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Empower Wealth Blog post by Empower Wealth

An early Christmas present?

We are engaged by property buyers for several reasons; ranging from investors who wish to be steered in the right direction for their investment purchases, through to clients who feel their blood run cold at the thought of bidding at auction. In fact, many buyers flick through the pages on the real estate search engines and dismiss properties that are going to auction. Why is this? It could be the mere thought of standing in front of a crowd, but in many cases it’s the idea of investing (mentally, physically, emotionally and financially) in the auction process, only to miss out at the very end. And let’s face it, most people feel upset after spending money on a building and pest inspection if they aren’t the successful bidders.

We’ve talked before about being prepared for auctions – and this includes understanding the REAL price of the property, not the quote that the agent tells you at the open for inspection. What a lot of buyers don’t realise though is that at SOME stage, the vendors can be tempted to take the property off the market and sell to the buyer who wants the property enough to make a compelling offer.

We don’t endorse this approach in every situation because there are a lot of occasions where it is advantageous for the buyer to bid to auction.

There are two reasons why we make an offer which takes the property off the market prior to auction – and these two reasons are;

  1. The buyer is likely to (or does) have competition, however the competing parties are not prepared enough to buy at that time (this may be the case if the other buyers are still coordinating finance, or still yet to get a building inspection done)
  2. The buyer has found the house of their dreams and is desperate not to chance losing it to an even stronger bidder on the day

Just as there are appropriate times to take a property off the market prior to auction, there are times where the clues are compelling NOT to take the property off the market and to proceed to auction.

There was an auction campaign not long ago where our buyers were prepared to pay over the vendor’s reserve for a property. After discussion with the agents we knew that they were not confident that they had other bidders. Our buyers had fallen in love with a property that didn’t have strong (if any) competition. The agents knew that they were keen on the property and tried to encourage them to make an acceptable offer prior.  Our buyers were quite excited at the idea of securing the property within their budget, however we could smell the opportunity awaiting them and instructed the agent that we would be bidding on the day. The property passed in on a low bid to me and we went inside to negotiate. We were able to secure the property for $36,000 less than they were prepared to pay the day prior – it was a great result for our clients.

In our current Melbourne market we are in an interesting time of year with our final sprint to a result prior to Christmas. Those vendors who have auctions up to the first weekend of December are in a better position than those who are locking in auction dates for the 15th and 22nd  and many of the agents are commenting that these vendors are quite prepared to consider offers prior. For any buyers out there who are motivated enough to stay on the trail all the way up to that final weekend before Christmas, there are some good opportunities to be taken advantage of. With less buyer competition, more vendor motivation and most importantly, more AGENT motivation – this time of year can be exciting for investors and home buyers.

In combination with the seasonal buying conditions, our current market is also showing early signs of (dare we say it) a market recovery. The market is still sensitive and jittery in certain localities and at higher price points, but as a general observation, the median ‘spend’ band properties in the areas within 12km from the city are experiencing higher levels of buyer interest, higher auction clearance rates and stronger demand than our quiet winter months were showing.  As buyers agents, we’ve seen several properties recently sell for far more than the agents and vendors anticipated.

Is this a sign of a changing market?

We think it’s too early to call but if our RBA decision next month is to cut the interest rate again (and provided the banks pass on any cut), our property market can look forward to a continued re-emergence of first home buyers, investors and upgraders who will have factored in the implication of their increased cashflow and the flow-on effect it represents on their top end price limit. And the best thing about shopping in summer is that buyers can enjoy their enhanced buying conditions over a quieter January period. We will be doing so!

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