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BEWARE THE AUCTIONEER …..How much is a nod worth?

Friday, April 20th, 2012

I was recently at an Auction with a very experienced auctioneer and a “Buyers Advocate” The bidding opened at $640k and then the Auctioneer suggested a bid of $700k which he got. the next bid was $705 and then went up in increments of $5k but all the time the Auctioneer was suggesting rises of $15k. i.e at $725, he suggested $740k. The bidding was under the reserve and the 2 bidders (a couple and a buyers advocate) were getting confused as it was going so quickly and the auctioneer was creating the confusion. At $755k, the auctioneer suggested the next bid should be $775k just as the couple were nodding their heads for a 5K bid, the auctioneer suggested $780k to the BA who also nodded his head, the couple only then realised their mistake and withdrew.

The confusion was created by an experienced auctioneer who does auctions every weekend, an inexperienced couple and a BA that had too much money in his pocket and didn’t know how to spend it wisely.

The Auctioneer can always try and control the increments but you should always bid clearly with the amount of your increment or fall into the trap of nodding your head which plays right into the hand of the auctioneer…..it can be fast and intimadating and if you are not used to bidding at auction, a nod can be very expensive!

If it is all too intimidating, and if you are unsure, then get an experienced professional to help you.

A nod can cost tens of thousands of $$.

Jenni Wright – 0419 343 482

Advocate – Domain Property Advocates

Tags: advocacy, advocate, Auction, auction results, auctioneer, Auto, Buyer Advocate, buyers advocate, Draft, dthe, mistake, nod, pocket, property prices, the Auctioneer, vendor advocate
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ROB’S BLOG – “It’s a number’s game” or is it ?

Friday, April 20th, 2012

At a dinner party I attended recently, the topic of median house prices came up in general conversation….some were delighted with the increase in the “value” of their homes and others were confused why their homes had gone down even though they lived in virtually the same area. So, after a heated debate discussing why the median price was an inaccurate measure of value, the question was asked…. Does anybody know how the median price is calculated ? There was dead silence. Do you know ?

To begin with , the median prices that are released by the REIV & other statutory bodies throughout the year are not what your property is worth or it’s value as most people wrongly believe, it is purely one of a number of measurements used to interpret value. It is a summary of a large amount of data as a solitary figure.

The median price is the middle figure when all the data is lined up from the lowest to the highest price. If the data has an odd number of figures, then the median price is the middle figure when sorted. If the data has an even number of figures, the median price is the average of the two middle numbers. Obviously, the greater the amount of data, the more meaningful this measurement is. So, now that you know what the median price is and know that it is not what your property is worth, why all the hoohaa ?

It’s all about the average !

Confused ? Don’t be. Whilst the average ( mean ) is the easiest measurement to calculate, it is not suitable when the data is skewed. A good example would be when the data contains an abnormal no. of high end of the market sales. This will effect your average but not the median. So when compared with each other, you can identify how far the data is skewed from what it really should be. The same applies if there is insufficent data but this will cause any measurement to be inaccurate. Another useful indicator is the mode which is the most frequently occurring figure contained within the data ( safety in numbers).

In summary, none of these measurements are useful in isolation but when compared over a longer period of time, trends can be identified which support changes in the value of property. So, next time the median or average house prices are announced for the quarter, don’t rub your hands with glee or pull your hair out in frustration, compare the data to the previous year , then it will make some sense. And…. next time the topic of median prices is raised, a good question to ask might be… How does the median price for the last quarter compare with the median price for the previous 3 quarters ? or What is the average median price for the previous 12 months ? Now you’re talking !

FOOTNOTE :

The most relevant data to assess the value property for buyers and sellers alike is comparable sales which will be the topic of my next blog.

Rob Millar – 0414 330 179

Advocate – Domain Property Advocates

Tags: advocacy, auction results, Auto, Buyer Advocate, Draft, house, median house prices, median price, median prices, number, property, property prices, summary, topic, vendor advocate
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LOVE ME TENDER, LOVE ME TRUE – ROB’S BLOG

Tuesday, February 21st, 2012

In the past 12 months, clearance rates at auction have fallen dramatically. Without the prospect of competition and the stigma that follows from a failed auction, many agents are pushing the tender process. WHY ? Unlike an auction which needs competition to be successful, the tender process only requires one buyer and the agent still get’s their appearance money (advertising ).

From a buyer’s perspective, the tender process is like a secret maze, it’s a nightmare. Here’s why….Most people associate tenders with government bodies or business organisations who require specific goods and services. Whilst there are special terms and conditions in all tenders, it is widely accepted that the lowest quote is successful. In regard to real estate, it is not a matter of highest and best as there will always be a notional reserve price. The other difference is that if the reserve price has not been inserted on the authority and with tenders they never are, to comply with statutory guidelines the agent is required to disclose their estimate of the likely selling price and whilst this sounds good, what if the vendor’s expectations are higher or if the agent’s estimate is inaccurate?

So herein lies the problem, there is no transparency. Because the tender is confidential – sealed bids, locked boxes, security measures, closing dates etc other than the agent advising you with their estimate, there is no means of knowing what level of interest the agent has in the property or what the reserve price is unless the agent is willing to help you and why should he / she? It’s supposed to be confidential remember and to expect anything less would destroy the integrity of the tender process. At least with auctions you get to see who you are bidding against, face to face! For these reasons it is not uncommon for the successful tender to be significantly higher than the other bids ( that’s if there are any ) because of the fear of missing out and the mindset of many home buyers – What’s another $100,000 going to matter in 10 year’s time? Heard it before? Imagine how uneasy you would feel if you found out afterwards that you were the only buyer who submitted an offer?

The most disturbing aspect of the tender system is what occurs after the tender process has closed. If the highest bid is not accepted and there are other bidders what happens? Does the agent deal exclusively with the highest bidder, conduct a board room auction, ask all buyers to re-submit their best offers or simply hope that somebody will pay the reserve price? The answer is all of the above…What a nightmare!

The fundamental difference between a tender for commercial purposes and the sale of real estate is that one depends on a commercial outcome and is fairly simplistic whereas, the other is governed by strict statutory guidelines in regards to the agent’s duty of care ( to the consumer ) which are severely compromised by the confidential nature of the tender process. Are you feeling lucky? If not, then get help from the people that do know, Domain.

Rob Millar

Advocate

0414 330 179

Domain Property Advocates

www.domainadvocates.com.au

Tags: advocacy, Agent, Auction, auction results, Buyer Advocate, Domain, estimate, LOVE, property prices, reserve price, vendor advocate
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Ten years ago

Friday, November 25th, 2011

A review of some market indicators shows that a lot has changed in the past decade.

In the June quarter this year the median Melbourne house price was $590,000, which is 103 per cent higher than the $291,000 recorded in the June quarter 2001.

A decade ago the stamp duty payable was $13,120, which is 132 per cent less than the $30,470 which was payable on the median house if purchased in the June quarter this year. Unlike a decade ago, first home buyers can now benefit from a 20 per cent reduction on this bill for most homes.

However the First Home Owners Grant was valued at $7,000 in 2001 and is still valued at $7,000.

According to the Australian Bureau of Statistics, the average home loan to a non-first home buyer was $291,200 in June this year, 99 per cent more than the $146,500 recorded in June 2001.

The median price of a house in Toorak was $2,175,000 in the June quarter this year, 105 per cent higher than the $1,062,500 in the June quarter a decade ago.

In more affordable Broadmeadows the median was $370,500 in this year’s June quarter, a substantial 219 per cent higher than the $116,000 in the June quarter 2001. This is indicative of a trend that has seen the more affordable suburbs increase in value more rapidly.

And finally, in the City of Ballarat the median house price has increased by 122 per cent from $130,000 a decade ago to $288,500 in the most recent June quarter.

Warwick Brookes

Domain Property Advocates

Tags: advocacy, auction results, bill, Buyer Advocate, cent, decade, home, June, median house price, median price, property prices, stamp, vendor advocate
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Buyers agents

Friday, November 25th, 2011

Over the past decade the number or real estate agents acting as buyers agents have increased and buyers should consider using their services, after all vendors always have an estate agent acting on their behalf, handling inquiries, marketing the property and ensuring the best possible sale price.

Buyer’s agents can be a good idea for the simple fact that most people don’t buy a home on a regular basis. As a result they are not experienced in the market, don’t immediately know the prevailing market conditions in the area they want to buy nor do they have the benefit of the day to day monitoring of a local area that a buyer’s agent does.

A buyer’s agent can take the emotion out of the auction and negotiation process for you. They attend, bid at and engage in auctions every week and know when and how to bid to help deliver the best result. They will even tell you that sometimes the best result may be to not buy a home at a particular price because there is a more suitable property around the corner.

An REIV member Buyers Agent can bring that experience to the process by using their professionalism to deliver a better result for you.

In the same way as you would interview a few estate agents before engaging one to sell your home you should interview a few buyers’ agents. This enables you to compare their services, knowledge and fees and find the right buyer’s agent for you.

Warwick Brookes

Domain Property Advocates

Tags: advocacy, auction results, Auto, Buyer Advocate, buyers agent, buyers agents, Draft, estate agent, estate agents, property prices, real estate agents, vendor advocate
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