How to Win at Auction Without Being a Tool

March 15, 2018 / iolanthegabrie / Leave a comment

Last weekend I attended an auction in my neighbourhood. I was just sticky-beaking and enjoying the Saturday morning theatre. I arrived early and had a peek around the property after being greeted by a cavalcade of junior agents with iPads (don’t be mean to them … we were all young once and wore shiny polyester suits and sunnies on our head inappropriately until we knew better).

At auctions, you can almost always tell the serious, interested buyers from those who – like myself – are attending for sport. They tend to fall into two categories:

Serious bidders at auction be like:

The ‘Been there, done that’ bidder: older purchasers who are standing at some distance from the auctioneer. They arrive five minutes before the auction, and don’t attend the open. They’re cool ‘coz they’ve purchased property before (and they’re probably superannuants with loads of equity). Bless their cotton socks (and their Uniqlo vests over cashmere paired with chill AF oversized sunglasses).

The ‘I should have done a nervous poop at home before oh God why didn’t I do a nervous poop why does this always happen to me’ bidder: they’re newbie first home buyers (although they might not be spring chickens, given the state of the Australian economy). These guys arrive ten minutes before the open for inspection begins, spend quite a while inside the property and then stand around right in front of the home waiting for the auctioneer to emerge. They’ll often be on obviously chatty terms with the agents, and have brought a horde of supporters with them.

At Saturday’s auction, both of these bidder types were present. Both bidders probably had the wherewithal to purchase the property, but it was the ‘been there, done that’ buyer who nabbed it in the end. And their strategy? It was to participate and not be a tool.

The ‘been there, done that’ couple waited until the auctioneer made a vendor bid, and then made a fair offer that was within quote range (although at the lower end). There wasn’t a huge amount of interest in the property, and they patiently waited for another bid to be made. The ‘I should have done a nervous poop’ buyer was obviously chomping at the bit to make a bid. He was a fella in his late 30s, rocking to-and-fro on his toes and trying to stare the auctioneer down. The auctioneer (who clearly knew this purchaser had an interest in the home) continually referred to this purchaser, giving him an opportunity to bid.

At this point the property wasn’t even on the market. Even if he did bid, he still wouldn’t have purchased the property as it had not made reserve. The ‘I shoulda done a nervous poop’ buyer was occasionally conferring with his partner and parents while the crowd waited to see if he would bid. He went on to ask questions of the auctioneer, before eventually saying he would make a bid of $1000. As I said, the property wasn’t yet even on the market, and the newbie buyer’s strategy was seriously impaired: if you want to have first right of refusal to access to reserve and negotiate with the vendor, you need to be the last bidder. You need to have the property passed in to you.

Of course, his $1000 bid was rejected (they were calling in $10,000 brackets), and the happy-to-participate ‘been there done that’ buyer went inside and purchased the home. The difference between the more experienced bidder and the newbie bidder comes down to this: a willingness to participate and an understanding that tricky strategy at auction is a load of hogswash. You got the money or you don’t. You participate or you don’t.

I bet the newbie buyer was spewing that they didn’t purchase the home they had so clearly invested in emotionally. From stalking nervously outside the front of the home to in-depth conversations with the agents and bringing a horde of supports along for the ride: they wanted to buy the property. But they got too caught up in micro-strategy and trying to be smart, excluding them from negotiating with the vendor.

Bidding

Here are my top tips for winning at auction (without being a tool).

1. Have finance pre-approval in place. Don’t even begin looking for property until you’ve got a hard budget to work with. It will only lead to heartache! Bidding at auction without pre-approval is something you should never do, as when you purchase at auction there is no cooling off. (Pro-tip: use a broker, not a bank.)

2. Take action (within your budget). If you’ve found a property you’d like to buy, participate in the auction. Don’t be like our poor mates who psyched themselves out with gameplaying and froze. Raise that hand and bid.

3. Don’t get too smart about bids. Putting forward a $1000 bid early on in the auction – before it has even reached reserve – is a tool move. By all means once the property is on the market, break down those bids as you see fit, but do so with purpose.

4. If a property is going to pass in, make sure it passes in to you. You’re not obligated to purchase at the vendor’s reserve – but you’ve won the opportunity to negotiate and know the reserve. If you don’t have the property pass in to you, you may have it stolen out from under your enthusiastic tootsies, which would suck.

False Economy: Why Abolishing Stamp Duty for First Home Buyers is a Fail

March 6, 2017March 7, 2017 / iolanthegabrie / Leave a comment

stampduty

Stamp duty taxes in Victoria are legitimately bonkers. They’re at genuine ‘You’re in a cult call your Dad’–levels of crazy. An archaic tax which was never meant to actively disadvantage property purchasers at the extortionate rate it does today, the State Government of Victoria’s coffers are filled courtesy of our love of real estate. And whilst it makes sense to update this rough tax lever from days of yore, there’s no political will from either side of the fence to amend the percentage of stamp duty taxes we pay – our economy relies too heavily upon it.

At a ridiculously huge 5% of the value of a property, Victorian Stamp Duty taxes equate to approximately $30,000 on a $600,000 mortgage. $30,000 ain’t small potatoes in anyone’s language. That amount of cold hard cash could pay for a hipster wedding, replete with taco-truck and Snapchat-station. It could furnish a home with a mixture of IKEA and one carefully chosen couch from West Elm. It could pay off a portion of your HECs debt. First home buyers have a lot of things they could spend their $30,000 stamp duty fees on, which is why Dan Andrews’ announcement that the State of Victoria will abolish these taxes for newbie home buyers purchasing properties up to $600,000 has been such a hit.

The bad news is, abolishing stamp duty fees for first home buyers only makes it harder for them to buy property. I’ve got a lot of time for Dan Andrews (I even call him Dan, which means we’re bonfide mates). I’m a pinko-lefty, and I’ve been impressed as he has developed into a great communicator and a good Premier. And I understand why he’s made the move to abolish stamp duty fees: it buys him more political capital in the leadup to an election, and it’s hard to argue with the benefit of abolishing such a tax for a group doing it tough.

But it’s false economy, because stamp duty isn’t the barrier to first home ownership.

Wider economic issues which can only be fixed at a Federal level are those which are disadvantaging first home buyers. And whilst Dan’s olive-leaf offering to first home buyers makes everyone feel kinda good, it’s a butterflies-in-the-tummy moment with a high price to pay. It’s the tax-policy version of diuretic romantic movie The Notebook: it makes you feel something in the moment, but you know it’s not good for you in the long-run.

Abolishing stamp duty taxes will fuel demand in a property market which is already fiercely competitive and difficult for first home buyers. It gives a false sense of richesse, intimating that newbie property owners have another $30,000 or so in their back pockets to spend. And whilst $30,000 is nothing to sneeze at if you’ve got it in the palm of your hand – in the life of a 30-year mortgage, it makes little difference to your purchasing capacity.

The barriers to property ownership for first home buyers are:

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Deposit

Accruing a 10 – 20% deposit on a property is a Herculean task. It can feel particularly Sisyphean (see, arts graduates go everywhere) as prices soar ever-higher around you, whilst you continue to sock away $500 bucks a month for your deposit. This is obviously depressing for first home buyers, and a true disadvantage for those who can’t move in with the parentals to save for a deposit. With Melbourne rents being what they are, saving for a deposit is a true barrier to lending.

Rather than offering a nominal $30,000 reduction in stamp duty (which isn’t giving you cash, it’s just a commitment not to charge you anything), why couldn’t the State Government enter into guarantor scheme with lenders, allowing purchasers to fast-track their deposit on HECs-like repayment loans? That’s would be a genuine hand-up. (Which would probably also inflate property prices if our interest rates remain at such lows – but it’s true action rather than a gesture.)

The Cash Rate

The national cash rate is too low. Whilst banking institutions are slowly raising rates independently and limiting some kinds of lending, the Reserve Bank of Australia have left the cash rate too low, for too long. People are able to borrow huge amounts of money for very little. Those who have equity – i.e. those already in the market and Baby Boomers in particular – are taking advantage of these conditions. This bombastic pairing of great equity earned from 20 years in the property market with ultra-low interest rates explain why first home owners represent such a small percentage of those purchasing real estate in Australia. They can’t compete. And all that cheap lending is no good for our nation more generally – where can we go next time there’s an economic crisis? Rates must go up, to both slow the pace of property transactions and to safeguard our economy for the bumps that are bound to come in the future. It’s actually making interest rates more expensive that will even the playing field for first home owners – not the omission of $30,000 from their mortgage.

Negative Gearing

The big one. Negative gearing actively disadvantages first home buyers in a wholesale manner that no stamp duty amnesty can ever address. Australians look to property as a safe way of building wealth and security for the future. They know superannuation won’t really help them – because whilst there are multi-millionaires with lush super balances – your average Mum and Dad will need to invest in order to retire with any modicum of comfort. So – property and negative gearing has been our national panacea. Those who have property assets have seen them grow – exponentially – over the past two decades. One couldn’t save at the rate a property in an in-demand local is growing at the moment. These property owners are now unlocking that equity to buy up big – benefiting from tax benefits which make it easier for them to own and maintain multiple properties than it is for a newbie buyer to stake their claim on a Title.

Without changes to our negative gearing tax laws, we are impoverishing younger generations. At the very least, we’re creating a future where individual wealth will be dynastic in nature, with Mummy and Daddy allowing their children the chance at home ownership. If you come from disadvantage, it’s game over. Now, I’m not necessarily saying that we destroy the whole kit and caboodle – but that negative gearing should be amended or abridged to limit the kind of property an investor can negatively gear, the value of the property an investor can negatively gear and the amount of property an investor can negatively gear.

Realtalk: abolishing stamp duty for first home buyers is an appealing gesture. But it’s an impotent action which only compounds demand in a market starved of supply. It diminishes the ability of first home buyers to purchase property. It’s a sugar-high with one bad hombre of a comedown. It compounds the effect that the true barriers to first home ownership present – and if the Federal Government don’t take action by working with lending institutions on equitable deposit terms, by amending negative gearing taxation laws and by working with the RBA to lift the national cash rate – future generations will be locked out of the property market.

PS for First Home Buyers: If the ship’s going down, make sure you spend your $30,000 with gusto and enjoy a frickin’ deluxe taco-truck wedding with a meme-inspired pinata. Treat yo’self, because it doesn’t look like the ruling elite ever will. #BAM

heartforward

All The Single Ladies, All The One Bedroom Apartments

June 16, 2016June 16, 2016 / iolanthegabrie / Leave a comment

singleladies

Today’s Hometruths Melbourne blog is for the ladies in the audience. And not just the single ones. I want y’all to be financially literate and financially independent. And the key to this literacy and independence rests on one keystone: the one bedroom apartment in your own name.

In my years as an estate agent, I was privy to the financial and emotional bullying of young women who were attempting to assert their independence by purchasing their own asset. Here’s two ways their story would go:

Scenario One:

The young woman would start attending open for inspections to get a measure of the market they were in. Most young female purchasers are well-informed, taking time to research their preferred investment location and its sales histories. They have their finance in order and they are ready to purchase. They absolutely have the capacity to make independent financial decisions for themselves. They’ve got their eye on a one bedroom apartment, and they’re ready to make a commitment. But then the well-meaning family members or significant others step in.

‘Oh darling, this place is so small! Why don’t you spend the same money on buying a villa unit in (insert outer urban location here)?’ says Mum. ‘Sweetheart, you’ve gotta be careful with these agents. They’re swindlers. Offer them $100,000 less, and not a penny more. And this place is old – think of all the repairs you’re gonna have to do. Trust Dad. We’ll help you save for a better place than this – something new, something where you’ll get better value for your dollar.’ Finally, the boyfriend (who often hasn’t the savings or will to assert financial independence behind him that she has) chimes in. ‘Babe. I don’t think we’re ready for this. What about the housing bubble? Wait for that. What about an overseas holiday for six months? Don’t you want to make memories with me? Also, I hear that Collingwood is going to become overvalued soon. Don’t take the risk honey.’

Scenario Two:

They would find a one bedroom apartment in an inner-urban area which matched their budget and lifestyle requirements. Their hands would shake with the gravity of the situation as they signed the contract of sale (after having their solicitor look it over, young women being the rightfully cautious peeps they are). The relief in their voices was palpable upon learning their offer had been accepted by the vendor – sometimes there were tears and hugs, too. But then it came time for their ‘final inspection’ of the property prior to settlement – and naturally, they’d bring along Mum and Dad and the boyf, wanting to share their joy and hoping for praise from their loved ones at their achievement.

This would rarely occur. Rather, she would skip into the apartment with glee ahead of me, before her Mum and Dad would begin picking out every irrelevant, negative detail of the property. ‘Ooh, the grout in the bathroom’s a bit dirty isn’t it?’ ‘Great living room, but it’s so close to the kitchen isn’t it?’ ‘The view’s not great darl. Wish you called me to have a look at it first.’ And often, in whispered tones ‘can you get out of this contract’? The joy in her eyes would dim. She had made the wrong decision, it seemed. She wasn’t capable of buying property – isn’t that something only the professionals, and men were to be relied upon to do well?

This bullying is insidious, profoundly destabilising and ultimately misogynist. It’s sabotage. Sure, it’s coated in a veneer of concern – it’s probably unconscious on behalf of the perpetrators – but at core, these attitudes reinforce that she can’t make decisions about financial matters for herself. Which is patently untrue. In all cases, ‘she’ – the buyer of that much saved for and wanted one bedroom apartment – had saved her shekels, done her research and shown great bravery in committing to her own future. For a woman, purchasing a one bedroom apartment on her own is a revolutionary, feminist act. She is saying to the world (and to herself, more importantly) that I can make a decision, I am capable and I am responsible for myself in this rowdy world.

A one bedroom is the keystone to a woman’s financial future. Don’t listen to the naysayers who pretend that one bedrooms aren’t valuable because they’re not on land. Pish tosh. Value has to do with location, not land per se. Particularly when you’re young and you just have to get a foothold in the escalating market. The one bedroom you buy isn’t for you to live in forever. It’s just an elevator – it will grow at a rate that you can’t hope to save for yourself per annum. It will give you equity as the years pass, and enforces savings on you into the bargain. Soon enough, you’ll be able to buy something else – either keeping that first, important one bedder or selling it to trade up. The only thing you need to worry about, lady, is buying in an area that is desirable – or in the suburb next to the desirable one. Older apartments are fine – they increase in value just as much (and often moreso) than their newer counterparts. I probably wouldn’t recommend buying in a giant development or ‘off the plan’ – but that’s my own peccadillo. A property in a good area that you can afford to service is better than no property at all.

And that boyfriend? Don’t let him move into your hard-won asset, or ride on your coattails onto the contract of sale with a declaration of eternal love. If he didn’t put in half the deposit, he’s not the owner. Let something which has taken such focus and commitment – and bearing of emotional strain to purchase – be yours alone. Repercussions for allowing a casual partner to cohabit for an extended period of time in your residence can be severe: if you split up and a court rules you as de facto, that ex-partner may be due a portion of your property. If he liked it, then he should have a put a ring on it. Whether you’re a fan of marriage or not, buying a property with a partner at an appropriate stage in your relationship is the best bet. You can then liquidate your one bedroom and put it towards the bigger purchaser made together, or (even better!) keep it and build a portfolio in your name.

You can do it, ladies. Buy a one bedroom apartment. On your own. No boyfs or BS about it.