Auction tips you need
While the ‘official’ auction season may have come to an end, there are some good opportunities for investors who follow the right advice and keep astute on looking for deals.
Those shelving their property plans over Christmas are missing out on prospects, says chair of Property Investment Professionals of Australia (PIPA), Ben Kingsley. Heading out this weekend and keeping an eye on properties that previously missed out at auction may be one of your better investment decisions.
“Astute property buyers and investors are still active in the property market over the Christmas and New Year break because they know some great buying opportunities can come up,” Mr Kingsley says.
“Most vendors will want to start the New Year with their property transactions completed which means they are often more motivated to close a deal.”
These properties may have greater scope for negotiation and, therefore, discounting, as well as less competition.
“Properties that may have gone to auction in late October or November might still be on the market at a reduced price – or with a vendor more willing to move on price,” he says.
This may bring properties that caught investors’ eyes earlier in the year back within their feasibility bracket.
For investors looking to get back into auction season when it heats up in 2013, Mr Kingsley shared his ‘Top Tips’ to getting the most out of auctions with Smart Property Investment:
1. Look close at days on market
In most instances, the longer a property has been listed, the better, as this will more than likely lead to a price reduction. But keep in mind that there may be a very good but not so obvious reason why a property has been listed for so long. Classic examples are future development close by or unruly neighbours, so do your research.
2. Understand the motivation of the vendor
If the vendor has purchased elsewhere they might be desperate to sell. However, any good selling agent will never be upfront about this, so you need to listen well and ask smart questions. Your questions need to be very specific, such as ‘Have they purchase another property and they need to sell?’ Selling agents are great at half truthful answers, but when they are asked a specific question, the cat will usually come out of the bag – or their body language will give it away.
3. Have your finance ready
A ‘ready to go’ deposit is essential. Agents get paid on the sale of the property, not on the listing, so if one party is offering to close the sale and the other party is putting all sorts of finance conditions on their offer, the agent and vendor will often choose the unconditional offer – even if the other might be a higher price, because their offer could fall over at any time.
4. Offer optional contract terms
You may come across a great property which is an investment grade asset, but the vendor and selling agent are keeping their cards close to their chests. To determine whether they are a serious seller, you could offer a couple of alternate contract terms. You might offer a lower price for a short term settlement of 30 days or you might offer them a further price increase if you can settle in six months. There is nothing better than negotiating a long settlement with a very small deposit, knowing the interest you are saving is more than the increase in price you offered and also, if you have bought well, knowing the value of the property is increasing.
5. Be patient
You might start negotiations between now and Christmas but the vendor may stall on price or terms. Stay cool and stay silent. Let them know this is your first and final offer and leave it at that, but make sure you tell the agent to call you if and when they are willing to accept your ‘reasonable’ offer. As the weeks of January go by, their confidence and patience might waver, and you just might get that call.
Some final advice that investors must take on board is to do your due diligence, “even if in a race against the clock … don’t enter into any sales agreement unless you’re 100 per cent certain it’s right.”