The task from Steves Newsletter 9/5/07 : Scan through your local paper and locate a property that is coming up for auction in two weeks time. Attend the open house and take down notes about who you think would buy the property (age, income, family status etc) as well as how much you think they will pay for the property. Attend the auction and then compare your expectations with what happens. Write up a report and post it in the 'General Property' forum at PropertyInvesting.com. The best post made prior to the end of the May will win a fabulous prize.
Property up for auction 12 May 2007 : 117 Cardigan Rd, Mooroolbark.
Why chosen : Is at high end of properties for sale in the Moorolbark area in sort after Edna Walling Estate. Has scarcity since properties in the renowned estate don't come up very often. I received a flyer in the mailbox (that originally entered the bin) with no price and being a local I knew it was at the upper end of town.
About the property :
The Agents speel. "STONEWOOD COTTAGE" Auction Sat 12-May-07 11am More than $775,000 117 CARDIGAN ROAD MOOROOLBARK
Central in a mature, sunny garden of over 4000sqm (1 acre approx), behind a picket fence and stone gateway, "Stonewood Cottage" has been extended and developed, combining old world character and charm with the latest modern features and design from the glass roofed atrium entrance, fabulous kitchen & open plan living to the stone & mahogany fireplaces, picture windows, leadlight and brush box timber floors. Glass doors open to pergola covered outdoor living, stone BBQ, 8 seater spa under weeping umbrella tree and a magnificent fully tiled, solar heated in-ground pool. Quality fittings, double carport and cubby complete the picture.
Did an inspection and came away with a new valuation less than the original I would have quoted based on the advertisement and knowledge of the area. The 1 acre property was not in the “Edna Walling Estate” but across the road from it and one block back from another road that separates the Good from the Bad. Also, I'd aksed for an inspection at 9.00am but the agent insisted I come at 9.30am. No wonder, the road it's on is a narrow thoroughfare for buses and traffic going to/from the local college further up Cardigan Rd. So, yes at 9.30 it's a pieceful acreage, but 30 minutes earlier there's a constant stream of traffic and very difficult to get out of the drive.
The house is unique in that it's an origianl homestead that has been subdivided and the largest lot left for the original Stonewood Cottege. Being an old style it had slate walls half way up and the rest is Wood with a tin roof. There were a few ad-hoc additions making it a strange layout with very open living areas with tiny bedrooms and no robes. Just one bedroom and toilet, kitchen in good condition. Outside was swimming pool, solar heated and spa with gas heating. Large 2 car carport.
Given it's a unique country style house it would have appeal to a select buyer after it just grabbing them emotionally. If they come along to auction it could go for 800K. Otherwise it it's a small family after a large size block who are willing to to some extending it would go for 650K. It's just a matter of getting someone along who is taken by the charm.
After the inspection here I went up the road to another property that was far more modern but on 5000sqm block and they were asking $595K. It didn't have the charm or character of Stonewood, but on a slightly larger block with less established gardens, no pool, 4 BR, 2 Bathroom, 2 toilet, Brick, Double Garage. These type of places in the area have been fetching 550 – 650K.
Who I think would buy the property :
Income level : 150K+
Family Status : Family with one or two kids or Older couple wanting retreat style.
What they'll pay. When I heard the location and before I saw the asking price from the Agent in the advertisement, I immediately thought 750K+. After inspection of the two properties I revised by assessment to 680K for Stonewood. In other words I think it will be passed in since with an advertised price of 775K, I think it will be on the market at anything above 750K.
Update Auction Day : 12 May 2007
At Auction it went for : $800K to either a stupid bidder or a dummy bidder. Here's how the bidding went.
Bid 1: Auctioneer asks for opening bid – a guy hanging onto a mobile looking like he's taking instructions bids 700K.
Bid 2 : Auctioneer asks for bids in 50K lots and after no more bids are received the Auctioneer provides a vendor bid at 750K.
Bid 3 : No one else bids but the same guy hanging on the phone offers 800K.
Auctioneer receives no more bids, goes inside to talk to vendors, announces the house is on the market are there any more bids. No more received – SOLD to the one bidder on the phone who only had themselves to bid against!
That's 17.6% above what I thought.
Update 16 May 2007
Well as I half expected I received a call from the smiling agent taking names to say unfortuately the property didn't sell and was now back on the market. Apparently the person on the other end of the phone was an old lady who couldn't come up with the money. So the friendly agents attitude changed when I said that yes I half expected it would be back on the market because the Auction just didn't seem right. Getting defensive she abruptly asked what I meant. I explained hw the bids went and that it was very strange for the same person to put in such a high bid against a vendors bid. Well she said it's now back on the market at 800K.
Tyhis really got me going. How can you put it back on the market at 800K when it didn't sell. She insisted but it did sell. But why are you calling me then, your telling me it didn't sell, it didn't sell at 800K and the vendors own bid was 750K so how can you claim it's now 800K. Again I stated this is why the whole process here is “not right”, don't bother calling me again, I won't participate in this anymore.
Learnings.
The whole Auction process is a farce.
Despite Dummy bidding being against the law, it's happening.
There is little you can do to catch these rouges
Go to an Auction and watch the process carefully
After this experience I wanted to learn heaps more about Auctions and how these rouges get away with it, an excellent resource is at http://www.lawersrealestate.com.au
Despite what the agents tell you about no cooling off and the sale is final – absolutely not true
I would avoid auctions unless you get to take some control, see the Sec32, Contract and put your own terms in, know your price, get legal advice, don't be fooled by the enivitable dummy bidder – assume they are there.
Hope you enjoyed my story, I'm going to go to a few more of these just for fun.
Good story Courage, thanks for your legwork and sharing! Unfortunately there are no auctions in my area at present. I'd love to test my wits in this homework challenge!
"Despite Dummy bidding being against the law, it's happening."
That was precisely my thought as I read your tale…
Nothing new under the sun I'm afraid. Good heads up Courage.
Don't let this nightmare put you off. Unfortunately it's pretty normal.
Use it as a learning experience. You can pick up good bargains at auctions so get back on the horse.
A lot of people are intimidated by auctions and don't realise you can make changers to the terms etc.
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