Stories before this
Sweet home project 1 buying an apartment in St Kilda East
Sweet home project 2 choosing an agent to sell the St Kilda East apartment
Sweet home project3 selling an apartment
Sweet home project 4 – endless inspections
When we were looking for a house around Heathmont, we noticed that “Private Sales” were more popular than "Auctions" in this area. We thought that an "Auction" was like a competition with other buyers and a "Private Sale" was just a negotiation with the vendor, so the latter seemed more peaceful and we thought we might be able to get a good price. But after a couple of trials, we realized that Private Sales are often much trickier than Auctions and that greedy agents (just kidding...kinda) can still use their tactics to get high prices - although when we were selling our apartment, we would have loved a high price!
We came to realise that Private Sales aren't so much a negotiation with the vendor, but a competition of secret (or are they sometimes even imaginative?) competitors. One place we saw was advertised as ‘500K plus’. We knew that the vendor, as a general rule, wanted at least 10% on top of the 500K (which means 550k) so we tried to put in an offer of 560k. When we called up the agent, we didn’t have to say the price on the spot. Instead she asked us to come to the office and put in our "official" offer. Paul finished his work early and we went to the agent together on Monday evening.
The agent told us some people came in to put in offer already and she was expecting a couple more after us. She explained how it works and told us we needed to put deposit of $1000 for the offer. We didn’t bring our check, so she said we could transfer the money that night and if we weren't successful she’d refund our money.
‘So…how much?’ she got into the point. Then we told her our offer was 560k.
Suddenly she changed her attitude a little bit and said “Well if you like, I can wait until tomorrow for you to put the deposit in. You will find out the result tonight.” I could tell that our offer was not good enough for her to bother taking our deposit and refunding it.
In the end, we found out that this house sold for 620K. Since it was a private sale, we couldn’t know what all the other people’s offers were, so the second highest offer could have been 570K and this successful buyer might have paid 50k extra. We'll never know. At an auction, at least you know for sure the second highest bid.
I know at auctions, people can get carried away and pay more than what they can afford, but still there’s the possibility that you can get a good price if there’s no other strong competitors. But for private sales, there’s no second chance, so you have to guess what the other people’s offers are going to be and make up your mind. Not too low but not too high, if you really want to get that place, you have to just put in the maximum offer you can afford.
We went to a funny auction too. This 3BR house in Ringwood was advertised as “430k plus”. By that time, we knew that the theory of 10% plus wasn't really working anymore and that the price would be 15%-20% plus, which we thought meant 495k-516k. When we got there, there were literally hundreds of people. A TV crew were even there, as well as a South American music band – it was almost like a street festival. Although their third bedroom was a bit weird (it looked like they changed the dining space in the kitchen into a bed room) and there were couple of cracks on outside wall bricks, we thought that house was okay if we could get it at a good price, because it had a big backyard. But the bidding price went up quickly over our budget. When it reached 600K, we started to think it’s funny because we thought it wasn't worth anywhere near that much with all those negative parts. In the end, they sold that place at 880K!!! Oh well…we just thought it was crazy.
This was the time we started to think that we wouldn’t be able to afford 3BR house in Ringwood/Heathmont area. We saw so many houses around there and saw same agents many times. After we put in some offers for private sales, agents started to know our "real" budget and somehow we felt like they were thinking we’re losers…
Next time, I will write how we finally found "our place".