Auc­tions a tricky bid for own­er­ship

As Auck­land’s prop­erty mar­ket soars, many won­der if they will ever get on the home own­er­ship lad­der. Throw in the auc­tion process and the stakes are raised fur­ther. Ju­lian Raethel re­ports.

Central Leader - - NEWS -

When Jess Foun­tain en­tered the auc­tion room she wasn’t re­ally ex­pect­ing to walk out a first-time home­owner.

It was the 23-year-old’s first ex­pe­ri­ence as a bid­der and she thought the three­bed­room, brick-and-tile house in One­hunga would be out of her price range.

But the ham­mer fell at $590,000 on Fe­bru­ary 4 with no com­pet­ing bids and af­ter plenty of ne­go­ti­a­tion with the ven­dor, it was hers.

‘‘We were ex­pect­ing it to go for $620,000,’’ Foun­tain says.

‘‘I’m stoked about buy­ing in One­hunga, I’ve lived my whole life in Royal Oak.’’

In a red-hot mar­ket, auc­tions are an at­trac­tive op­tion for ven­dors.

Ac­cord­ing to Bar­foot & Thomp­son, the me­dian Auck­land house price in Jan­uary was $700,000.

Al­most 40 per cent of all Auck­land dwelling sales in De­cem­ber went by auc­tion, Real Es­tate In­sti­tute of New Zealand data shows.

Trans­ac­tions in Auck­land also dom­i­nated the na­tional auc­tion mar­ket in De­cem­ber, ac­count­ing for al­most 75 per cent of New Zealand’s auc­tion sales.

Foun­tain’s in­tro­duc­tion to the auc­tion process was swift and luck was on her side.

She only viewed the house three days prior and, with the help of fam­ily con­tacts in the prop­erty and build­ing in­dus­tries, was able to do her due dili­gence at no cost.

‘‘We worked out all the stuff with the lawyer and the banks in two days.

‘‘I went halves with Mum [on the 20 per cent de­posit]. I doubt there are many peo­ple my age who have money in the bank to buy a house.’’

Auc­tion night was held at the real es­tate com­pany’s of­fices and at­tracted 80 peo­ple. Foun­tain went with her fa­ther who agreed to do the bid­ding for her.

‘‘Ac­tu­ally I wasn’t that ner­vous prior, which is odd, my Dad was more ner­vous than I was.

‘‘The first sale was a onebed­room unit in Mission Bay that sold for $500,000,’’ she says. ‘‘I started think­ing: ‘What have I got my­self into?’’’

The Foun­tains’ tac­tic was to place a bid at the last minute but it soon be­came clear they were the only play­ers in the game.

Foun­tain set­tles on March 12 and will ser­vice the mort­gage by get­ting ten­ants in, while she lives with her par­ents. Buy­ing at auc­tion can be a daunt­ing process for any novice in the mar­ket.

Sat­is­fy­ing your lender’s de­mands with LIM re­ports, build­ing in­spec­tions and val­u­a­tions can be an ex­pen­sive process.

And it may be only a mat­ter of days be­fore the auc­tion rolls around.

Crock­ers Prop­erty Group sales manager Peter Holmes says this is the rea­son not many first-home buy­ers ac­tu­ally pur­chase at auc­tions.

‘‘There’s a huge amount of ex­pense prior – be­fore they know it they may spend $1000 and then may miss out,’’ he says.

‘‘It’s best to go along and see some auc­tions to see how the process works.’’

Mar­garet John­ston from Bar­foot & Thomp­son says it is tough for some.

‘‘A lady I knew went to eight auc­tions and missed out ev­ery time.

‘‘Af­ter that she started to know what to look for.’’

Keep­ing a clear head is im­por­tant, that ex­tra $5000 or $10,000 bid could leave you with some ex­plain­ing to do to your lender.

Mark Sumich from Sumich Es­tate Agents and Auc­tion­eers says it’s im­por­tant not to get too caught up in the rush.

‘‘The re­al­ity is you ei­ther have the ac­cess to the money or you haven’t.

‘‘It pays to have a few fig­ures in your mind – bid­ders ac­tu­ally do more re­search than the agents,’’ he says.

On auc­tion day it’s good to have a strat­egy in mind. Will you go in strong? Bid con­sis­tently? Or throw your hat in at the last minute?

Keep in mind that just be­cause there’s a big crowd that doesn’t nec­es­sar­ily mean there will be a lot of bid­ders.

Sumich says auc­tion day can bring out a bit of ev­ery­thing.

‘‘The man in the gum­boots is just as likely to bid as the guy in the suit.

‘‘Buy­ers are get­ting more used to the auc­tion sys­tem, we’re see­ing more emo­tional buy­ers who wait to see what hap­pens.

‘‘New Zealan­ders are per­fectly suited to the [auc­tion] style of buy­ing.

‘‘Be­ing more clever than the per­son stand­ing next to you ... the games­man­ship,’’ he says.

Don’t be afraid to take some con­trol dur­ing the process, he says.

‘‘In­ter­rup­tions are gold at an auc­tion,’’ Sumich says. ‘‘It breaks it up and makes it more hu­man.

‘‘You can say: ‘Ex­cuse me Mr Auc­tion­eer, can you just give me a mo­ment please’. It gives you some time to con­tem­plate where it’s go­ing.’’

Af­ter all, you are bid­ding on what could be the great­est in­vest­ment you’ll ever own.

Graphic: SIMON BOSCH

Tall or­der: The bar­ri­ers to home buy­ing can seem im­mense, par­tic­u­larly at an auc­tion.

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