Deceased Estate Auction

From: Mike .

Hi All,

Today I attended an auction of a Deceased Estate in my area of North Ryde.

The RE mailout had the usual colour photos and plenty of RE hype, eg, set in popular...this much loved...perfect start for young family...plenty of potential...walk to...handy to...etc. Now, the most telling words were "Deceased Estate - WILL BE SOLD".

It's a free standing 3br cottage, it's clad fibro with permaclad or permanclad?, tile roof, small bathroom (original), modern kitchen (ie renovated), 3 good size bedrooms, house is approx 14 squares, block size is 560 sqm, Blenheim Rd has lots of thru traffic and a bus route. Has established lawn and basic garden, ie, perimeter shrubs and small trees.

The flyer says bidding from $270,000, however, agent says interest already shown at $290,000 and will probably go off in low 300's.

I don't see many of these so I thought I'd go along to observe the auction and see whether it goes off at a discount as some would have us believe.

Bear in mind, that in the last 3 years, the average growth rate for houses in North Ryde was approx 7.3%. The projected average annual growth rate over the next three year period is approx 10.38%. Bear in mind, also, that historically, North Ryde's average growth rate has been slightly under the average for the whole of Sydney.

The median sale price in the North Ryde area last year was $381,000 and the median rental yield last year was 4.61%. So, based on that data, we can say that North Ryde is not an unpopular suburb. So should we expect to find a bargain here? Remember, the property is meant to be on the market from the first bid. (At the auction, during the bidding, I saw the auctioneer ask the agent whether the property was now on the market. Strange, since there shouldn't have been a reserve.)

At the auction I estimate a crowd of about 60 people standing around the front lawn in light rain. Nobody would start the bidding so the auctioneer asked the agent for an opening bid. It was $300K! So, the agency's initial estimates were just a ploy to attract bargain-hunters. I believe it's called low-balling. Now, do something for me, take a deep breath and hold it for as long as you can. That's how long the rest of the auction was. In quick succession, the remaining bids were, 320, 330, 340, 350, 360, 370, 375. All done, sold! No arm twisting was seen at this auction. As the crowd dispersed I overheard the Agent remark that he neither expected the bidding to go that quickly or that high.

So what conclusions can we draw from that about "D" sales. Obviously, you won't find a bargain in popular, good growth suburbs. Remember folks, we ARE meant to be on the verge of a recession! What's North Ryde going to be like when the good times roll around?

Regards, Mike
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Reply: 1
From: Gee Cee Cee

Future recession but still a hyped up market.
A lot of people still see property as the thing to be in.

My local papers headline today was "Views Nice At Twice The Price".
Sold 1998 @ $265k, Sold this week @ $616k.
Now everyone wants to get on the same train.

Also where did $ flow into last time there was a major Stock Market correction? Was that around 1987?

Deceased estates, Mortgagee auctions// bargains sure.

I have picked them up during low times when no one even attends auctions. Think you are going to pick up a bargain whilst the market is running hot?? Most likely not.

Just my ravings.

Gee Cee
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Reply: 2
From: Rolf Latham

?Low balling" ?

I have recently read that the main purpose of giving "lower than reserve" price estimates to potential bidders is as a marketing excercise for the agent.

No, not to give the seller a higher price, or even to impress the seller. I have heard it is to give the impression to OTHER buyers that the agent is good at getting buyers out of the woodwork, hence resulting in fresh listings from the auction.

All good and well, but I have also been told that at the emd of the day, the people that "fund" this marketing excercise are the buyers who never had a hope of competing in that market - those that were told 290 maybe 325 say. How many pest and building inspections etc, and how much time is WASTED allround even though the reserve was always set at say 345 ?

Please someone tell me what I have heard and read is wrong, since while this might be legal it must surely be unethical ?

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Reply: 2.1
From: Sim' Hampel

Rolf, from what I've seen, what you described is most certainly the case.

My experience with auctions, one company in particluar (in Adelaide) do extremely well with auctions because they have the marketting down pat.

They are a very slick operation with some very experienced operators, they work as a team with the agents hyping up the buyers then the auctioneer doing his thing.

Now they primarily deal with quality properties, and I believe they are really good at getting high price and leveraging the demand for quality, but at the same time they really push the marketting pitch, bringing in more auction business for themselves. For lower quality properties I have seen them low-ball to keep the momentum and crowds appearing.

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Reply: 2.1.1
From: Rolf Latham

Sim I do not object to the marketing as such, thats life- I market too, but not at the specific costs of others.

But surely there must be something to prevent an agent from claiming such "low price opportunities" are possible when they have set the reserve with the seller at 30 or 50 K more.

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