Search for an apartment in Bondi

30/04/2016

My property search diary from Location Location Location Australia Season 3 | Episode 8 – Search for an apartment in Bondi

Scary auctions.

Scott and Angela had a healthy budget of over $1M to buy a 2 bedroom apartment in Bondi Beach, where the market had been hot, hot, hot for many months. Auctions were going crazy and prices had risen sharply in the months since they first started to look.

To put it into perspective, their budget was roughly 30% higher than Sydney’s median house price, so if they moved to the ‘burbs they could have a freestanding 5 bedroom house with a pool for the same money!

You need a crystal ball when you are looking for a new home. Most people buy thinking of their current needs and even though they might look ahead they often simply don’t know what the next stage of their life has in store for them.

For instance, Scott wanted to walk to the surf, which is completely understandable. But he also was thinking about having kids at some stage after he and Andrea get married. As much as he may not want to entertain this thought, he won’t be surfing as much then. He might be better off thinking about whether they will need to buy a car when that day comes and if so, where are they going to park it.

And then there is the very real possibility that they would end up buying their lifestyle pad and finding all of a sudden that their friends start to have kids and up and leaving the suburb! 

Nevertheless it’s easy to see why their hearts were set on staying in Bondi. So if the search is going to be centered on a such a popular area, they had to come to grips with auctions. And the first thing to deal with is the agents quoted prices versus the sale price.

It was a lot harder to pin down the price of the Dover Heights property as there we no direct comparables and very few sales at all to review over the previous 6 months.  And as it so happened, the market in that price bracket suddenly surged, which resulted in enough buyers being interested to create a competitive auction and push the price way over what was quoted.

The foreign language of auction price guides.

So many buyers make assumptions about what to add on to auction price guides. I have heard such mantras: “add 10%” or “add $100K”, for instance. But the fact is that blanket rules simply don’t work. Sometimes agents get it wrong and accidentally over-quote, or their practise might be to be as realistic as possible. Under these circumstances you might just miss out on great properties because you assume everything is under quoted.

Some buyers fear auctions so much that they never look at a property unless it has an asking price. Unfortunately, though, avoiding auctions in some areas means you are limited to the dregs as all the quality property is marketed that way.

The only way to reduce your chances of either missing out or paying too much at auction is to educate yourself about the market and keep up to date with recent sale prices. Look at the recent comparable sales for any property you decide you want to buy and make your own mind up about what it is worth. And set your upper limit before you go to auction, not during the auction. Really test yourself: ask at what price would you kick yourself if another buyer got it.

We ended up going to auction for Andrea and Scott and we secured a fabulous apartment for them at a price that was a lot less than their upper limit. And I believe that their upper limit was not unreasonable. The reason for this was that in doing the due diligence and finding out about the strata we discovered that information was not as readily available as it usually is for apartments. We saw this as an opportunity because it could discourage other buyers from pursuing the property. We looked at other avenues to satisfy them that this was a well run building so that they could go to auction and bid with confidence.

What a great outcome! They secured a property that perfectly met their brief, exactly where they wanted to be, well within budget, at auction and in a competitive market. From the outside looking in you might have thought this was impossible. But by not making assumptions about auctions and by looking for an opportunity to bid or negotiate with limited competition, we were able to seal the deal!

6 tips for winning at auction:

1. Remember that auctions might be scary but there are some benefits to buyers: transparency being the biggest.
2. Don’t assume that all agents underquote by the same ratio or amount.
3. Do your own research on recent comparable sales and make your own mind up about a reasonable market price for the property.
4. Don’t make a pre auction offer simply because you fear competition. Remember that you need to make a really strong offer which needs to be well in excess of other buyer interest at the time.
5. Don’t make a pre auction offer unless you are ready to sign a contract under auction conditions.
6. Set your limit before you go to auction, not during the auction. Ask yourself at what point you would kick yourself if someone else bought it.