Marketing for $100K below value?

[RedCat]

I have my eye on a property going to auction soon, listed for $800K+. it seemed a little on the cheap side to me so I looked at it very carefully on Saturday and saw a few cosmetic problems but nothing major (no inspection done yet).

Anyway, I called a RE agent friend of mine at another agency to ask him his thoughts and it turns out his associate had appraised it recently and valued it at $900K. Surely that's what they told the vendor, so did the agent they are using ALSO tell them 900 or close to it and if so, why is it listed for $800+?

I know the + makes it difficult but what are your thoughts on this? I'm quite interested in bidding for it, but not sure how to play it. Sure, I DID feel it was listed cheap and I know the area really well, but does that mean I should try approach the auction with a knock out bid or something?

Any advice or suggestions welcome please!

 

[Michael A]

The legislation to prevent under quoting is a joke. All that now happens is the agent now puts TBA on the auction authority where the reserve should be inserted which is legally acceptable. The perception of a successful Auction is created by the " quote them low and watch them go" process, this is taught within the industry. It creates the public perception that an agent quoting $800 plus that achieves $950 has achieved an above market result, rather than a better than average con. The current vendors expectation will have a 9 in front of it gaurnteed. The bunny's turn up expecting to buy in the low 8's and will mis out a few times before they understand the game. Informed buyers will know to ad 10% minimum and hopefully the market reduces the vendors expectation an additional 10 % from what the agent quoted because they have committed $15'000 in advertising and can't afford to to spend this again. Welcome to the auction process.

 

[RedCat]

I haven't bought at auction since 2003. Doesn't seem like it's changed too much since but to quote $100K below in the current market can't be good surely.

My RE friend (who is also an auctioneer) is going to give me his advice prior to the day but I'd appreciate any advice from here too. I am looking to buy this property as an IP initially, but also as a future PPOR when my stepson moves out in 5 or so years hence buying in the same area we already live in.

My friend suggested setting my limit in the region of $912K, but then he is a RE Agent.... Surely if it's current 'value' is $900, then I shouldn't have a limit any higher than that, and maybe I should be thinking more around the $880 mark?

 

[MIW]

Offer before the auction!

I have my eye on a property going to auction soon, listed for $800K+. it seemed a little on the cheap side to me so I looked at it very carefully on Saturday and saw a few cosmetic problems but nothing major (no inspection done yet).

Anyway, I called a RE agent friend of mine at another agency to ask him his thoughts and it turns out his associate had appraised it recently and valued it at $900K. Surely that's what they told the vendor, so did the agent they are using ALSO tell them 900 or close to it and if so, why is it listed for $800+?

I know the + makes it difficult but what are your thoughts on this? I'm quite interested in bidding for it, but not sure how to play it. Sure, I DID feel it was listed cheap and I know the area really well, but does that mean I should try approach the auction with a knock out bid or something?

Any advice or suggestions welcome please!

RedCat,
Have you thought on making an offer before the auction?
I too wished to purchase in the same suburb so that in 5-10 years our sons could live close by. The price was $1.2 mil but I know I could have bought it for $1.18 (median for the suburb being $1.7). Had some drainage issues at about $30k to fix and needed internal cosmetic renovation.
The property never went to auction as was sold prior but under auction terms.
Another one we looked further out at $800K and was listed for auctin too but was sold prior (good cosmetic renovation with $900 potential rent).
This strategy can work, if your offer is quite quick and prior to the auction and available only for 24 hours (1 day). Just use your negotiating skills....and good luck!

 

[RedCat]

Thanks for the advice. There seems to be a bit of interest in it (from what I overheard from others viewing the property) but it's worth a shot. Hubby doesn't see it until a week before auction due to work commitments. Is an offer 5 days out from auction too late? I a get the feeling that would just make them over confident and want to wait until auction day anyway. No harm in trying, but I still need to establish a limit should it go to auction.

 

[shuggy]

Great post , bang on the money and quoted for truth .

The legislation to prevent under quoting is a joke. All that now happens is the agent now puts TBA on the auction authority where the reserve should be inserted which is legally acceptable. The perception of a successful Auction is created by the " quote them low and watch them go" process, this is taught within the industry. It creates the public perception that an agent quoting $800 plus that achieves $950 has achieved an above market result, rather than a better than average con. The current vendors expectation will have a 9 in front of it gaurnteed. The bunny's turn up expecting to buy in the low 8's and will mis out a few times before they understand the game. Informed buyers will know to ad 10% minimum and hopefully the market reduces the vendors expectation an additional 10 % from what the agent quoted because they have committed $15'000 in advertising and can't afford to to spend this again. Welcome to the auction process.

 

[Ms Jade]

^ITA.

RedCat, you will know how much interest there's been when you ask if they will accept prior offers. If an agent suggests a prior offer it's usually a good sign there's little interest. There's no harm in trying but I think if there's interest it would be highly unlikely they'd accept an offer five days out. All you can do is figure out your Walk Away Price and make sure you stick to it.

 

[RedCat]

Even though I haven't bought anything at auction in years, I think I'm strong enough to set my limit and not go over it. I've often found myself amused at auctions watching the bullish guy puff his chest out and keep bidding like a show-off until he's paid WAY over market value. I'm not gonna be 'that' guy (or girl).

Thanks all for the words of wisdom. I'll report back on it.

 

[Propertunity]

http://www.somersoft.com/forums/showpost.php?p=812505&postcount=16

 

[Angel13]

Hi RedCat, good luck at the auction. Make sure you keep us know how you go. I'm excited for you

 

[ldriver]

I noted that it was pretty standard to add 10% on the top of the quote in Richmond. You might not like it ( I didn't, as a vendor) but that's the way they play it because other agents do.

And LOL- do you remember the guy in the pink coat with the escorts at the Block Auction- free advertising!!!

 

[RedCat]

OMG! How FUNNY was that guy in the pink jacket. Crazy. People were milling outside those Block properties every single night and day for weeks on end. Bit weird if you ask me. I live in the next street and didn't go near them.