Auctions Get Lower Prices – Peter Lees

Homesellers tempted to auction their homes should remember 4 words AUCTIONS GET LOWER PRICES. Never mind what you read in the papers, auctions are a financial minefield for consumers. Despite the booms in many areas, thousands of home sellers are turning their backs on auctions and benefitting. But there area still thousands of sellers who don’t realize, until it’s too late, what happens to them at auction. They get a LOWER price, that’s what happens. If someone is trying to talk you into selling by auction, then before you sign anything, please read this.

NINE REASONS AUCTIONS

GET LOWER PRICES

1.     THE STARTING PRICE

It seems as if the price goes up at auctions. But that’s only because it starts LOW. It’s like starting the day with a massive hangover and saying that you are going to feel better as the day progresses. That’s not a good reason to get drunk every night. Avoid drinking and avoid the hangover. You start the day in good shape.

2.     RESERVE PRICE

The reserve price is the price at which the home can be sold. It’s the lowest price a seller is prepared to accept and that becomes the central focus of the auction. If you are trying to get the highest price, do NOT make your lowest price the main focus of the sale.

3.     REPELS BUYERS

Research shows that more than 90 percent of buyers do NOT like actions. It makes no sense to use a system of selling disliked by most buyers

4.     INCONVENIENT

One of the BASIC rules of marketing is: make it EASY for people to buy. Auctions do not make it easy. They make it hard. Many buyers see that a home is for auction, and if the date doesn’t suit them, they don’t even bother to enquire. The buyers that are lost in this manner are often buyers who would have paid thousands of dollars more than the auctions final selling price.

5.     BARGAIN HUNTERS

Investors, property dealers and bargain hunters all know that auctions are one of the best places to find cheap deals in real estate. It is well-known that deceased estates and mortgagee sales are often sold for a “song” at auctions. Auction agents try to justify this by saying, “look at the banks and government departments. They use auctions.” But sale is more important than price.

6. COMPARATIVE

If two or more people want to buy the same home, the worst thing you can do, from a negotiation point, is to allow each person to SEE what the other is offering! Instead of offering their highest price, each buyer will only offer a SMALL amount above what the other buyer offered.

7. DECEPTION

To persuade sellers to auction their homes, agents will talk about high prices and then to get buyers to come to the auctions the same agent will talk about low prices. Most times both the seller AND the buyer are deceived. The sellers end up selling for less than they were told they could get, and the buyers often end up paying more than they were told they could pay.

8. SELLS TO THE WRONG MARKET

To attract buyers, agents will market the home by advertising it to “start from” a low price. This is supposed to attract buyers and indeed it does. But it attracts the wrong buyers who want to buy at the LOW price NOT at the price the seller wants. Many of these buyers cant afford to pay much more than the price advertised and so on the day of the auction, there will be a crowd of buyers all wanting to buy at a low price.

9. FAILED AUCTIONS

When a home does not sell at auction – and thousands don’t – it is labeled a “failure’. Buyers think something is wrong with it; and many will offer LOWER prices. Like a wounded animal with vultures circling, failed auctions are easy prey for bargain hunters.

Is Now A Good Time to Buy Property? By Paul Kounnas

Like most people, you're probably confused by the daily bombardment of mixed messages about the state of the property market.

Are you finding it difficult to make sense of the conflicting information?

Well don't. The market is going through a transitional period where some properties will remain stagnant, others will rise and some will fall.

There are no apparent signs of home sellers so desperate to sell that they would give away their properties at a 30% discount, which would then trigger a collapse in the housing market. In Australia there are less than 1% of mortgages in arrears, which is considered low by international standards.

We are also currently seeing the signs that the market is beginning to stabilise after the slowdown we experianced during the past twelve months.

Paul Bloxham, HSBC's Chief economist for Australia and New Zealand, and a former RBA economist, believes that the prospects for the Australian economy are strong. Paul Expects house prices to "track sideways' in the short term and then rise in line wth household disposable income - we expect that housing prices will continue to grow at a modest pace over the next few years. We view the risk of a sharp fall in housing prices as very low."

This is a year of opportunity for the astute property investors, who can see through the maze of mixed messages. They will do very well as they take advantage of long term opportunities presented by the current market.

If you a selling and buying in the same market this is a good time, particularly if you are upsizing.

Can you remember back 10 years ago? How cheap were properties then?

Don't be the one looking back in a few years time saying "I wish I bought back in 2012 when property was cheap."

Old Versus New by David Kerr

If there's one topic property investors rarely agree on, it's what makes a better investment: old or new?
Proponents of buying 'old' argue that established dwellings are typically more affordable and can be renovated to create equity, whereas those buying 'new' argue that this is outperformed by the tax incentives that new properties deliver.

Confused? Here are the arguments for both sides of debate, but remember there is no right or wrong answer, regardless of which corner you stand on! Old and new properties both have distinct, unique advantages and what counts as an investor is that your decision matches your individual strategy and goals.

Reasons to buy New
1. Tax Depreciation
If you're an investor, one of the big advantages of buying a newly constructed property is that you can claim depreciation as a tax-deductible expense. This includes the depreciation assets in the buildings and the cost of the building itself, as well as wear and tear on fixtures and fittings in the property. The newer the property, the higher level of depreciation.

2. Better Quality Tenant
Brand new properties tend to attract a better quality tenant, which means a higher rental income and fewer headaches for the landlord!

3. Less Maintenance
Unlike new homes that require little maintenance, owners of second hand properties are often faced with immediate maintenance issues. The cost of repair in older homes can significantly inflate ongoing expenses.

4. Warranty
As a purchaser of a new property you are protected for a number of years against major building defects by home warranty insurance, which all builders of new homes in Australia are required to carry.

Reasons to buy Old
1. Equity
There is little opportunity to add value to a new home, whereas the investment made in an old home can grow in the future should you choose to renovate or extend.

2. Affordable
It's often said that you get more house for less dollars buying a secondhand home than when buying a new one. For entry level investors, old properties can have the advantage of an affordable price tag.

3. Unique Appeal
Older homes often have great features that can't be replicated in new homes. A well maintained period - style home, for example, will reap rewards in capital growth down the track.

4. Established Sales History
There's little guesswork in buying an established property because you'll be able to trace back the property's appreciation and find out how the suburb has preformed. This can help give you the assurance you need that you're buying a good property.