[batgirl1001]

We are interested in buying our first home in NZ- Auckland that is and it seems like all the properties we like or think we can afford are on auction.

We just witness our first auction today and it was a long, stressful process even for people like us who are just observers ....phew....:(

We saw many houses never reaching their reserve prices (set by the vendors) and less than 10% sold under the hammer. Many bidders walked out quite disappointed.

It seems like auctions are getting to be the only way to get a house more and more in Auckland. We definitely prefer negotiation but we've noticed a trend that house owners are going straight off to auction without being very long on the market and a few which are just newly listed- go immediately to auction.

We called a couple of agencies about houses on auctions and it seems their answers were always vague on the price set- more often they quote CVs and always never failing to mention how property prices are generally increasing and that owners are looking to get above the CVs yet still be affordable in today's market. I find that such an irony. Is it really that bad now?

So bearing this process in mind- is there any advice, incidents, pitfalls to watch out for if we intend to buy through auction? :exit

On the whole I wouldn't want to for it seems people get quite carried away in the bidding process. I saw a women who refused several times to bid $460 on a house, edged on by the auctioneer- suddenly going all the way to $480 and still lost out when the house sold $485.

[cappuccino]

The thing that put me off with house auctions is that you have to be pretty keen in advance and get all the reports completed - building/LIM etc.. cos once you win the auction the sale is unconditional and you can't back out. Can work out quite expensive doing all that preparation and then not winning the auction.

Good luck!

[sizzlingbadger]

Quite a few houses are going for auction and not selling then coming on to the market with a price or by negotiation.

If you're really keen on a property and it's going up for before auction day go to the real estate salesperson and ask that you would like to have conditions on your contract like 'subject to finance', 'subject to due diligence', you could also say that you're very keen on getting the LIM and builders report done before the auction this way they know you're a serious buyer not just a tire kicker. They have to go back to the owners and ask whether they will accept this, not many people know this as they just assume you have to be unconditional on the day but it's not true. The owners may reject it and say they want to see what happens on the day, fair enough if you can and want to bid on the day go ahead. If no one bids you can note your interest on the property and take on negotiations once the auction process has failed.

Do stick to your reserve and don't get carried away, it is a great time to buy a house in the current market as there's quite a choice but you don't want to end up regretting it as you may not get the money back on it if you needed to sell.

Also make sure you research fully, ask salespersons in the area what properties have sold and at what price, you could also ask if they have a monthly newsletter informing you of what's sold in the past month and the prices. That will give you a good indication of where they're sitting in relation to RV/CV but really take the RV with a pinch of salt, most areas are going through the RVs again now and in some places these are coming down by a fair amount !

Good luck, be brave, research and be prepared :nice1

[Super_BQ]

IMO, I find that for most home owners in NZ are not serious in selling their homes through auctions because of their unreasonably high price reserves. I've heard this countless of times that when times are tough, home owners just simply refuse to sell for a loss. Compared to other developed nations, NZ has a relatively high turn over rate in home sales - that is on average, the house changes hand every 5 - 6 years. So for those that bought a house in the past 3 - 5 years at the height of the storm where borrowing funds was easy, you'll find little luck getting bargains.

There are many aspects in home auctions that just don't rest with the bidders. The truth is with auctions, you get what we call "Fair Market Value". The problem we see in NZ is the sellers are not serious with selling because the FMV is a lot less than what they paid for - end result is most auctions 'pass' and nothing is really sold. A friend of mine back in Canada was caught under this but he was rest assured that it didn't matter how much of a loss he would have because he would ALSO be buying into his next house under the SAME MARKET CONDITIONS. The strong obsession that Kiwis have with making $ from their homes is impeding to 1st time home buyers. There's also a huge part in the real estate agent to convince the home sellers to get real with what their house is worth in today's market. Although in most cases what we find is the realtor is happy enough to charge the listing and auction fee which can vary between $3000 - $5000 regardless if the house is sold OR NOT. Call it bottom fishing.

I'll admit going to an auction is frightening for the beginner and even after attending to several auctions, you still have no idea what can happen. You really have to check out the competition by evaluating who is at the auction. This is IMO is the most difficult part and how to determine when the bidding prices become stupid. You may find new migrants having no idea what prices should be and often pay insanely.

Apart from auctions, I would be more concerned about the homes that are leaky. I've been told that it could be up to 30% of ALL NZ houses have some form of water damage or rotteness, and this figure is not targetting homes recently built (with the monolithic cladding designs) but in fact, houses pre-1990s too could also have issues with water. It's so much of a minefield that even professional people get caught up in it. I say this because recently we heard a dentist that just bought a home and discovered the house was rotting. This caused so much stress to their lives that they are considering divorce.

As far as GV (CV) go, they are meaningless. Especially since many of the GV/CV valuations were made 2 - 3 years ago where home prices were valued at their peak. Unemployment levels were at the lowest level during that time too. If houses are sold at near GV, then the house must be quite exceptional. Just remember that the higher the price, the bigger the take the realtor gets.

One important advice at the auction, if you happen to be the highest bidder, made damn sure your offer is ONLY VALID for a set time period of say 24 hours. You NEVER want to put yourself in a situation where the real estate agents could go back to another buyer and jack the price up (or have them pull many of the other stunts). You want the ball in your court by putting the pressure on to them so they can't muck around. Make them come to you!

BQ

[batgirl1001]

HI....thanks everyone for your advice and wisdom about auctions. I have to agree there seems to be a lot of pitfalls in the process of auction and often the buyer is the one who feels powerless in this process.

Finally went to Harcourts to discuss about houses and the agent showed us 7 in our price range in a suburb we liked. 4 were on auction and of all that we seen, the nicest that we liked (based on photos alone) was set to be auctioned on 10 Dec.

So we chatted on auctions and the procedures is very much like you mentioned and what we saw- getting your financials and reports all ready before the auction, organise inspection etc etc all this before an auction takes places. Seems to be a lot of things to do especially since you never know if you might not get it. All the effort put in could be a waste of time and money....:uhoh

I asked how long a house has to be on the market before they are auctioned and the agent mentioned usually 3-4 weeks. I was certainly surprised at how short it was- I have food in my fridge more than a month old.

Certainly the agent mentioned you could also approach the seller before auction date and set a conditional offer which he may reject for a go at the market.

Incidently I saw this at the auction and the conditional offer was used as the starting price of the house on auction which the auctioneer mentioned will be accepted as it was the reserve price- 2 bidders got into the process ( I assume one of them was the one with the conditional offer) and the house was finally sold for something like $930 way above the reserve offer of $800.

So insane. :wah

I have to say that I always thought lawyers were awful but it seems like agents are another kind of human altogether. And they are making it hard for new home owners to own their first home. I even suspect quite a few are encouraging owners themselves to be greedier and ask for more. Which explains why some houses we saw at auctions never got sold....their reserves must be awfully high.

And I have another issue too with leaky houses. Seen a few which looked gorgeous on the outside and you couldn't tell it was leaky but they (agents/owners) are not yet required by law to inform you. Of course I think even if they knew or suspect it, they wouldn't be telling.

I have to do my research a bit more and see if it is worth going through the process at the auction. We are meeting a bank and a mortgage broker to discuss financial options. It seems I won't be able to get through the front door of a house until I am told by a bank I am worth something to them.....;)

Thanks!

[sizzlingbadger]

With the new Real Estate act that came in this week owners have to by rights tell the salesperson if there are any known problems or defects on their property. If they don't then legal action can be taken against them, the owners when they sign the new listing form are made aware of that point and I'm sure the first case will be a huge fine for the owners :nice1

Great to see you're sorting your finance out before hand, it's amazing how many don't do this and then fail at getting finance once the offer has gone in. Still make sure you put in your conditions 'subject to finance' really just to protect you in case something comes up :)

[gonzo]

Just wondered if it was still the case that auctioneers in NZ can make up bids i.e pretend that there was a bid at that level. No doubt sizzling badger (no offence intended) can tell us as I seem to remember that she qualified as an estate agent. IMHO the whole process in NZ is about as opaque a system as can be devised by human beings. Caveat emptor is the order of the day. When you look at estate agents charges in NZ they are unreal compared to the UK, remember that on top of these charges the vendor pays the advertising costs. Estate agency in NZ = all rewards & no risk whatsoever. Just remember when you are buying that inorder to get out level the property will have needed to appreciate at least 6% its all bull market stuff. Why are houses flipped so regularly in NZ because again IMHO they are all rubbish and simply counters on a board game.

[norma]

When we were buying our home a few years ago we had a book called 'The Streetwise Homebuyer'. It's a good guide to buying in NZ. You might be able to find it in your library, if not it's available for purchase at:

http://www.wheretoliveinauckland.co.nz/StreetWise.aspx

[Fern01]

I believe auctioneers can bid, and bid once only, on behalf of the vendor. Some pull out bids from the air, or make believe the phone is ringing with another bid, its not an option I would choose. As has been said your homework must be done before the auction, then you can't be sure you will win.
We have sold a number of properties, auctions are a no no for us. Many times the vendor is looking for a quick sale, hence the property being on the market for only 2-3 weeks, ideal for the real estate agent and he/she will certainly push for an auction, often costing the vendor more than should be necessary.

[Joolzr]

It may be worth going one step further and saying 'subject to suitable finance from Branch X of Bank Y'. Or you can be forced to take a bad finance deal.

[Super_BQ]

owners have to by rights tell the salesperson if there are any known problems or defects on their property. If they don't then legal action can be taken against them, the owners when they sign the new listing form are made aware of that point and I'm sure the first case will be a huge fine for the owners

I've brought up this issue in another post in the past. The handling of leaky homes can be done in so many ways that it's really difficult for the law to blame any party. A likely scenario starts where the house is 1st built by the new homeowner. Some years later signs of water damage appear. The owner has 2 critical choices. A) File a claim against the original home builders & or through Master Builder or Certified Builder association or B) Take action in their own hands and tell no one, do ALL the repairs solo.

The problem with option 'A' is that any file against the builder and more importantly, through the local city council will for sure put a scar on the LIM report. This is why option 'B' would be the most likely case depending on how severe the damage is. When times comes around to sell the home, NO ONE KNOWS, not even a home inspector. An old house that is leaky, tell the real estate agent that it's been fully renovated.

So even if the onus is on to the seller to fully disclose, you will find that any report of water damage on the house would drastically affect the re-sale value (like the tax dept. LIM reports don't forget). I mean why would you blame the owner for putting up so much $?

I was talking to a building company yesterday and the person said that it's cheaper to build a house than to buy existing. By a margin of at least 15% though, i'm not sure if she was factoring the benefit that the house is brand new vs ones that has been fully raped.

[batgirl1001]

I am wondering what are the chances that you buy a home and found out it was leaky about 6 months later or so and still be in effect able to sue/take action against the previous owner/agent for not informing you?

It certainly would be hard to prove it, wouldn't it? After all, they would claim ignorance of the issue and assume that you the new owner did the homework. There are some cases where I've read that even a home inspection is not a guarantee against buying something leaky since such companies themselves are not liable.

It seems to me that people keep passing the buck around....that in the end the taxpayers bear the larger share of the burden. If you bought a leaky home you would want someone else to be responsible for its repairs and not just you alone since you felt misled....but in the other shoe....if you are a taxpayer....you wouldn't want your taxes to be used to repair someone's home since it is not of benefit.

So where does the council, developers and builders, previous owner, real estate agencies accept the responsibility of the share of building/selling a leaky home?