The markets changing look for the signs. 14/03/13

It’s early march 2013 and the sun is still shining in Melbourne. It’s been a while since the end of the world as we knew it, or the global financial crisis as everyone else called it, and in the property game it appears that things are starting to look up.

We see a lot of things printed about the state of the property sector in Melbourne and in fact around Australia, and for the most part the doom and gloom content tends to get the headlines. With the recent clearances at auction in Melbourne over the last month being up around the 70% mark though, a little good news is making its way toward the front of the newspapers. This is a really interesting time as a result. Similar to the change of tides that fishermen look for. Let me explain what I mean.

For the last few years there has been a lot a talk about retraction in property prices. Let’s face it, the prices paid two or three years ago are not the prices we are getting today. As a result of all this reporting and transactions still happening in the market, there have been a few properties that have gone for a song. It’s a result of people having to sell not wanting to, but it’s a sales result none the less. These low results, although not the normal median price, can be used as an indicator by the news machine to show how bad the world really is.

And they can also be used by real estate agents to determine a “lower than usual” quote range. Now hear me out, I’m not saying they are under quoting as such, just using the lowest comparable rate to set the advertised list price. This super low quote tends to get people really interested. The greater the interest, the greater the number of participating parties at auction. The more bids and action the more competition. And we all know what competition does to prices.

So what “signs” should we be looking for and be wary of? Well based on the information above we need to be aware that a lot more properties are going to Auction. They are being listed at really keen prices, totally justifiable, but very cheap. This will be evident by the numbers of people going to opens at the weekend, which has increased, because let’s face it, everyone loves a bargain. This will then lead to people “having a go” at auction because it’s cheap enough to try your luck. Hence the greater clearance rates and higher prices.

The key signs to look for at these auction properties are “no offers before auction” and a “delay in section 32 availability”. Sorry sir, we can’t take your offer as the section 32 is not available yet. Anything that delays the transaction so it gets to the battleground of auction is a sign that the seller’s strategy is to ramp up the competition and interest and get the higher price.

All is fair in love and war and real estate I guess, and as a seasoned negotiator anything that takes away my ability to control the offer process and pits me against an emotional public is not for me. I don’t let my clients pay more than they should and you shouldn’t either. By all means still look at auction properties, but understand that the tactic of ramping up competition by listing as low as legally possible is making a comeback. Just don’t get caught in that game. Negotiate hard but fair, and have fun. Good luck.

Garry McPherson

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