08 Oct Do the opposite to what others are doing – Frank Valentic
Is now a good time to buy a property? Ask a buyer’s agent and you can bet the answer will always be the same but Frank Valentic who is a buyer’s agent – you might have seen him on The Block – has a good reason for saying now IS a good time.
Kevin: Well, regular listeners to the show will know the name: Frank Valentic. Frank is the director of Advantage Property Consulting. He’s considered to be one of Australia’s leading buyer’s agents and vendor’s advocate. Operates out of Melbourne.
Kevin: Those who’ve seen Frank, you would have seen him bidding on the The Block series of auctions, throughout Melbourne, over the years. You would have witnessed his very competitive instincts and energetic nature firsthand. He joins us. Goodday, Frank, how are you doing?
Frank: Good, Kevin. Thanks for having me on your show. Looking forward to chatting to you.
Kevin: Ah, it’s always a pleasure, mate. Always a pleasure. I want to talk to you about a comment I heard you make recently, that now is the best time to buy. Why would you say that?
Frank: Well, Kevin, it is a buyer’s market in most parts of Melbourne, and Sydney, and around Australia, so you want to buy when the market is in your favour. Definitely, it’s a better buying time at the moment. Most buyers follow the herd mentality, and buy when others are buying. In a hot market, we see that, and it’s the savvy investors that are buying now, when there are more opportunities. The clearance rates are lower, and you’ve got less competition.
Kevin: It’s always amazed me, how people continually chase hot spots, and by the time we get to hear about them, they’re anything but hot spots. I guess the exception there would, probably would be Hobart, that just seems to continue growing, doesn’t it?
Frank: Yeah. Well, areas like Melbourne, for instance, we’re now seeing how the clearance rates down. That’s around 60%. Last year, that was 76%. I know in Sydney, they’re down sort of 50%, and they were up at 70to $80%. I know Hobart is a little bit more consistent than that, but in our areas, you’re definitely … it’s a better time to buy.
Frank: We’re seeing one to two bidders at auctions, whereas, last year, we were seeing four to five bidders. My savvy buyers are getting in now. They buy when the market’s down, not when it’s up, and investors retreat. They sort of follow the herd mentality, and when the market’s hot, they buy. That was up at about 50% of the market being investors at the peak a few years ago, and now, they’re down to 25%.
Frank: That’s really where the opportunities lie. You’ve got less competition from those investors at the moment.
Kevin: It’s interesting you make that point about number of bidders, because I’ve done a number of interviews recently, where we’ve looked at things like auction clearance rates, and are they a good indicator of what’s really happening with the market? I think a better indicator is, how many bidders are turning up to register at an auction, and how many of them actually bid? That tells us a lot about the sentiment of the market, doesn’t it?
Frank: Oh, it does, and there’s less buyers out there at the moment. There’s more buyers sitting on the fence, and homebuyers buy all the time, because they have to buy. They’re upsizing, they’re downsizing, so owner-occupiers are the real dominant force in the Melbourne market, for instance, and most parts of Australia at the moment. It’s really now a good time to get in there, and basically, pick up some good opportunities.
Frank: I will say, Kevin, that property’s a long-term game. It’s not a short-term one- or two-year game, so your 10-year plan starts when you buy, and if you buy now, your 10-year plan strategy comes into effect in 2028. If you hold off and procrastinate a couple of years, two, three, five years, 2023, your strategy doesn’t come out the other end, at about 2033.
Frank: So it’s really about having a 10-year plan, and sometimes, people get caught up too much with whether it’s a great time to buy at the moment, and whether you’re going to pick up bargains, when it’s really about a long-term game plan.
Kevin: Frank, can I talk to you about The Block for a moment? It occurs to me, or seems to me, that there is a huge amount of publicity around The Block. Obviously, it’s a television series, when people turn up to bid, as you’ve done in the past. There’s a huge amount of competition, anticipation, that someone’s going to have to pay a premium price. How do you keep a lid on that, the excitement of it all, and not get carried away with it?
Frank: Well, you’ve got to stick to your budgets, Kevin, that’s number one. That’s why our clients get us to bid, so they don’t get up with the emotion. We’ve now bid on 30 of the 40 Block properties over the last nine series, and we’ll be hopefully bidding in our tenth series in a row in Melbourne.
Frank: We’ve purchased eight of those properties, but we’ve walked away on another 22, so the main thing is, not to get carried away with the cameras, and the emotion, and the Block paraphernalia, and it’s to really just focus on, what is your walk away price, make sure sure we don’t go over that, and make sure that we stick to our budgets, just as you should in every auction.
Frank: You’ve got to have a walk away price, and not just keep bidding, and overpay, and then find the bank valuations coming lower, and then you find yourself in hot water.
Kevin: Frank, let me ask you a question, then, about that walk away price. Is that the only price in your mind? Or do you have one, “if I could secure it at this price, that’d be great? That’s walk away price, but I tell you what, if we’re really pushed another thousand or two, we’d go to this figure”?
Frank: Yeah, I think, often, you’ve got two prices, and it depends on your client. A lot of people will see me on the phone, getting instructions, once we’ve reached our price. Sometimes, the clients will go a few more bids, and go that extra level, but it really comes down to getting instructions from the client. Unfortunately, sometimes, on The Block, the clients say to us, “Well, bid to this level, and then, call us, and get some further instructions.”
Frank: So, sometimes, you do have that first price, and then, you might get a few extra bids there, but I make sure the clients never carried away, and spend hundreds of thousands above their original budget. Might be a couple of extra bids, Kevin, and then, you’ve got to call it a day, and say, it wasn’t meant to be, and move on, and try and find something else.
Kevin: Frank, of the eight that you have purchased, was there any money left in the tank? In other words, were you aware that maybe they would have paid a little bit extra? Or was that it?
Frank: Most of the times, we were pretty well on our last bid, so your bidding there, it’s pretty competitive, and as you see, Kevin, there’s often four, five, six bidders there, trying to buy these Block apartments. Often, you’re pushing yourself and pushing the budgets right to the limit. So, no, there isn’t a lot of spare change in it, Kevin, because we’ve set budgets that I think are realistic.
Frank: We’ve never had a problem with any of the bank valuations, and I know some of the other Block purchasers. There was one this year, where one of the purchasers in Elsternwick actually, on sold two of those properties, for whatever reason, and hopefully, it wasn’t because they couldn’t get the finance.
Frank: But that’s really important for us is, just to make sure that we’re giving our clients the right advice about what they should pay, and what they should walk away at.
Kevin: Of course, one of the criticisms from people who don’t believe in auctions say that auction doesn’t get you the highest price, it just simply gets you the highest bidder. What would you say to that?
Frank: I think auction is a very very good means of selling for the seller, because you’re generally getting that competition there. You can get a bit of emotion, and egos involved, and sometimes, that translates into some back and forth bidding, and you can get some great results, as we’ve seen in the Melbourne market, in the last six years of this boom cycle that we’ve had, and no doubt in the Sydney market.
Frank: When there is competition at auction, there is emotion. There is that sort of, fear of missing out, and people can push themselves and the properties on the market. They can push themselves 100, 200, $300,000 very quickly. I still think it is a very, very solid way of selling a property for sellers. We try and avoid buying at auction, Kevin, as buyers’ advocates on the block.
Frank: I’m called in, because most of our clients don’t want their heads on TV, so my bald head goes up on TV, instead, and they don’t want the world to know that they’re spending $2.5 to $3 million, and let everyone know everything about their personal situation. Sometimes, we’ve got celebrities, or a very well-known client, say in Melbourne, and they don’t want to be on TV, apart from Hughsy.
Frank: He, obviously, he was happy to go on last year, but most are happy to keep it pretty quiet. And so, that’s all part of it, is just making sure that if you’re a seller, I think auction has a lot of advantages. And, as buyer’s advocates over the last 18 years, we probably buy less than 10% of our properties at auction, because we always tend to think we’re going to pay more, when we’re buying under competition.
Frank: Whereas, if we’re buying private sale, off market, finding those distressed sales, and not having to compete against four other, five other people, as we do on The Block auctions, we’re hopefully going to get a better buying price for our clients.
Kevin: Wonderful talking to you, Frank. All the best, and I look forward to seeing you on the upcoming Block, the next lot of Block auctions.
Frank: Thanks, Kevin.
Kevin: Good on you, Frank. Frank Valentic there, from Advantage Property Consulting. Thanks, Frank, talk to you again soon.
Frank: Thanks, Kevin. Nice talking to you. Cheers.