First time auction buyer - Help?

[dannyjak]

Hi all

We are looking to upgrade our home slightly and have found an ideal place in the same area. The idea is to eventually move into this place once we feel it is ready. The house we have found is going up for auction, the first open inspection was 2 weeks ago. At that time I didnt see too many people going through. Unfortunately I missed the open on the weekend that just passed. The agent stresses that there has been alot of interest though. It could be true, or he might be talking it up as well.

Because I live in the area, I have a rough idea on prices. I have been researching for previous sales on onthehouse.com.au, looking at previous and current listings on RE.com and Domain. I have a budget in mind. Agent is setting expectation at over 600k (over my budget), but in my opinion, it is not worth too much over 600k anyways. My hope it to suss out interest and see how my budget fits in with the overall market. Who knows, might get it in my budget at auction.

Most houses in the area are on 500-600sqm and 3-4 bedrooms. A mix of older fibro, 70-80's brick veneer, and nicer looking modern 2 storey brick houses.

The house I am looking at is a 4 bedroom modern 2 storey house (maybe 8 years old). Basically no money needs to be spent. The house is on 430sqm, and is almost a mirror image of the one next door. It appears that someone bought the lot, then divided in 2, built the 2 houses and then sold.

A house across the road, 3br brick veneer, probably 1980's, sold at auction a few weeks ago for 486k, however it was on 580sqm.

Also, the agent keeps asking me what my budget and price I would put on the property. I have declined to tell him on several occasions as I do not want to reveal my hand. Furthermore, the agent wont give me any indication on price, this is because "it is going to auction and the market will determine it". Somewhat a fair call, but dont expect me to tell you what I will give.


Anyways, given the background, my questions are:

My hope is land size difference will leave the house in the 5-600k range, is this feasible? i.e. this house is nicely built, but on 150sqm less than an older home that sold recently across the road for 486k.

Should I make an offer beforehand? I tend to think that I shouldnt because the offer would have to be over my budget for the vendor to accept, otherwise the vendor would just wait until auction, even if they were desperate

What can I do to avoid spending $$ on a building + pest inspection, only to be priced out of the auction very early? It's an added cost for no guarantee of success

Should I be getting a RPData report? or is onthehouse.com.au sufficient for previous sales information? if they work on the same data, I dont think there is a need for an RPData report

How can I get more information around vendor's expectation or the level of buyer interest out there?

Any suggestions on auction tactics? I went to one around the area lately and noticed that there is no real strategy, fattest wallet wins basically. Although I did notice that if it gets to the end stage, and you immediately beat your competitors offer by $1k repeatedly, it shows you have a bigger wallet and want it more?




Thanks so much for your help

 

[dannyjak]

Oh the house sold for 210k in 2001, not sure if this helps

Assuming net 9% growth per year over the last 10 years, puts it up at 500k

 

[Marty McDonald]

If it's 8 years old brick house I doubt there would be any issues with building and pest. That said it's a small price to pay considering the investment you are thinking of making.

You could try and test the waters with a low pre offer subject to building and pest. If not accepted and goes to auction register on the day but don't bid unless below your budget, and let it gets passed in if no other interest that way you can resart negotiations post auction with the requirement of the building and pest inspection. I think in the first 48 hours though negotiations are auction conditions.

 

[Ed Barton]

I I think in the first 48 hours though negotiations are auction conditions.

the agent would like you to think that. a buyers offer is subject to any condition they choose. put in a condition that the agent must undress to their underpants and dance around in the rain for 2 hours. now i would pay another 20k just to see that.

 

[Propertunity]

My hope is land size difference will leave the house in the 5-600k range, is this feasible? i.e. this house is nicely built, but on 150sqm less than an older home that sold recently across the road for 486k.

150m2 is probably irrelevant unless it has development potential

Should I make an offer beforehand?

Not unless you can determine that the vendor is not commited to the auction process and is open to selling prior. Otherwise all you do is show your hand.

What can I do to avoid spending $$ on a building + pest inspection, only to be priced out of the auction very early?

Have enough knowledge of comparable sales to know what the price range is.

It's an added cost for no guarantee of success

That's what puts many buyers off buying at auction.

Should I be getting a RPData report? or is onthehouse.com.au sufficient for previous sales information? if they work on the same data, I dont think there is a need for an RPData report

Get a free residex report from one of the mortgage brokers on here.

How can I get more information around vendor's expectation or the level of buyer interest out there?

Spend enough time buying and developing the relationship with the agents that you can ask "What is the vendor's expectation of price? What did you tell 'em it was worth in your selling agency agreement? What is the level of buyer interest out there?" and be confident they tell you the truth when they answer.

Any suggestions on auction tactics?

There are plenty in the forum here. Use the search function.

I went to one around the area lately and noticed that there is no real strategy, fattest wallet wins basically.

Last point is ultimately correct unless you can bluff them that you have a fatter wallet and they give up.

Although I did notice that if it gets to the end stage, and you immediately beat your competitors offer by $1k repeatedly, it shows you have a bigger wallet and want it more?

Or go up in bigger increments $2K, 5K etc. Go to some auctions, learn some tactics.

 

[Propertunity]

If it's 8 years old brick house I doubt there would be any issues with building and pest.

No, no and no. Termites can and do attack new homes and 6 moths later they can be completely eaten out.

I think in the first 48 hours though negotiations are auction conditions.

No

 

[Marty McDonald]

Thought I would get response from that! I do actually know a few big time investors that don't do pest inspections on relatively new builds in urban areas. Not saying it is right or wrong. However if it only takes 6 months for a house to be trashed by termites do you also suggest an owner gets a test every couple of months? These guys just get under the house with a torch and look for filings and put their ears to the walls.

I'll take your word for it on the other point but would appreciate a little less dismissive feedback if you don't mind, keep it nice.

 

[Propertunity]

..... if it only takes 6 months for a house to be trashed by termites do you also suggest an owner gets a test every couple of months?

Every 6 months for properties in a high risk area / condition. 12 months as a minimum.

These guys just get under the house with a torch and look for filings and put their ears to the walls.

Tourch looking for mud trails is good. Moisture meter in walls also good. Ears to walls - OK late at night with minimal ambient noise - but only severe infestations normally heard this way.

I'll take your word for it on the other point but would appreciate a little less dismissive feedback if you don't mind, keep it nice.

I was being quick not dismissive (busy day, sorry). Generally accepted convention is auction conditions until mid-night on the day of auction.....then something about glass slippers & pumpkins

 

[dannyjak]

The 150m2 less in the newer place I am looking to buy effectively means much smaller yard area for the house, compared to the other house.

With regards to making an early offer, the vendor is not living in the house. They have already moved into a new house in another suburb. However, am cautious of showing my hand and they dont appear that desperate to sell.

I have a rough idea of the price range, but am no property expert so its difficult o know for certain. I guess there isnt much I can do about the building and pest inspection, other than just to pay it.

Who can provide help with a residex report? that would be really handy!

Thanks for your help, will have to build a better relationship with the REA. He is very tightlipped and will continue to be so but will ask what he told them the property was worth when they signed with the vendor. Problem is, they will always lie, talk of a higher price and much more buyer interest than there actually is.

Will try and attend more auctions this weekend if I can

150m2 is probably irrelevant unless it has development potential

Not unless you can determine that the vendor is not commited to the auction process and is open to selling prior. Otherwise all you do is show your hand.

Have enough knowledge of comparable sales to know what the price range is.

That's what puts many buyers off buying at auction.

Get a free residex report from one of the mortgage brokers on here.

Spend enough time buying and developing the relationship with the agents that you can ask "What is the vendor's expectation of price? What did you tell 'em it was worth in your selling agency agreement? What is the level of buyer interest out there?" and be confident they tell you the truth when they answer.

There are plenty in the forum here. Use the search function.

Last point is ultimately correct unless you can bluff them that you have a fatter wallet and they give up.

Or go up in bigger increments $2K, 5K etc. Go to some auctions, learn some tactics.