08 Nov Check your attitude at the auction door – Cate Bakos
Cate Bakos tells us that many people go to an auction not expecting to buy so they don’t prepare only to find out that it was very achievable for them, and they should have prepared a little bit better.
Kevin: An interesting thought, the other day talking to Cate Bakos, who joins me as my guest. G’day, Cate, how ya doing?
Cate: Hey, Kevin, I’m well. Thanks.
Kevin: I wanted to talk about your concept of intent pressure, and how many people maybe go to an auction not expecting to buy, so therefore they’re not fully prepared. And then they find that in this environment, this market, that it was very achievable for them, and they could have prepared a little bit better. You’re seeing a little bit more of that, are you?
Cate: I definitely am, and it’s really interesting. Now in this changing landscape, people are underestimating their chances, and even if it’s a flat chance, like a 10 percent chance, they’re leaving it to the last minute. And they’re either getting that phone call from the agent saying “we’ve got an acceptable offer,” and it’s, let’s say, $590,000, and the client might have thought that it was a mid-sixes property.
Cate: All of a sudden, they’re scrambling to get their offer in by the deadline, or they’re still there at auction and they see it passing in, or not getting the deeds. And they realise that, had they been prepared, they could have bid with confidence, and that’s when I get very distressed, last minute freak-out calls. And they want to go and step forward with an offer, but under auction conditions, it can be unconditional.
Kevin: Is this happening because the market is actually adjusting, and maybe in some cases buyers are still thinking it’s running a little bit out of control? In other words, their expectation of what it’s going to sell for is actually greater than what it really will?
Cate: It’s an interesting question. The prevalence of it happening is far higher at the moment in this changed environment. But I’ve seen it happen in a hot seller’s market as well, because you can never predict exactly what will happen with a property. And sometimes, the agent can give the impression that it’s going so well, it’s flying. And so buyers are a bit lackadaisical about preparing for it, they just go ahead and watch the auction and plan to watch the property sell, and realise that there were a few details there that were overestimated. Maybe the people that the agent thought they had have gone to something else, or they haven’t gotten their finance in time, or whatever the reason.
Cate: So it does happen in all markets, but we see it a lot more in a buyer’s market.
Kevin: It’s a difficult position for agents, because the thing that they want to portray all the time is success. They want to say, well, this one is going to sell, I’m confident it’s gonna sell. Yet, maybe that’s building an incorrect expectation in the eyes of the buyer, which could effectively make it not sell, because they are almost talking people out of becoming interested in it. Am I making sense here?
Cate: Yeah, you are. It’s such a difficult situation for agents, because on one hand we want them to be honest with us and prepare us for competition, and give us an idea of how competitive the bidding could be. But on the other hand, we don’t like hearing when the property is going really well. Or we don’t like the agents talking down the possibility of the sales results, so when they don’t lean on how many buyers they’ve got on it, or they suggest a price that’s lower as a bit of a guide price.
Cate: And we are pretty tough on the agents. We expect a lot from them, but in this climate, the honest answers are often “who knows what will happen in this market.” And I think finance is the key, and the agents know that buyers can be keen on the property, and they can have the right sort of budget. They just might arrive at auction and haven’t got their finance sorted, and they’re not prepared to bid under the hammer, knowing that it’s an unconditional bid.
Kevin: It’s a very emotional time, both for buyers and sellers, where the buyer doesn’t really wanna miss out. That fear of missing out sometimes makes people pay that little bit extra that they probably shouldn’t. And you must see that quite a lot, Cate.
Cate: We do. We see people pay extra when they’re fearful of missing out. And we also see people scrambling to throw in a bid when they’re ill-prepared. Every now and then I have to say to someone, we can’t bid. If it passes into you, I can try and respectively, negotiate all of the conditions for you so that you have the comfort of a finance clause, but at the end of the day, if they haven’t done all of their due diligence, they don’t wanna wake up the next day and realise they’ve got no cooling off and they’ve made a mistake.
Cate: But the important thing is, if you think there’s a chance of getting a property, even if it’s a small chance, and you’re totally keen on it and you’re planning to attend the auction, it pays to do a little bit of homework, decide what you’re prepared to pay for it, and make sure that you’re satisfied. That the price you’re paying is what it’s worth.
Cate: And also have that contract looked at. You don’t want to throw ten contracts at a solicitor, that will drive them mad. But if you’re really serious about a property, and the agents indicated that they can’t be certain it will go under the hammer, you should be prepared for a pass in.
Kevin: And you should also be prepared for the fact that you’re gonna miss out, because there’s been a lot of people very, very upset with the fact that they have missed out in the market that we’re currently in, and maybe we’re moving through, Cate.
Cate: It’s a little easier for buyers now. You’ve got a better chance of buying once you’ve got your finance sorted and you’re prepared, than what it was a year ago. It was such a tough seller’s market a year ago, and people were getting smashed at auction. So it has come off. The levels of competition are certainly lower, the buyer call is diluted, particularly when it comes to being pre-approved and ready to bid. And we’re seeing a lot of properties sell after auction, or via private sale with a subject to finance call.
Cate: So, buyers should remind themselves of the fact that the conditions have changed. And if they step forward with a reasonable offer that’s subject to finance on a private sale, or if they can talk to the agent long before the auction, they might find that they have a chance to incorporate a finance clause, or at least plan with enough time.
Kevin: I’ve been talking to the buyer’s agent of the year for Your Investment Property, Cate Bakos, from Melbourne. Cate, thanks very much for your time.
Cate: Thanks for having me, Kevin.