The fastest thing in Melbourne this Spring other than the horses are the rate that the properties are selling. The weekend being the Saturday before the Melbourne Cup was an exception in the Melbourne Real Estate Market as most enjoyed the racing fever already at Derby Day and many continued to claim a long weekend of celebrations until the Melbourne Cup at the Flemington Racecourse on Tuesday 3 November. A great moment in history was witnessed as the nation held it’s collective breath to watch Michelle Payne became the first-ever female jockey to win the Melbourne Cup, riding Prince of Penzance to take the $3.6 million prize.
This Saturday will be back to regular business for the Melbourne Real Estate Market. Though preparing to bid at auction can create a lot of stress for buyers. Some property buyers are highly experienced when it comes to purchasing property at auction, some need a reminder of the basics and other’s just don’t have time or require much needed assistance. We will share some tips for Bidding at Auction and other recent Real Estate news which we hope assists you in the current Melbourne Market, the greatest and most liveable city in the world!
‘With over 20 years real estate experience in Melbourne,
Master Advocates strength is our true personal focus to deliver excellence across independent
Buyers Advocacy and Property Management services.’
In this issue:
- Bidding at Auction: Pre-auction preparation and auction day performance
- Feature story: When is a good time to bid against yourself?
- REIV: Market update (Real Estate Institute of Victoria)
- REBAA: Benefits of using a buyers agent (Real Estate Buyers Agents Association of Australia)
- Mortgage News: Industry update – bank interest rates and activity
- Suburb Spotlight: Straight Outta Pascoe Vale
- Core Logic RP Data Real Estate Market Outlook 2015-2016
Bidding at Auction
Before you get to the auction date, their are several steps and due diligence checks which one should perform that are standard when purchasing property via any method being Closed Tender, Private Sale or Public Auction. I personally would avoid a Closed Tender method when possible and regarding Private Sale if it is advantageous for the client attempt to draw all parties into a boardroom auction environment. Due diligence and experience is the key to selecting the right property.
Buying property at Auction in Victoria requires all offers to be unconditional if purchased during the period of three (3) clear business days directly before and/or after the auction date. So one must be certain that all preparation has been performed thoroughly to ensure the best chance of establishing that the property is the right choice for your investment goals, budget and lifestyle. Further suggestions as a preparation guide are as follows:
- Get your money in order: Ensure that your finance mortgage lending limit is pre-approved including the government stamp duty amount which will apply and be added to your purchase price at settlement (State Revenue Office Victoria – Stamp Duty Calculator). Identify what your maximum purchase price limit can be separate from the stamp duty amount.
If you haven’t already established a relationship with a Mortgage Broker or Financial Institution that you trust. Research and secure a consultation with a reputable Mortgage Broker and ensure that they are experienced.
When engaging any professional service provider to care for your financial or legal needs, one should always ask or find out the serious questions such as how many years of experience they have in their industry, their qualifications and area of specialty, credible accreditation and how much experience they possess relating to the services that you require, ie: Residential Real Estate Property Transactions.
- Put together a wish list: Identify your ideal property criteria needs and wants analysis. Consider issues like location, neighbourhood, transportation, schools, property architectural styles and structural type, number of bedrooms, bathrooms, car spaces, total land area or outdoor living spaces to building size ratio and aspect/direction of property.
Too often buyers randomly go and inspect property with little thought in mind of their future needs. Before you start inspecting property, put together a wish list of needs and consult the list regularly while you evaluate properties. All property in my opinion should be purchased with a minimum of a ten (10) year plan to retain and assess to have a greater opportunity of good capital growth and rental yield.
- Choose your top 3 suburbs: By narrowing your search down to your top 3 suburbs, it is more realistic to be able to properly research the market. If you choose more than three suburbs at any one time, you are unlikely to be able to gauge market value and risk overpaying or becoming overwhelmed with the process.
- Create an agent contact list: Once you have identified your top three suburbs, your next step is to put together a comprehensive database of every selling agent in those preferred areas.
- Contact the selling agents: Once you have put together the database of selling agents, you then need to contact them and let them know you are interested in buying a property in their area. Sometimes you may be lucky to find a property that has not yet been listed, giving you an advantage over your competitors.
Be sure to share your needs and criteria with the agent other than your budget initially, save that for once you have inspected the property and ready to assess what it is worth to you in the market place before you make an offer.
Sharing your criteria will make the agent’s job easier and speed up the process on matching you with the right property that they may have available. This will save time and energy for everyone, though importantly you may avoid wasting time chasing the wrong property while you may be missing out on the right one.
- Inspect 100 comparable properties: In order to properly understand the market in your preferred suburb, it is recommended that you inspect 100 comparable properties. Obviously, this is time consuming.
Enlisting the services of a professional Buyer’s Agent is the most effective way to save time in the property search. There are also numerous property sales data reports available to supplement your research which most professional Buyers Agents, Sales Agents and Mortgage Brokers have access to and should be able to provide them to you upon request relating to specific property. Such as Core Logic RP Data Comparative Market Analysis, Demographic Data and Sales or Rental Historical Reports.
At this stage if you are still wanting to battle it alone, be sure to compare prices of available property that match your criteria with property that is currently on the market for sale, though more importantly with property that compares realistically that has actually sold. You may have to amend and adjust your criteria expectations according to your budget (cut your cloak, according to your cloth).
There are free resources that will allow you to search and compare recent sold property results such as Auction Results By REIV (Real Estate Institute of Victoria) or Auction Results By realestate.com.au.
Go out and inspect as many properties as you can that match your criteria and budget, attend comparable auctions to experience the process of the real event unfold in person. This will help you visualise your actions for your own auction day and desensitise your emotions in the high pressure atmosphere that the auction environment creates (the more you sweat in practice, the less you bleed in battle)
- Create a shortlist: Once the research has been completed, you need to put together a shortlist of three or four properties and focus carefully on these.
- Arrange inspections: Multiple inspections may be needed to determine which property is preferred. Make sure all the appropriate building and pest, plumbing, electrical and engineering inspections are conducted if the property is going to Auction.
If the property is listed for Private Sale, having your legal representative add the relevant inspections as subject to special conditions with the terms of your offer on a Contract of Sale would be wise.
Take a camera and photograph internal and external features of the house to help you remember your inspection.
Check water pressure and test to ensure all appliances, fixtures and fittings that are to be included with the purchase are in good working order.
Always take a brochure from the selling agent as well, this will serve as an easy tool to make comparisons, consider options and notes when deliberating a shortlist selection.
- Contract reviews: Always obtain a legal representative or Solicitor’s pre-purchase contract review of the Contract of Sale and Section 32 Vendor’s Statement for the property that you are interested in prior to entering any negotiations to make an offer to purchase via Private Sale or Auction.
- Get a floor plan with measurements: Make sure the floor plan is practical and functional. A good floor plan allows an efficient flow of traffic and makes the most of light and aspect. Changing an existing floor plan can be costly.
- What does the Vendor want: The selling agent is obligated by privacy and duty to act in the best interest of the vendor. That is the person paying them to sell the property. In most cases unless the vendor instructs the agent with authority to disclose the price they will accept during negotiations prior to auction, the agent won’t be able to share that detail with you.
In Victoria the vendor is not obligated to disclose or decide a reserve price prior to the auction date. Though you can seek to find out some other key details from the agent that may be a motivation of the vendor such as dates for settlement terms and deposit, which may show signs of how motivated a vendor is. For example, if the vendor is demanding a 30 day settlement or if the settlement is a longer period 60 or 90 days and they are demanding an early release of deposit, the vendor is most likely motivated to sell due to the need of money/cash flow or prior commitments and investments elsewhere and for this reason they should set the reserve price at a realistic level. This can be a good thing, if the reserve is set reasonably, the rest will be up to yourself and the other buyers in the market to determine how much the property is worth and how great the demand is currently.
If you require special terms for the auction relating to the deposit amount or settlement dates other than what an agent is requesting, be sure to negotiate and receive permission for this in writing from the agent well before the auction date on the grounds that your terms would be approved should you be the successful purchaser bidding on the auction day. For example, you may require a 5% deposit to be accepted rather than a full 10% and you may require a 30 day settlement rather than the average 60 or 90 days if that is what the agent is requesting.
- Know your limit: By now you should have a clear vision and opinion of how much the property is worth to you and what it should be worth in the current market. Before attending the auction to assist in controlling the highly emotionally driven decisions, make sure that you set yourself boundaries. Note the ideal price which you would like to purchase the property at and the absolute limit that you will tap out of the bidding and walk away with no regrets. Do not deviate from your plan. There are always more options.
If it is your ideal property to occupy as your home, you may decide to have a higher limit within your budget. Planning long term with a minimum of 10 to 20 years, the Capital Growth that you should achieve when selecting the right property should far outweigh any short term perceived loss if you believe you are paying a stretch of an extra $10,000 to $20,000 for the property.
If the choice is to purchase as an investment then you should consider the facts more closely, potential capital growth, current rental value, vacancy periods and potential net yields after outgoings, maintenance required, professional service fees for management of the property, rates and taxes.
- Bidding Strategy: Have a clear and confident bidding strategy set within your pre-arranged limits. If you are bidding to purchase with a partner, other investors in a syndicate or stakeholders. Be sure you have your agreements and instructions set out in writing. Preferably prepared by a solicitor with a limited general Power of Attorney created for the purchaser that will be representing and bidding on the day on behalf of all parties. This will make completing contracts of sale with all required purchasers names included a much smoother process without complications during settlement in future should you be successful.
When bidding, one should be focused, there should be no need to deliberate or hesitate with other co-bidders. This will show weakness and empower competitors to feel more confident even if they have a similar purchase limit to you. You want to keep them guessing and concerned under the pressure in the auction environment. Set a regular limit of bidding intervals that you are confident with, for example $2,500.00, $5,000.00 or $10,000.00 rises. Having your maximum limit set as an odd number, for example $773,000.00, can be practical decision as most buyers set an even dollar value as their limit.
Generally unless you are in a rush to make another scheduled auction, avoid bidding before the auctioneer announces that the property is officially “on the market”. If the momentum of the auction is going well and the auctioneer has not paused to make the announcement though you feel the price level the bids are at should be on the market. Politely ask the auctioneer if the property is in fact “on the market” to be sold. If the property is not “on the market” and the auctioneer reaches the point in the auction where the property is going to be “passed in”, this is the right time to place a bid to ensure you are the highest bidder and have the first right to negotiate with the vendors reserve price once the property is “passed in”.
All going well, there is no more waiting and the property is on the market to be sold at auction. Allow other bidders to compete and exhaust their limits. Once the rate of bidding frequency slows down, still wait for what may seem like the final two bidders to continue to battle, possibly showing hesitation and reduce the amounts being bid. The auctioneer will call the amount three (3) times before selling, calling for further bids. Wait for the “first call”, if no further bids, enter the bidding after the auctioneers calls the “second call”. Remain consistent with your bidding amount and confident with your bid until you reach your limit should competitors still be engaged in the bidding. Ensure you do not delay and hesitate with your bids, keep them guessing their own actions, not yours.
A few more general tips as a guide for conduct on Auction Day:
- Have your cheque book ready or the amount of cash deposit that you pre-arranged with the selling agent, ensure to have it with you on auction day. If you do not have the full deposit amount ready on auction, make sure you have pre-arranged authority with the agent in writing that you will be allowed permission to pay a nominated amount as a cash deposit on auction day, for example $5,000.00 and the balance of the full deposit as agreed on the contract of sale by the next business day to be paid or transferred directly to the selling agency’s Trust Account.
- Familiarise yourself with the Auction Rules on display at the property
- Review the copy of the Contract of Sale and Section 32 Vendor’s Statement that is on display at the property, ensure that it is the same document and contents which you received and reviewed prior to the auction
- Stand in clear view of the auctioneer and agents
- When the auctioneer states the property is “on the market” it will be sold to the highest bidder
- If the bidding does not reach the vendor’s reserve price the property will be passed in to the highest bidder who has first right in negotiations
- Upon sale signed contracts will be exchanged and a deposit must be paid
For further details or consultation relating to services contact Master Advocates – Real Estate Services
Feature Story: Game of Homes – When is a good time to bid against yourself?
In case you missed the recent Domain Real Estate article, here is a link below to the full story on our news blog.
This story relates to a tactic that I performed two weeks ago at an auction, which caught the attention of the Domain Real Estate journalists.
In the west, a state-of-the-art four-bedroom house at 20 Allan Street, Aberfeldie, saw one bidder bid against his own buyer’s advocate…
REIV: Market update
A clearance rate of 67 per cent was recorded this weekend compared to 69 per cent last weekend and 67 per cent this weekend last year. There were 433 auctions reported to the REIV today, with 288 selling and 145 being passed in, 60 of those on a vendor bid. More than 5,000 auctions are scheduled for November – expected to be the biggest auction month of the year.
|Weekly Auction & Sales results, Market Snapshot|
31st October 2015
REBAA: Benefits of using a buyers agent
What is a buyer’s agent?
A buyer’s agent will:
- Evaluate the specific needs and wants of the buyer and locate properties that fit those specifications
- Assist the buyer in determining the amount that they can afford and show appropriate properties in that price bracket
- Assist in viewing properties – accompanying the buyer on the showings, or previewing properties on behalf of the buyer to ensure their specifications are met
- Research the specific properties to identify any problems or issues to help the buyer make an informed decision prior to submitting an offer to purchase the property
- Advise the buyer on structuring an appropriate offer to purchase the selected property
- Present the offer to the seller’s agent and/or the seller on the buyer’s behalf
- Negotiate on behalf of the buyer to help obtain the specified property, keeping the buyer’s interest in mind
- Assist in securing appropriate financing for the selected property
- Provide a list of potential qualified service providers (e.g. movers, accountants, solicitors etc) if these services are needed
- Most importantly – FULLY oversee the buyer throughout the entire real estate transaction
REAL ESTATE BUYERS AGENTS ASSOCIATION OF AUSTRALIA (REBAA)
- REBAA is Australia’s leading professional body for buyer’s agents.
- REBAA was established in 2000 with the goal to raise the profile of the industry and to establish guidelines for the professional conduct of real estate buyer’s agents nationally.
- Buyer’s agents are licensed professionals that specialise in searching, negotiating and purchasing property on behalf of buyers
- REBAA’s key roles include providing help and guidance for buyer’s agents while actively campaigning to make the property market more user-friendly for the buying public.
- The entity has also provided strategic advice to the NSW Department of Fair Trading review of the Property, Stock and Business Agents Act, to ensure the activity of buyer’s agents is considered in drafting amendments. REBAA members are also actively involved in similar legislation with Government in Victoria, Queensland and Western Australia.
- As a leading player in the property industry, REBAA offers significant benefits to both buyer’s agents and consumers.
- As a respected industry body, REBAA gives buyer’s agents the credibility of being part of a professional body and the opportunity to promote qualifications through its membership.
- By choosing a REBAA member, buyers can be confident they are dealing with an experienced and professional buyer’s agent.
Mortgage News: Industry update – bank interest rates and activity
Whilst many market analysts were anticipating a rate cut this week on Tuesday 3 November, the RBA (Reserve Bank of Australia) has elected to keep the cash rate on hold at 2.0 per cent for another month. This is the sixth month in a row that the RBA has kept the cash rate on hold, after bringing it to down to the lowest levels in Australian history in February and May this year.
3 Basic Tips – Saving for a house deposit
- Find out how much you can borrow –
This is the first essential step in your pursuit to purchasing your first home. Most people will need to obtain a mortgage when purchasing their first home. Accordingly, figuring out how much you can borrow will depend on a number of factors, such as: your income, living expenses and any debt you may have.
By determining how much you can borrow, you will discover how much you need to save for a deposit.
- Prepare a budget, and stick to it!
Compile a list of essential and non-essential expenses. By minimising the latter, you will be able to save more money.
Shop around and research which banks are offering the best interest bearing savings accounts.
A Melbourne based Mortgage Broker, Teo Torrelli who is a local expert with experience in the industry since 1985, shared some information and important facts relating to bank interest rates and activity that has taken place in the past few weeks.
Another big four bank has followed Westpac in hiking its variable rates. CBA announced that its Standard Variable Rate will increase by 15 basis points, to 5.60 per cent for owner occupied home loans. Investment Home Loan Standard Variable Rate will increase by 15 basis points to 5.87 per cent.
Please be advised a number of our non-major and wholesale lenders have no plans to increase variable interest rates.
The last of the regional banks has joined ME, Suncorp and Bendigo and Adelaide Bank by announcing that it will increase variable home loan rates.
BOQ yesterday announced that it will increase interest rates on its variable home loan products by 0.18 per cent.
Interesting to note the recent increases by non-majors which were between 0.15% and 0.20% was less than the increases by the four major banks.
Many of your clients are paying too much for their home loan or investment loan – before the recent rate rises.
Since the rate rise, we have noticed a large saving for most clients by refinancing to a non-major bank.
A LEND – Mortgage Solutions
“arranging loans since 1985”
0419 512 833
Suburb Snapshot: Straight Outta Pascoe Vale
Suburb Snapshot: Pascoe Vale
The following data is sourced from realestate.com.au.
Median Property Sale Price:
- House 2 BR $495,000.00
• House 3 BR $701,000.00
• House 4 BR $747,000.00
- Unit 1 BR $ –
• Unit 2 BR $430,000.00
• Unit 3 BR $536,250.00
Median Property Rental Price:
• House 2 BR $335 PW
• House 3 BR $380 PW
• House 4 BR $450 PW
- Unit 1 BR $250 PW
• Unit 2 BR $345 PW
• Unit 3 BR $403 PW
Lifestyles & People
- Established Couples & Families 18.5%
• Independent Youth 14.0%
• Maturing & Established Independence 13.3%
- Nature Reserves & sporting grounds
• Close proximity to CBD (10km), train station & tram lines
• Variety of sports clubs, Pascoe Vale swimming pool and close proximity to DFO Essendon.
Core Logic RP Data Real Estate Market Outlook 2015-2016
As the Spring selling season progresses we are seeing a rise in the number of newly listed properties being added to the market, however, we aren’t seeing a commensurate lift in transactions resulting in a rise in the months of housing supply.
The months of supply calculation is simply a function of the trend number of property sales and the amount of properties listed for sale. For example, if there were 100 homes for sale and we typically see twenty sales each month, there would be five months of supply in the market. Or, in other words, it would take five months to absorb all the stock available for sale. Although there is a lag in receiving sales, other data such as valuation activity, clearance rates and mortgage commitments, point to a minimal increase in transaction activity so far this Spring. As a result we are starting to see the months of housing supply trending higher.
Across the combined capital cities, there is currently 3.4 months of supply on the market. This figure has increased from a recent low of 2.9 months in March. You will note on the first chart that the months of supply figure spikes each Christmas/New Year period. This is due to the fact that sales volumes fall sharply at that time of the year while there is also a moderate fall in total listings. As the number of newly advertised listings continues to grow we anticipate that the months of supply figure is likely to trend higher. Although the months of supply is rising, it remains low on an historic basis. This is of course reflected by a fairly rapid rate of sale however, much like headline value growth figures this is largely being fuelled by the very strong conditions across the Sydney and Melbourne housing markets.
Melbourne – the city currently has 3.4 months of supply for sales which is the same figure as it had over each of the past 2 years. Melbourne has the 4th lowest months of supply of all capital cities.
Higher levels of advertised supply is great for buyers, providing more options for purchase and reducing any urgency in the market to make a purchase decision. Buyers should be able take more time to make a purchase decision in those markets where advertised supply levels are higher and they should be able to negotiate harder on the final contract price when they do decide to buy.
The opposite can be said for vendors. Markets where months of supply are high indicate conditions are generally more favourable for buyers. Vendors may need to be more willing to offer a greater amount of flexibility in their sale price and be prepared for a longer selling period if they aren’t prepared to reduce their price expectations in line with market conditions.
Article by Cameron Kusher, CoreLogic RP Data Senior Research Analyst
Supportive information sources: Domain.com.au, REIV, REBAA, RealEstate.com.au, A-Lend Mortgage Solutions, Core Logic RP Data in association with Master Advocates – Real Estate Services – published November 2015