When our former neighbours at our former residence were trying to sell their home, a potentiaol buyer had a building inspection carried out which found a number of defects, so the neighbour had a second inspection done which revealed many more problems.
When we were ready to list our home, our agent strongly advised that we have a building inspection carried out so as to be able to rectify any problems in advance, so I called the “building inspector from hell” who our neighbour had used.
We followed his report and rectified everything so that the couple who bought our home received a perfect report from their building inspector.
Naturally, when we were buying our current residence, we ensured that we used the same building inspector who once again found a number of problems including the pool fence not being compliant despite it having been inspected by a pool fencing “expert” and having had dodgy repairs carried out by the cheapskate owners.
May I suggest you look up Neil Jenman of the Jenman Group. He used to be a real estate saleman and turned into a consumer advocate. He sends out free books which are very much worth a read. He writes about all the tactics and practices real estate agents use.
When selling we used a real estate agency which followed his principles, and did very well out of it compared to ‘standard’ agents. [I have no relationship with them apart from that.] You can also do well buying through them.
In the ACT, vendors must obtain a building inspection certificate to sell, and this is available to all potential buyers.
I have had two pre-purchase building inspections done. The first one was through the Aust. Institute of Architects who gave me the names of their most experienced people doing building inspections. The second was a firm that specialised in pest and building inspections.
Neither inspection was worth the paper they were written on. They both missed major issues that a trained and competent practitioner should have picked up.
The second one was so bad we went to a large firm of lawyers to see if we could sue the firm. The legal advise was … don’t waste your money. They have many complaints about building inspections, and the forms you sign have so many wiavers in them that suing did not & would not get anywhere.
The problem as stated by others is that the building inspectors are not truly independent. They rely on firms to give them work. If they give bad reports which stop purchases, they will not get any more work, so no bad reports. They may equivocate and say something like ‘some mortar coming away’ instead of ‘the wall is collapsing’.
The only way to get a honest building inspection is if you are friends with someone with appropriate expertise who will come and give you their opinion.
I don’t see the connection between the two. If we agree that auctions are quite inappropriate in many situations, how does that bear on maximising value where they are appropriate?
If you don’t think auctions tend towards maximising value more than any other method what is it and why?
We diverge on any agreement that auctions are appropriate in any routine circumstance. I think they should be the exception rather than the rule, reserved for unique situations rather than every day gaming buyers. It is gaming buyers as much as it might be extracting maximum value from my perspective.
Each to their own - it doesn’t pass my ethical sniff test for a vendor to openly bid on an asset they already own, let alone the ones plucked from thin air … my view only, your mileage may vary …
The vendor’s bid is just another psychological device to go with others in the auction process. It has no real force. It isn’t as though by bidding the vendor is taking away your decision about how much to pay. Auctions are not the only situation where we must learn to deal with attempted manipulation as part of sales tactics.
The salesman at the car showroom will try to manipulate you, so does Nigella Lawson when she seduces the camera and the tailor who tells you your new suit makes you look taller/masculine/cute or whatever he thinks you want to hear. The auction has many such tricks in it, vendor bids is just one more. Dealing with all of these is part of a broad education.
If you can’t deal with the possibility of manipulation you should also avoid buying cars in person or tailored suits and definitely don’t watch food porn.
Many comments in this thread suggest to me that people have or have had an emotional investment in one or more auctions. This is not the way to approach an auction or you will fall for all the tricks and pay more than you want to, or miss out and wonder why.
Here are a few things to try before you bid on a house.
Go to some low value auction selling goods that you have an interest in. There are many auctions going all the time selling stuff from a few dollars a lot and up. It could be cars parts, wine or old furniture.
Practice. Get the feel for how it goes, understand the pacing and the auctioneer’s patter. Watch how the other bidders behave. Get someone to watch how you behave! Feel when your heart starts to race and learn to deal with it. You must have skin in the game so actually buy something.
Set a limit and stick to it. When you consider your limit consider that most people will pick a round number. So you pick a figure just over the round number. You think it is worth about $50. If you are going up by fives when it gets to $45 you don’t say $50 say $52. All the bidders who were thinking $50 have just quit. If somebody jumps in with $50 you say $52.
Go to some property auctions as a spectator - it’s free education. Get a good position where you can see and hear the key players. Watch the auctioneer, agent and vendor and the bidders. Listen to their tone and watch their body language. Guess what they are saying to each other. If you really want to get sneaky plant you best friend or SO near them so they can eavesdrop. You can’t do that yourself if you are watching their faces.
Chat with people after the auction. You may be surprised what they will tell you about how it went or why they did/did not buy.
This will cost you a few Saturday afternoons and maybe a few hundred dollars. A good investment I believe. A single bid on a house could be $10,000.
Never had any ‘investment’ in an auction and bought my house privately. A mate is a retired agent and auctioneer and the stories he tells. His stories do nothing to moderate my cynicism.
For some of us buying at auction is not an option. We are perhaps not all equals when exposed to rivals. There is a lot of cost and effort on inspections or pure luck if you are make a binding bid
Although the process of private treaty sales is not without risks. Many agents appear to run a silent auction with advertised “offers from” rather than a nominated price at market. While there are supposedly strict rules around how agents handle offers.
Also common is the dutch auction approach where the asking price is set high and negotiations proceed to determine who will bid the closest figure. When the agent is the only one who knows all the players and what they are doing this hardly seems any more fair than the manifest manipulation of the open auction.
Are estate agents supposed to reveal the vendor’s reserve to everybody before the auction? We are talking about a 5% margin here. Apparently the rules allow a 10% range on price guides. As we see every day predicting the actual sale price is very hard.
My understanding is the purpose of the guide is to give potential buyers a ballpark figure to decide if they should look further at any given property. If a buyer takes it as anything more than that they are far too naive. If you want to get professional advice on the likely selling price the vendor’s agent is the last person to ask, they are working for the vendor not for you.
The other point worth making is the guide price is set at the commencement of marketing campaign, based on recent similar sales in the local area. The auction reserve is established by the vendor immediately prior to the auction taking place (which could be weejs or months after the guide is established). The reserve may increase compared to the guide, especially in a rising market or if there is a lot of positive interest in a property. If a buyer knows that these circumstances occur, a vendor is likely to increase the reserve as a result of this knowing the property is in demand and the marketing campaign occurred during a rising market.
Some other points.
the buyers at an auction determine the market price on the day of the auction. Properties which have a high level of interest, may result in a higher market price than expected as buyers may outbid competitors in order for a success in purchase.
a property can be sold below the reserve. If a auction does not achieve the reserve, the auctioneer will consult with the vendor to determine if the vendor is willing to lower the reserve to gain a sale…or whether the reserve is fixed and the property is passed in.
That is 100% correct and if they try and work for both parties, this would automatically result in a conflict6of ihterest.
It is in the interest of both the agent and vendor to achieve fhe highest sale price possible. The vendor maximises their return while the agent maximises its commissions (unless one is using for an agent with a fixed commission).
The defence of the auction system where a guide is good if it is within 10% was predictable. The buyer is supposed to know that, and maybe should or employ an advisor.
I completely understand how the real estate industry works. The implicit question is whether it is ‘right’ to work as it does. In some countries it is the way, in some it is tolerated, and in some a price is set and if someone offers that price or more it is sold, no auction conducted.
As a new Australian if I read a guide showing $600K, I would expect the reserve to be not more. Silly me.
I’ll rekindle this with a question why some posters think the auction system using the real estate industry’s ‘rules’ is just fine for real estate, but not for petrol, food, clothing, medical care, or most anything else. The argument is auctions ‘maximise value’ so why not maximise all the value out there and move the wealth around accordingly?
The metro area petrol price cycles maximise the oil companies revenue, so that too must be just good business.
Imagine if the groceries auctioned food. Snap peas, price guide $15 kg with no intention of selling them under $16.50 kg. Those on benefits looking for that special feast might be let down if they were the only bidder on the day and were knocked back on their $15 or $16 kg bid. Those unsold snaps might go for $22 the next auction when everyone is back from holidays and ‘yesterday was pay day’, so why let them go cheap?
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For those who haven’t followed that is an antagonistic question/argument not a suggestion I promote or support the real estate auction system as practised.
There is for many items of fresh fruit and veg an auction that does go on behind the scenes at the markets. In that instance it generally works against the growers as they are at the mercy of the market and agents dealings in the day. The outcome, an auction prioritises making a sale on the day. Whether it delivers a fair or the best outcome for seller or buyer? The winner changes on a daily basis.
For the big grocery chains their response has been to seek direct grower supply contracts for many products. This takes out the middleman as well as improving certainty. Fairness also debatable.
As it is with fruit and veg, so might it be with real estate. The trap with real estate as a buyer can be emotional attachment to a particular property on market. Every agents dream! The same with those perfectly ripened and presented mangoes at the front of the counter.
As there are in many industries. F&V have the added problem of ‘time utility’ whereby if they are not sold they deteriorate and lose value, so I beg forgiveness if that was not the best example to put up but trust it made a point.
Sometimes I feel like a Bernie Sanders in a Trump rally as the odd person out, but I attribute that to my being a ‘no so new’ but still a new Australian who grew up were it was ‘not as it is’ so I have a different perspective from my life experiences as well as my life view where community needs to be in the equation, not just ‘me’.
