 first unit purchase for a young couple to multiple million dollar residential developments. Ian's business background and endless numbers of negotiations make him one of the industry's leading negotiators.

Ian is married with two adult children, living in Patterson Lakes. He is a keen fisherman when weather and business allows the time.