auction Archives | Apartment Specialists

Tag: auction

Summary:

There are a few risks to be aware of, over above the normal due diligence and these factors do have an impact on you when buying at a mortgagee auction.

Getting legal advice is recommended as the bank has hold over the property, not the original owner.

However, the owner has the rights to take the chattels – be aware of this.

The damage in the apartment under a mortgagee auction is the buyer’s responsibility.

There are no vendor warranties, so where modifications have been done there is no guarantee that it has its code of compliance.

The time frames with tenants change too, as you are only able to give notice upon settlement so it can take longer to have a vacant possession.

TRANSCRIPTION:

Good day, Andrew Murray here, from the Apartment Specialists. Now, going into buying at mortgagee auction, there’s a few more risks that you need to aware of.

Now, other than your standard auction, where you’ve got to do all your due diligence up-front, you’ve got to get your building inspections. You’ve got to check the LIM report. You’ve got to make sure the property is fine, have your evaluation, have your finance sorted – all that kind of thing. Now, we all know about that.

But on top of that, with a mortgagee auction, there are a few factors which you need to be aware of before you go into buying. And before you do, go into buying at mortgagee auction, I’d highly recommend you get legal advice, so you can fully understand it.

But briefly I’ll just go through it now. What you’ve to understand that, is the bank has hold over the property, not what’s in the property. You can go and inspect the apartment or the house or whatever you’re buying, and the chattels that are in that apartment, may not be there when you settle on the apartment, because the owner has their rights to come in and go and take them. That’s your floor coverings, your dishwasher, your washing machine, your lights. Basically everything in the apartment. So, be really aware of that.

Also, another thing is, if there’s damage to an apartment. So, often what happens when you purchase an apartment, and you go under contract, often whether anybody was living in it, if there’s tenants, or if there’s anybody goes into it, and damage occurs, on settlement the vendor is liable to fix that before settlement. But under mortgagee auction, you don’t have that protection. Any damage that occurred to the apartment and between that time frame, is your responsibility.

Another one is, there are no vendor warranties. This is what it comes down to– especially in an apartment where the contract can get modified, things are changed, walls are put in. In a lot of cases in the CBD – and I come across this all the time – where apartments have modifications, and they haven’t been done legally, so there hasn’t been a code of compliance granted, or consent granted.

Under a normal mortgagee situation or a normal Seller Purchase Agreement, you have a vendor warranty that puts these into place. But in a mortgagee auction, there is no guarantee or no warranty in place, to say that anything done to the apartment or the property has its code of compliance.

Another one that a lot of people aren’t aware of is getting vacant possession. That can be very, very difficult. Because you’re not actually able to have vacant possession, until you are the legal owner.

Normally, when you purchase an apartment and you want vacant possession, the seller, if it’s a periodic tenancy, can give 42 days notice, or can start that process. When it’s a mortgagee auction, and you buy at a mortgagee auction, you can’t actually go through that eviction process until you are the legal owner. That means all the time frames change. If it’s a periodic tenancy, it goes to 90 days. There’s all these other factors involved. You can talk to your lawyer about  it under the Tenancies Act. But what I’m sort of highlighting here is, a mortgagee auction isn’t just your normal auction.

There are a few differences that you need to be aware of, and when you are purchasing, you are at risk. Before going to bid at mortgagee auction, what I highly recommend is, you go and seek legal advice. Just to get an idea of what could happen. I hope that helps and otherwise, all good.

Thank you. Cheers, Bye.

myth 9 auckland apartment auctions

Apartment Specialists Podcast No: 26

Summary:

I go in-depth about auction in this particular podcast so you will know what to expect when you’re dealing with an agent. This is another myth that you know about.

TRANSCRIPTION:

Andrew Murray, Apartment Specialists. This is quite a big one. When auctioning your property, only you and the agent have an idea what your reserve is. Now, that is a myth and it shouldn’t be a myth.

Now, I’ll explain to you – I’ve been in two major offices in the open CBD Market for starting my own company. Basically, both did their auctions in the same way. So, what would happen was, you’d have a meeting – you’d have your sales meeting – and those who were auctioning the properties would introduce their property. They’ll ask everybody not what it’s worth, but what would the reserve need to be to guarantee it to sell. And then, the agents would set out the price. Say, that’s worth 200. Say, to guarantee it to sell, it would need to be 180,000. And if it was a 500,000 property, to guarantee it to sell, it needs to be $440,000. Then it would be the agent’s objective to go and try to get that reserve.

The next week in another sales meeting, the agent will report back – different sales meetings or in different agencies at different trends are the ones that I saw – some would go, “What’s reserved?” or “It’s A plus-plus”, which means it’s better than you want it. Or, A-plus means it’s on the money or A, it’s pretty close. B-plus, it’s a little bit far away and B, yes there’s a bit of distance there. Other ones would be going like, “Yes, that’s exactly where you wanted it guys. Go get your buyers” and it’s going to the auction.

Now, it didn’t really sit right with me but that’s sort of how it’s done in the Auckland apartment market when it comes to auction. And what would happen was a whole mentality: that by telling an owner that everybody knows your reserve and knows it’s a low reserve, that’s going to bring in more buyers – it’s going to bring in more competition. Now I disagree with that because it’s bringing in buyers that want a bargain. They’re bringing in buyers who don’t want to pay retail. And so, that’s not the kind of competition you want. Yes, there is an argument that it does make the base of the auction and it can help in that way. But what it does is – it means that your apartment could sell for less than you really want to or what it should be selling for.

So, how to stop this or make sure this doesn’t occur is, why even get the reserves prior to the auction? Why not keep it in your head and you and your partners head? And if the auction gets to the price you wanted to, well then let it sell. If it doesn’t then go from there. Because if you think – put your mind in a bidder or in a buyers mind – you’re bidding for an Auckland apartment – and they already got in mind what they want to pay. If it is a good auction and the other buyer is also emotional – you got two emotional buyers and they’re pushing the prices up. You will at least know that it’s met the reserve. If anything is going to make the buyer say, “Oh, that must be market value”  or “That must be what owner wants. I don’t want to go too much higher.” So how is actually giving the reserve to the buyers an advantage to the vendor? I don’t see the logic – maybe there’s a side that sees it, but if they do please write in a comment or tell me.

That’s a myth. So, when you’re auctioning your property, if you do choose to auction it as a property that is suitable, i.e. not an investor apartment where emotions involved, don’t disclose it. You don’t have to; keep it in in your head. Then, you can make the best decision for you.

I hope that’s helpful. Next month – I’m sorry next week – I’m going to talk about an interesting question. One that you probably wouldn’t expect from me. What’s my opinion on private sales? If you don’t want to use a real estate agent – because a lot of people have had bad experiences with them- how do you sell it privately? And I’ll just do a quick podcast on that.

Cheers. Bye!
best selling methods auckland apartment sales

Apartment Specialists Podcast No: 10

Summary:

In this podcast, I’ll be talking about the best selling methods and common schemes of real estate agents, especially when auctioning your apartment and how they get more when they do.

TRANSCRIPTION:

Andrew Murray, Apartment Specialist, methods of sales.

Did you know real estate agents get paid more to auction your apartment than they do to list it with a price? Now, what I mean by that is, when the agent gets paid the commission, the listing agent will get a higher percentage of that commission if they auction the property. And the person who found the buyer will get a smaller amount of commission. And that has all kinds of implications. That often means that, if someone’s got a really good buyer that’s not on their listings, they would rather push their buyer towards a listing that’s listed with a price, because they get paid more money. It also means that – in a lot of occasions – well, if you ask yourself if you’re going to get paid 70% just to sell a property and not find a buyer, are you going to do as much work to find that buyer? Well, you can make that conclusion yourself. So, it’s quite interesting.

Now, about the other point… Okay, if you ask me right now. How I’d sell my house in Auckland, I’d say I’d auction it. So, what am I saying here? I’m not saying auction is not a very good way of selling. I’m saying that it has its time and its place. If you ask me how I would have sold my house three years ago – no way by auction. Because we weren’t in a burning market. We weren’t in a time where – basically there was more demand than supply. Now, I have apartments and my parents have apartments. If you ask me how I would have sold my apartment three years ago, I would definitely list it with a price. If you ask me what I advice I give my parents – list it with a price. If you ask me right now in a burning market how would I sell my apartment, I’d list it with a price.

Now, what’s the difference between an apartment and a house? There is a huge difference. And that’s the reason why statistically, when you look at all that, how the highest prices are achieved – and most buildings I know are through listing with a price. It’s because of due diligence. It’s because people are scared of buying apartments. They need to do their due diligence.

When you come into an auction, you’re making an unconditional offer. And a lot of people they want to have conditions. Before they purchase, they want to have a building inspection. They want to be able to go through the minutes with a fine tooth comb. They want to be able to get an evaluation and a conditional price. There’s a lot more conditions, people are a lot more scared when they’re purchasing apartments. Going to an auction, doesn’t suit them. Also, values.

Also, if you’re looking at apartments now, we’ve got so many of them. If you look in a suburb, there’s probably maybe 20 at the moment – 20 listings in a suburb, maybe 30, maybe 40. Well, in an open CBD, there’s about 700. And if you look at say 3 bedroom, there’s probably about 300. So there’s so much choice. You look at the traders, how do they sell their apartments? Now, these are people who buy apartments either directly from the owners or off real estate agents and then – they buy them undervalue and then sell them at the maximum price. And that’s their job. That’s their business. Do they auction their apartments? Nine times out of ten they do not. I see a lot in the housing market, but not in the apartment market. So, ask yourself, that’s their business to get the highest price “Why aren’t they auctioning their properties when selling their apartments?” Let’s look on Trade Me. Look at Icon City. That’s the biggest trading in Auckland apartments or apartments in New Zealand. And they’re not auctioning, they’re listing their price. So, that should give you a good idea.

If your agent does tell you that the best way to sell your property is by auction. Ask to see the values or the highest sales achieved in your building and find out what methods of sale were used to achieve those sales. And you can get that information from the REINZ. So even a real estate agent can get that information. So it is available and that will help you choose what method of sale is best for you. And if they are pushing auction and it’s not the best method so sale – you’ve got to ask where their motivation is. Is it for them? Or is it for you? So I hope this helped. I think it will have given you a very good insight – especially into the apartment market which is very different.

And next week I will be talking about knowing your building. How important it is that you choose an agent that knows your building and the questions to ask and to find out if they do.

Cool. So, if you haven’t downloaded it already, as I mention on each podcast. I had a lot of great feedback. This is just one of ten points on mistakes owners make that I see them making which costs them thousands of dollars in selling their apartments. Download it from www.apartmentspecialists.co.nz

Cool, cheers.