I went to an auction Wednesday night

D

depreciator

First time in ages as an active participant. The house behind me was being sold

http://www.somersoft.com/forums/showthread.php?t=37645

It seemed the only way I was going to get my hands on that land I wanted to extend my chook run was to buy the place, cut off the land, tart the house up and flog it - it would have been horribly negatively geared as a hold.

So prior to auction I negotiated a $5,000 deposit on exchange and a 3 month settlement period - with some access in between to start working on it.

I figured it might go for around $520-30K. That meant with purchasing costs and a reno, it would owe me about $600K. I would then cut off that land and the renovated house might be worth $550K i.e. the land would have cost me $50K. (In Sydney's inner west, that's a good price. And it would have increased my already large block to an unusually large one for the area)

There were a bout 10 active bidders, which surprised me. At $525K it was just me. And then one of those people who don't say 'boo' till the end popped up - she was by herself, around 30 years old. Bugger.

So it was me and her. I got to $555K and she went to $556K. The auctioneer tried to talk me into another bid, but I said: 'mate the place isn't worth the price it's at now.' (It was worth more to me than anyone else because of the opportunity it presented.) The other bidder didn't really like that comment.

After the auction I went up to her and said: 'Sorry for pushing the price up so much, I just wanted the land the garage was on.' She said: 'You're kidding?' For a second there I thought she was going to hit me.

I explained the scenario I envisaged and said: 'Now that you've paid way too much for a house that needs more work than you realise, let me know if you'd like some instant cash.' She seemed interested - well, at least she didn't hit me.

I also pointed out sort of casually that the existing derelict garage would have been built illegally and that she will have trouble rebuilding there because of a sewer main that is incorrectly positioned on the documents in the contract.

I reckon I'm still in with a chance. All renos run over budget and that place really does have a few problems. I'm sure a few months from now there will come a day when $50K in cash is pretty tantalising.

Scott
 
interesting post Scott :D I have never participated in an auction b4, but if I were you I'm sure I would have forgotten to ask and just let it go.. never hurts to ask! I hope you'll get that piece of land for a good price, as it's kinda on easement and not really much use to her anyway.
 
would not be logical for her not to agree to sell it, but then again what's logic got to do with investment right?

this could bode well for you - you have pushed her into a position of feeling as tho she should recover some of her over payment, whilst boosting the value of your neighborhood!
 
She told me she would have gone to $560K. Odd, because it's a lousy block and the house has no redeeming features. It's an ugly red brick 60s thing.
I thought I would get it because it wasn't the sort of house that anybody would buy to restore and it is too much hard work for the average couple starting out, unless one of them was a tradie. Still, when I didn't get it at that price, I sort of breathed a sigh of relief - it would have been a lousy 3 months.
Scott
 
depreciator said:
She told me she would have gone to $560K. Odd, because it's a lousy block and the house has no redeeming features. It's an ugly red brick 60s thing.
I thought I would get it because it wasn't the sort of house that anybody would buy to restore and it is too much hard work for the average couple starting out, unless one of them was a tradie. Still, when I didn't get it at that price, I sort of breathed a sigh of relief - it would have been a lousy 3 months.
Scott
Click to expand...

I thought of an idea.. you can help her renovating the place, but in return she gives you that piece of land for a heavy discount. You would have known the place better than an outsider (builder) anyway.
 
No.
I was pretty glad afterwards that I didn't get it for $555K. When I got home and was pretty cheerful, my wife assumed I had bought the place. It all would have worked out in the end, but I would have missed a summer because I would have been madly renovating the place and that would have annoyed me.
I suspect also that in the next few years another neighbour's house will be up for grabs - elderly couple next door. Their place is a much better strategic purchase for me.
 
Snap Scott!

Missed out on buying some extra backyard, but I'll be more interested in my neighbours block next door - an old lady as well. My fear though is it will sell without coming on the market. Do you plan on approaching your neighbours?
 
My neighbours don't speak great English - despite having been here since the 50s.
Their daughter, however, is a conveyancer and she's very on the ball - she was acting for me with my latest thing.
She will know that I would be interested.
Scott
 
Sounds like some emotional bidding there Scott. When you are bidding based purely on the numbers, its hard (impossible) to counter that.

3 points:

You don't know how much money she has to do the reno. She (or her parents) could be loaded.

She could be aware of how much work is needed and the problems with the property.

The land the garage is on has a value sure, but the real value in Sydney's inner west is in the access and off street parking, as i'm sure you are aware.

They would be extremely silly to not realise that. If they are in a position to buy the property in the first place they probably aren't that silly.

Good Luck mate, you just might get lucky.



depreciator said:
I'm sure a few months from now there will come a day when $50K in cash is pretty tantalising.

Scott
Click to expand...
 
Sadly it won't be of any use as a comparison with my place - mine is too odd. I'm putting a valuer through the hoops right now. I had to get the place valued a fortnight ago and I told them it was no good them sending out a resi valuer and expecting him to find comparable local properties. They don't exist. So they sent out a resi valuer. My place is 3 buildings - one of them an ex bakery. There are existing commercial use rights and it's in a residential area, so that makes it hard to value it. The comparative properties they put in the val were all houses $1.1 - 1.3m. My val came in over that, but not enough over it. I'm putting together something to assist the dills now.
 
Well, well, well.
It looks like the sale may be going to fall over. It hasn't yet, but the agent is canvassing interest and I would be the person most interested.
Not sure what the problem is with the sale - the agent understandably was being discreet because it's not dead yet.
Problem is that when I missed out on the property at auction I naturally convinced myself (often and at length) that it would have been a mistake to buy it. Now I have convince myself that I was an idiot thinking it was a bad idea.
I have told the agent to see if some cash prior to settlement would assist the buyer to settle. That may be attractive if the val came in too low or if the two rate rises since exchange are causing problems.
Scott
 
That's good news of sorts Scott.

What would be your preference now? Help her settle by offering to buy the backyard section you wanted, or wait for the deal to fall through and try to get the whole property?

If my memory serves me, the initial plan was to cut off the land you wanted and re-sell the house wasn't it?
 
I could have taken the whole thing on in December as a summer project, but not now. We're heading into our busy season - we've already had the busiest start to a year we've ever had. So buying the property, subdividing to get that land, doing a reno, and selling again would do my head in.
And given the property would be a big cash flow drain, I wouldn't want to hold it.
I suspect the deal is there if I want it, but my preference would be to give her some money to help her settle.
I don't really need the extra land. It would be nice to have, but it's not going to add hugely to the value of my PPOR. So I'd be crazy spending too much.
Scott
Just on the PPOR val. The valuer came back with a bit over $1.3m. And I can't get them to budge. The bank guy has been really good. The problem is apparently that $1.3m is the highest local sale and the valuers won't go higher. I know that property - it's a crappy boarding house in a lousy street that we did a Depreciation Schedule on. If there had been, say, a $1.5 local sale they would be comfortable going higher. It made me laugh.
 
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