The Elephant in the Room Property Podcast | Australian real estate
The Elephant In The Room Property Podcast with Veronica Morgan & Chris Bates

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Episode 7 | Are pre-auction offers really in a buyer's best interests? | Mary Anne Cronin, Phillips Pantzer Donnelly

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The inside scoop on why more properties sell before auction in a slowing market

Mary Anne Cronin, sales agent at PPDRE in Sydney’s Eastern Beaches, talks about buyer behaviour in her patch as well as sharing insights into the whole pre-auction offer process. We cover a lot of ground in this interview, including:

  • The things property buyers do that surprise her

  • The precise point in a marketing campaign where buyers lose interest

  • How she works both buyers and vendors in a slowing market

  • The importance of transparency in negotiations

  • How educated buyers can put themselves at a disadvantage

  • What and how downsizers are buying in her area

  • Meaningful questions buyers should be asking real estate agents

  • The decisions buyers need to make when trying to upgrade into a house

And we get the answer to that multi-million dollar question: why are prices so high in Sydney’s Eastern Suburbs?

Links:

Phillips Pantzer Donnelly
http://www.ppdre.com.au/

Maryanne’s Bondi Snapshot
https://www.youtube.com/channel/UCB_adtLTgw-bCo3O0Eb-sMw

Veronica’s videos
When is the best time to buy property in Sydney?
Do houses increase in value more than apartments?

EPISODE TRANSCRIPT: 

Please note that this has been transcribed by half-human-half-robot, so brace yourself for typos and the odd bit of weirdness…

This episode was recorded on 17th April 2018

Veronica: You're listening to the elephant in the room property podcast where the big things that never get talked about, actually, get talked about. I'm Veronica Morgan, real estate agent, buyer's agent, and co-host of Foxtel’s, Location Location Location Australia. 

Chris: And I'm Chris Bates, financial planner, mortgage broker and wealth coach.

Veronica: And together we’re going to uncover who’s really making the decisions when you buy a property.

Chris: In a moment Veronica will introduce our guest, and I can tell you that you’ll want to listen to find out what she has to say about how to nail a pre-auction offer. 

Mary Anne: The biggest visitation is in the first seven days, but the highest engagement is in that first ten days and that’s when the buyers are kind of, they’ve seen the property, they come back for the second time they fall in love with it, they’re actually hot to trot.

It sounds a bit weird but if you give them sometimes a bit longer, they come back three and four and five times, and that’s when they start seeing things wrong with the property and they go “ooh actually” or something else comes on the market so, you tend, you can lose buyers.

Chris: Then stick around for this week's elephant rider boot camp and we have a cracking Dumbo of the week coming up.

Chris: Before we get started, everything we talk about on this podcast is general in nature and should never be considered to be personal financial advice. If you are looking to get advice, please seek the help of a licensed Financial Advisor or Buyer's Agent. They will tailor and document their advice to your personal circumstances. Now, let's get cracking.

Veronica: This week we’re picking the brains of Mary Anne Cronin, director and sales agent at Phillips Pantzer Donnelley based in Sydney’s eastern suburbs. Mary Anna has been a specialist in the Bondi and Bronte area since she started in real estate over fifteen years ago now.

She maintains strong ties with the community and is very active across a wide range of local committees, as well as being president of the Bondi Chamber of Commerce and ambassador now here we go how do I say this? 

Mary Anne: Wairoa

Veronica (cont): Wairoa special school, what is that?

Mary Anne: So the Wairoa School is, it’s a wonderful school, I’ve been involved for close to fifteen, sixteen years, ah it’s a special needs school, um it’s one of the main ones in the eastern suburbs.

They’ve got about sixty five kids at the moment ranging from sort of year one all the way to year twelve um. It’s beautiful and yeah I got involved at a fundraising stage, and have been quite active for a while and so they’ve made me their ambassador which I’m very proud to be.

Chris: Oh that’s nice

Veronica: Prior to real estate Mary Anne worked as an investment banker in London, a background that enables her to provide clients with valuable insight into the financial aspects of property transactions and investment.

So you’ve got more than one string to your bow.

Veronica (cont): Welcome Mary Anne

Mary Anne: Thank you so much for having me Veronica, it’s a pleasure to be here.

Chris: You’ve worked in the eastern beaches and eastern suburbs for so many years. Is there anything that buyer’s do that still surprise you?

Mary Anne: Oh yes heavens above yes. And it’s even the experienced buyer’s I mean we recently dealt with a couple who would be in their eighties, and they’ve obviously bought and sold before, and we in throughout the negotiation process my my colleague Lauren actually said to me she said “they just don’t know how to buy property”.

They were making firm offers but not following through and then at the last minute completely withdrawing interest. So they were just not engaging on a realistic level. It was just like “wow do you not get the whole process?” It was quite interesting that somebody, who’d obviously been through it a number of times, had really no concept of what they were meant to be doing.

Veronica: That is quite fascinating somebody that somebody can get to their eighties and I’m assuming they’ve bought and sold a number of properties in their decades of living, or decades of adulthood (laughs) and they still don’t quite know what to do.

Mary Anne: I think part of it was they probably their last transaction might have been a number of years ago,

Chris: mm-hmm

Mary A (cont): And they probably hadn’t got involved in that negotiation prior to auction, which does actually baffle a few people I must admit.

In the eastern suburbs and across Sydney it’s all about auction, auction, auctions. We talk a lot about how to bid at auction, what strategies, what tactics to use, but what actually does anyone really talk about buying before auction and what’s involved with that process.

Veronica: Yeah it’s a really good question, we’d love to hear more about that.

Chris: I mean, were they waiving cooling off rights when they bought, you know, twenty years ago, I mean?

Mary Anne: Probably not.

Chris (cont): Yeah and I mean, I guess, what percentage of offers now a days have to wave their cooling off rights?

Mary Anne: Well in the eastern suburbs a hundred percent of it is unconditional. So if you're looking to negotiate before auction you have to be prepared to put your pen on the dotted line and put your cash hard down.

Chris: You’re talking there about how all offers now, hundred percent of them, are going with a 66W, I mean what what is the right way, or what is a good way for buyers to approach a pre-auction offer?

Mary Anne: Well I guess there’s a number of ways it depends on the competition.

So I mean look if there’s a number of interested parties the offers aren’t gonna go backwards and forwards until you get to that final, last man standing and that’s when a 66W goes on a contract.

We’re very transparent in our negotiations. All offers must be writing so we take offers which are still conditional via email, so everything, there’s an email trail which can be presented to the vendors, and until you get to that very last man standing, who’s the one, everybody else says “right I’m out” then that is when the 66W, um name on a contract and ten percent deposit cheque comes into the office and exchanges. 

Veronica: Sorry just for the listeners, the 66W is the certificate that the solicitor or your conveyancer will sign, that means that you can waive the cooling off period. 

Because if you are going to be buying an auction a property that is meant to be going to auction you’re actually going to be buying that prior to auction, you need to be able to, the vendor is not going to take, you know, midway through an auction campaign, they’re not gonna basically take the property off the market and give it to you with a five day cooling off period.

You have to buy under auction conditions so it’s the way that they replicate the auction conditions, is by getting the solicitor or the conveyancer to give you that certificate, um which does mean you have to get your contract checked by a solicitor beforehand. 

Mary Anne: mmm. Definitely

Chris: Is there any ways that buyers can present that offer in a better way that, as a real estate agent you know these guys are more serious and you’re more enticed to actually take that offer then just an email offer which can be pretty easily made.

Mary Anne: Oh look I mean somebody can put an offer on a contract and bring it into our office and present that with a 66W. Having said that, if there are other interested parties our duty is to the vendor.

Chris: mm-hmm

Mary A (cont): Ultimately our duty, we’re being paid by the vendor, so our job is to get the highest price possible. If there’s another ten thousand dollars out there that’s above that offer that’s on a contract it’s our duty to go and get it.

Chris: mm-hmm

Mary A (cont): So before we accept or take that firm offer to the vendor, which is on a contract, we still have a duty of care to go all the other parties and say “this is what we’ve got on a contract, if you are interested you also need to put that offer on a contract or come you know come in, email whatever it is but you need to increase that offer”.

Veronica: There’s so much underlying this pre-auction offer thing right.

So there’s market conditions, you know for starters, there’s there’s, ah whether it’s highly competitive or not, 

Mary Anne: Yep transparency

Veronica (cont): Whether the buyer is initiating this offer process or whether the actual agent is initiating this offer process, but every agent has a different process that they go through with buyers in order to get there.

Now I know I’ve actually bought my, personally I bought from you.

Mary Anne: Yes you did.

Veronica (cont): Yes a few years ago yes yes.

Mary Anne: I still remember. 

Veronica (cont): Prior to auction. And so you know I went through that process with you.

But can you explain because this is only one way of doing it and there is no rule, no laws around, how this is conducted so, do want to explain how you guys go about it and some of the alternatives that that you’ve come across with other buyer, ah sorry other agents.

Mary Anne: Yep, and and we we get this the time actually because um this year so far to date we’ve sold one hundred and fifty eight properties as of today, and of those only ten were at auction. So the majority of our properties are sold prior or post auction. 

Veronica: Now I’m going to kick in and ask a question on this one.

So a hundred and fifty eight properties sold to date, we’re currently recording in April, are all of those, were all of those put on as an auction campaign? And so most of them have been sold prior to auction? Is that what you’re saying?

Mary Anne: Pretty much all of those would have been put on an auction campaign, there was a couple that might have been off market or on the back of another auction, but pretty much all of those were ah auction campaigns.

Veronica: And how many, I don’t know if you know this off the top of your head, but how many would were those offers initiated by the agent?

So you identifying that you’ve really only got one strong buyer on it and you wanna get in, before it gets to auction versus a buyer initiating that?

Mary Anne: Oh most of the time it’s the buyer! 

So we work very closely I mean I think that’s the most important thing and that’s one of the reasons why Phillips Pantzer Donnelley probably, have a good reputation in transparency and they’re buyer work. We don’t just stand at the door take names it’s really important especially in the changing market, that you interact and engage with your buyers on an almost daily, weekly basis throughout the campaign.

So, the buyers don’t just get one phone call “oh what did you think of the property? Thanks bye.”

It’ll be “what else are you comparing it to, what else are you looking at, are you interested, do you want to come back and have another look, how can we help you, here’s the strata report”, let’s engage, let’s engage, let’s get you across the line because we know, we can see what other properties they’ve looked at, we’ve got the history because they’ve been and looked at probably twenty or thirty other properties with us, so we can help them attain their dream.

Chris: Do you find that’s a problem that some buyers are making that, they’re not showing enough interest in the property and, all of a sudden it’s sold and then you’ve spoken to them and you’ve gone well, you know, you actually thought it was going to go to auction but then like you say, ninety percent of your properties have sold prior to auction so...

Mary Anne: We do make it very clear to all the buyers especially if they come in through opens. Look we do have an auction date, having said that we make it very clear at open for inspections and in our call backs, if the vendor has told us their keen to sales before auction, we’ll make it very clear from day one.

Very often the vendors say no offers in the first week, they do want to get some level of feedback before considering those offers prior to auction.

Chris: mm-hmm

Mary A (cont): But certainly we make it quite clear, and before any final exchange of contracts happens all interested parties, emails, enquiries, etcetera get phone calls and emails from us to disclose that.

Chris: And when does it actually get determined within the business or with, that we’re actually going to sell now? We’ve had an offer that, you know the vendors keen to take and when you’ve got that offer, let’s say it’s one point two.

Mary Anne: mmm

Chris (cont): What do you do as an agent at that point? Do you then email around and say till five o’clock you’ve got to make an offer? I mean what’s your process there?

Mary Anne: So it sometimes comes down to the vendor and to the timetable of the other buyers, so we have to be mindful of all of that. We might have a buyer who say “look my finances are going to be tomorrow, can you give me twenty four hours?” Yes so we have to kind of respect that.

Chris: mm-hmm

Mary A (cont): We talk to the vendor and say look, ultimately it’s the vendor’s decision about when they want to close the deal. 

So the vendor might turn round and say I actually want this shut down today, I don’t care about Mr Joe Blow tomorrow, I want the bird in the hand I’ve got today and we have to respect that, and act under his or her, instructions. 

But we all we can do is give them the best advice and if we sincerely think this buyer is for real, they’ve got all their finance in place, we generally try and check that, we’ve got a great financial partner in Shore Financial and they’ll obviously help out as much as they can to make sure our buyers are ready to go, is to get them all in place and and yeah get the best price for the buyer.

Veronica: So this is sort of interesting, I wonder so we’re talking at the beginning of two thousand eighteen now where the market’s slowed down, there’s you know, we all talk about clearance rates and they’re in the sixties at the moment, a year ago the in the clearance rates were in the eighth percentile.

Were you having the same conversations in the early days of the campaign at that time or has that changed at all?

Mary Anne: Look back then of course we had a lot of people who’d missed out on a property with us only a couple of weeks ago and they were keen to secure something,

Veronica: mmm

Mary A (cont): Ahead of auction. So we had almost a reverse but still yet really wanting to lock that down. 

I think in some ways buyers, auction scares them a little bit because it’s that uncertainty of competing with other people whereas actually having a secure knowledge of securing a property beforehand, and having a price makes them feel more comfortable.

So last year we still had that process because we had quite you know healthy competition on properties, so you had buyers you know sometimes in the first or second day, putting offers forward that was too early for the vendors so that’s when it’s like well no stop stop, give us at least a week before we can actually put something forward.

So there it it’s happened in both ways but just for different reasons I think now.

Chris: And if the number one aim is to get, you know, the vendor I guess the best outcome,

Mary Anne: mmm

Chris (cont): Do you as a business think that getting a bit of competition prior to an auction, gives the vendor the best opportunity to get, I guess, buyers are behaving, maybe not like they would at auction and you’re getting probably potentially higher prices and fear of missing out with a lot of buyers? 

Mary Anne: Definitely and and if you look at the stats and it’s you know we’re very much looking at our stats as when, when we get the most visitation on a property when we get the most inquiry, and it’s very easy to look at the Domain or Real Estate graphs.

Chris: Yep

Mary A (cont): The biggest visitation is in the first seven days, but the highest engagement is in that first ten days and that’s when the buyers are kind of, they’ve seen the property, they come back for the second time they fall in love with it, they’re actually hot to trot.

It sounds a bit weird but if you give them sometimes a bit longer,

Chris: Yep

Mary A (cont): They come back three and four and five times, and that’s when they start seeing things wrong with the property and they go.

Veronica: mmm

Mary A (cont): Ooh actually or something else comes on the market so, you tend you can lose buyers, whereas finding them when they’re really keen and gung-ho in that first little while, can actually produce better results for the vendor.

Chris: I guess when anyone anyone sees a you know, you know PPD property on there they know that your process is that it’s probably gonna sell, prior to auction so.

You know do you find that your buyers are more are used to your process and they’re like well, I missed out on the last one that sold before auction so next time you list a property that they want as well, they’re more enticed to make an offer early?

Mary Anne: I think also our buyers are used to communicating with us a lot so there we have a strong line of communication with our buyers and so they feel comfortable with that process because they’ve been through it before, and look some of them are like “damn you again, I wish I didn’t have to buy from you” because they know they’re gonna be forced to pay a really strong price.

There’s some agents out there that are very happy just to, stand at the front door, wait ‘til the auction comes and hope that people turn up at auction and probably not call the buyers, you know more than once during the campaign, and and you know that shows in in how their results often are.

Chris: mm-hmm

Veronica: laughs

Veronica: But you’re talking really about working it.

Mary Anne: Yeah

Veronica (cont): ye yep (laughs)

Mary Anne: That’s working the buyers and the vendors, it’s you know communicating I mean we we have a call tally in our office, and um we actually compete to see who can make the most calls, because a) you do want to engage.

And you can see because we all make notes when we actually engage um with people in the database, how many times you call them, how many times you call your vendor, when you have vendor meetings ‘cause it’s really important to have those face to face meetings, you you can’t just sit.

I mean we get paid a lot of money to sell property so we should be working hard to make sure we get the best outcome,

Chris: mm-hmm

Mary A (cont): All round, for the buyers and for the sellers.

Chris: And what do you think some of the mistakes buyers are making? You know we’ve been in a very hot market now for five, six years, um you know I guess there are people who have missed out.

Mary Anne: mmm

Chris (cont): You know if there’s six people wanting to buy the one property, you know that’s five people who missed out so that’s five people who are still looking.

You know do you find that you know people who have been struggling with things like overconfidence or, you know they’re making offers that potentially are too high or? 

Mary Anne: Yeah I think there’s a number, there’s it’s probably a few different little things that buyers, I mean a) I think it’s trust in the agents and I I get that because there are some agents who don’t um induce trust in buyers out there.

I think if they if you can build a good relationship with a buyer you can help them, get to where they want to be because they feel that they actually, you know truly trust what you’re saying, you’ve your being transparent, there’s an email trail.

This is what we do you talk to them all the way through the campaign, you your honest and transparent about what the other competition’s doing, other properties that are on the market, and your honest and transparent with you know building reports or strata reports to say here, the information’s here this is what’s wrong with the property, this is what’s right with the property, not trying to sugar coat it all and just being straight forward.

And I think a lot of buyers don’t believe enough of what the agent... We try and provide as much information as possible, but sometimes that level of I’m not quite sure I believe you.

Veronica: I guess because there is quite a variety of different types of agents out there and therefore if a buyers been burnt for instance they’re going to tar everyone with the same brush, and it often takes them a long time and a lot of loses before they’ve actually worked out that, “oh actually not all agents are the same.”

It’s funny I’ve had some buyers say to me that, “oh you know an agent” and they might pick a particular agent maybe it’s you for arguments sake, and it might be “oh well Mary Anne’s called me a lot of times so I know she’s got no interest”, and I always have a bit of a chuckle about that, because I know that there are some very very professional agents out there that will as you describe, have regular communication with their buyers because that’s them doing their job.

And if that same buyer has been dealing with an agent, like when I spoke to you yesterday you said, so yesterday was a Monday, and I asked him how his campaign was going with this particular property and he said hadn’t spoken to any of his contract holders since last Wednesday. and I’m like you know there there’s not that many buyers floating ar...

Mary Anne: You need to speak to all of them

Veronica (cont): Yeah, they don’t sell themselves at the moment, I mean I was a bit surprised about that and thought bingo you know if we’re going to go for that (laughs) there’s a good opportunity.

But you know if if a buyers comparing say the way you communicate with them versus and agents like him that’s not calling, sometimes they might misinterpret that, do you pick up on that do you how do you handle that?

Mary Anne: I guess because we’re building relationships, I mean yes you’re right there are some people who don’t trust and I think that’s when you have to work a little bit harder with that particular buyer, or in some cases you go you know what you’re obviously very set in your ways so wishing you all the best, I’m gonna keep giving you the information but if you’re not gonna believe what I’m saying there’s not much I can do. 

But our job is just to keep doing our job and to keep doing it properly, that’s all we can do.

Veronica: Do you find that sometimes buyers will just shoot themselves in the foot?

Mary Anne: Yes they can get a little bit too clever, I’m not gonna give you an offer because I don’t believe you and it’s like well we are about to sell this property, and and I’m trying to give you every opportunity because there is a contract in our office and the vendor has said they want to exchange, and they’ll shoot themselves in the foot because it’s a property they really wanted.

Chris: mmm

Veronica: mmm

Mary A (cont): And they just go, you know what I don’t wanna play this game and it’s like, it’s it’s...

Chris: Part of the process, you’ve got to yeah

Mary A (cont): Part of the process, if you wanna buy a property put your hand up, put your hand in your pocket and pay the best price you wanna pay.

If you don’t wanna pay anymore that’s a different thing but if you so sorta go, you know what I don’t wanna partake in this process, well if you went to auction you’d be putting your hand up the same way,

Chris: mm

Mary A (cont): So it’s actually just replicating the auction process but it’s over phone or email or contract.

Veronica: Which is worse really

Mary Anne: Yep, well it’s in in some ways its 

Veronica: (laughs) for a buyer

Mary A (cont): Yeah yeah, but in some ways it’s actually there is a bit more transparency but then you’re not looking the buyers the other buyers in the eye.

Veronica: I think a lot of people underestimate the benefit of an auction under those circumstances.

As a buyer when you are at the end of your telephone you are relying on what the agent is telling you, and if you don’t believe that agent or, you know, worried about or whatever that just adds to the anxiety so it can actually... You know quite often buyers trigger this whole process and then, then they realise oh shit! You know what have I got myself in for?

Chris: Working in the eastern suburbs of Sydney you know probably one of the premier property markets in the world if if anywhere else.

I mean I’d love to hear what what with with buyers and with sellers, you know how do you think that the things are different in the eastern suburbs to, I guess other parts of Sydney? In terms of the type of buyers you’re working with and the investors and foreign investors.

Mary Anne: Oh look they’re definitely more educated. They’ve got information at their fingertips nearly everyone knows what RP data is they’ve got information APM they and go and look up when the property was last sold.

I mean I had a lady yesterday who actually said to me she was buying on behalf of her daughter she lives up on a farm, um Cessnock or something and she said why has this property sold so many times? So she’d gone onto RPdata, she’d actually seen that it had sold a number of times over the last twelve years and she was questioning that process and it’s like well, my vendors had it for five years and and you know she’s been very happy there...

But it was really interesting ‘cause she had all the information at her fingertips and I think that’s one thing that these buyers in the eastern suburbs have, very well education, there’s a lot of information out there, and these buyers know how to take advantage and and arm themselves with that information.

Veronica: And that is a very good question from a buyer you know to say why has a property sold so many times if it has transacted a lot because, the reality is that, you know what the average in sort of the inner city areas is sort of every seven years that a property might transact but.

Mary Anne: It’s about four or five years now

Veronica (cont): Yeah I’m mean

Mary Anne: It’s a bit less

Veronica (cont): And look sometimes properties do transact a lot because they are crap properties, let’s face it and sometimes they just transact because of the type of property that they are, they’re a small unit for instance and they’re at entry level.

From you your perspective though, all those buyers that have got access to that information how often do they know how to interpret it though?

Mary Anne: Some people over interpret it.

Chris: Yep

Mary A (cont): And probably read too much into it, like that lady yesterday. There was no reason for that property selling it was just circumstance it happened.

Chris:  Just natural yeah

Mary A (cont): So some people over read the information.

Generally though, I think what we try and do is actually put more relevant information out at opens and send when we send our email responses and when we talk to buyers, is to give them the relevant information, as opposed to them, going and sort of looking up um possibly some irrelevant information that might give them.

Veronica: (laughs) So you’re curating it (laughs)

Mary A (cont): Well yeah just to you know help them make the right decisions 

Veronica: So when you say relevant what, what information do you think is relevant to a buyer?

Mary Anne: I think relevant information to a buyer is, what’s happening in the building? So having an up to date strata report and having that available at a reasonable price for the buyers to download.

Chris: And if there’s negative things in that strata report?

Mary Anne: Make it clear.

Chris: You make it clear?

Mary Anne: Very clear.

Chris: mm-hmm

Mary A (cont): So if there’s some special levies happening on the building, there was one we sold in Victoria Road an apartment and they were gonna get the whole roof redone,

Chris: mm-hmm

Mary A (cont): And that was going to be a cost of about ten thousand dollars per unit.

Chris: mm-hmm

Mary A (cont): You’re gonna be up for this cost bear in mind, the owners paying some of it they’ve already had some of the special levies, but the balance is going to be yours and it’s very af it’s very, obvious in the strata report.

Chris: mm-hmm

Mary A (cont): So actually make that clear to the buyers before the download the strata report. 

Chris: I had a client recently just a couple of weeks ago actually, was ah almost ready to put the unconditional offer,

Mary Anne: mm

Chris (cont): With the 66W and hadn’t done the strata report check,

Mary Anne: (gasp)

Chris (cont): And there was seventy thousand dollars of repairs in the next two years, they didn’t have the seventy thousand dollars.

Mary Anne: mm

Chris (cont): You know and it’s such a simple check to do, just too actually read and really digest it but, you know sometimes you just think well other people are making offers and you just go with the herd don’t you?

Veronica: Well that’s it they just a lot of times and how often do you find this? That, buyers assume that other people have done their due diligence and they’re just sort of riding that wave (laughs) and I think that’s a hell of a lot of hope on a transaction of multi-million dollars in many cases.

Mary Anne: Oh definitely and my own brother actually bought at auction without doing a building report, without actually having the contract looked at.

Veronica: (scoffs) Your own brother!

Mary Anne: Tells you something

All: laughing

Chris: I guess one of the hardest things for agents is you’ve gotta be on both sides so, one you’ve gotta find listings so people who want to sell and then, who have gotta sell perfectly great property you know I guess in the eastern suburbs, you know there’s probably reasons why they want to hold on to that property for as long as they can, keep status quo.

But the you’ve also you know but finding the buyers for that property is not a hard thing, so how do you actually motivate, people to sell?

Mary Anne: So we we ride a very fine line I call it the tightrope, um because of course the vendors often don’t tell you their full situation often, you know they may be hiding what their real true reasons for the sale

I had a place recently and I’d been dealing with this family I actually helped them buy the house, about ten years ago, and it wasn’t till we got to the pointy end of the negotiation that I found out they were going through a divorce,

Veronica: mmm

Mary A (cont): Which was very very sad but you know I didn’t realise that was the reason for the sale. 

So, you know you’re balancing that, vendors and their background for why they’re selling, with the buyers and them telling us what they really really want or how much they’re really really prepared to pay or, what their finances really are.

So, it’s trying to manage that line between the two, and what’s the vendors real figure you know we know what the wish figure is because that’s what we talked about when we first spoke to them but, when it comes down to it, especially in a changing market is, what does it take to get this sales across the line from both sides.

Chris: And did you find that, did that property sell on the market? Or did you know, because a lot of buyers are not even aware that prop a lot of properties go off market, that they never even go on Realestate.com.au or Domain, they don’t even know that they you know that even happens and, a lot of agents you know, did that go on the market and actually sell properly or did it?

Mary Anne: Yeah

Chris (cont): Yeah ok. Are you selling many properties at all off market or?

Mary Anne: Um we probably have had I’d say there might be twenty, fifteen to twenty percent possibly oh,

Chris: Okay

Mary A (cont): maybe a little bit less,

Chris: Okay

Mary A (cont): What we’ve done this year, um but yeah and sometimes.

Chris: And still a sizeable chunk right?

Mary A (cont): It’s still a really good chunk. I mean some of them happens on the back of a sale like we had one is Salisbury Street Watsons Bay, and we broke the record for a two bedroom unit in Watsons Bay, you know, two point one million, and the one below went on the market and we sold it we had a number of the under bidders who wanted to buy it so that sold with no official, you know we had showings but

Chris: mm-hmm

Mary A (cont): Didn’t officially we had a couple of photos and went to our database.

Veronica: And what’s you know we get asked about off market a lot,

Mary Anne: mmm

Veronica (cont): And you know I’ve got various opinions on on off markets but, what would you say is the main motivator of somebody to list off market as opposed to go through a campaign?

Mary Anne: They don’t want the neighbours knowing, they want to do it quietly... Unfortunately what what a lot of people don’t realise is yeah we can we can do off market sales, we can get you a price but will it be the best price? 

And this is, as you say, a multi-million dollar asset, if you’re talking about something that’s worth two million dollars, and you can sell it for two million dollars but you know if you go to auction or you go through a marketing campaign, and you might sell before auction and you’re gonna get two point two, now two hundred thousand dollars is a lot of money,

Veronica: Yep

Mary A (cont): A hundred thousand dollars is a lot of money, let’s face it ten thousand dollars is a lot of money.

Veronica: Yep

Mary A (cont): So you’ve gotta really sort of weigh up I think the pros and cons, do you want to go off market and get an average price? And, you know, you might strike it lucky and get somebody who’s just missed out but, you’re certainly not gonna get that level of competition, um that market the whole marketing campaign can do.

Veronica: Do you sell every off market opportunity you have?

Mary Anne: No

Veronica (cont): Do you sell them all?

Mary Anne: No not necessarily.

Chris: So you just mentioned then around selling around selling an apartment in Watsons Bay,

Mary Anne: mmm

Chris (cont): And a new record.

Mary Anne: mmm

Chris (cont): One of the things I would love to get your thoughts on is the shifting reality for buyers and their paying two million dollars for an apartment in Watson Bay is kinda the new norm, and why are people now looking to make apartments their new homes and down size element to that as well. Basically just how the shifting dynamic of buyers is?

Mary Anne: Well I guess if you look at it we’ve got a growing ageing population, their living longer, their living healthier lifestyles, so they’re not going into retirement homes until they’re in their eighties and nineties, and some of them, you know, well after that.

So you’ve got people who are in a big home that’s got stairs that are probably going I really don’t, and I’ve got a garden, there’s four five bedrooms whatever, really want to get out of that, but a nice apartment with a bit of a view, a nice outlook, a bit of a terrace, as long as I’ve got parking and access to some public transport and, it’s interesting.

I mean Watsons Bay used to be considered quite a way out but it’s got a beautiful village atmosphere, you’ve got the harbour, the ferries just increased the number of services there so it’s actually a beautiful place to move to.

Veronica: Like a little country town isn’t it

Mary A (cont): It is a gorgeous little village, a fabulous little village. 

Chris: And are you seeing a lot downsizes kind of coming in and out does wanting, I guess, a beautiful apartment,

Mary Anne: Yep

Chris (cont): In a small block of art deco units, with a view, with no stairs, is that kinda a growing

Mary Anne: Def

Chris (cont): Demographic?

Mary Anne: Very much so and that’s, not just in the harbour suburbs but also in the coastal suburbs.

I mean we had um one in Tamarama that was,

Chris: Yeah

Mary A (cont): First floor, but gorgeous three bedroom apartment, that was just it was last year but it was just under three million. And that was a guy who already had an investment apartment on Bondi Beach but lived out ah in the burbs but was looking at his retirement and saying, hey you know I can just see myself sitting there you know it’s close to everything I can do the Bondi-Tamma walk, keeps me healthy and it’s still close to the city so I can commute in.

Chris: mm

Mary A (cont): So yeah, it is definitely a growing market and it’s not just, the junction... it’s funny cause you used to see, the junction with all the high rise properties um and Darling Point even of being where a lot of the downsizers go to. But I think, they’re starting to see that there are more interesting locations that’s not necessarily with lots of other older people, that are still in those sort of coastal areas that gives them access to you know a vibrant lifestyle. 

Veronica: And not as dense either, so I mean Darling Point is full of apartments and there’s like one café (laughs) it’s there’s you you got a lot of density without actually the lifestyle that goes with that, you’ve actually still got to get in your car to get anywhere and it’s quite incredible, and certainly Bondi Junction’s the opposite of that, you’ve got everything on your doorstep.

Mary Anne: mmm  

Veronica (cont): There’s smaller boutique blocks and Bellevue Hill’s been a big one really I mean hasn’t it in terms of a lot of people moving out of homes and spending roughly the same amount of money that their home probably would have sold for to get an apartment.

Mary Anne: Beautiful apartment with the views over the golf course and yeah,

Veronica: Yeah

Mary A (cont): Walk down and have a round of golf in the morning

Veronica: So you’re not actually, they’re not actually saving much money, in fact any money quite often is the case, would you would you agree?

Mary Anne: Ah look I mean there’s some of them, I think some of them but also there are some that you know obviously have sold a larger palatial sort of Bellevue Hill home or Vaucluse home and going into, their home might have been worth four or five million dollars and their going into a two and a half three million dollars so, they’ve still got a bit in their pocket for lifestyle.

Veronica: You’ve just gotta love chucking these numbers around don’t you I mean (laughs)

Chris: I mean there’s one thing that, it’s called mental accounting,

Mary Anne: Oh

Chris (cont): So basically where we make gains from we allocate that, so if we made two million dollars in property.

Mary Ann: mm

Chris (cont): I am more than happy to go and put another two million dollars into property because, I go “well I made that money from property, I’m happy to go reinvest it back into property.”

Do you find that when people are upgrading, in a very strong market that people are selling out of properties that were three, four million and they’re happy to then go reinvest that money and buy something that’s six or seven. Is that a lot of the buyers that are buying at that level? Or is it, you know I guess people taking out six million dollar mortgages?

Mary Anne: Well not many people have six million dollar mortgages but very often they’ve got an asset there that’s gonna allow them to to move up to that level.

Um and there’s look some very successful people who work in the eastern suburbs that have done extremely well, in startups, in fintech,

Chris: mm-hmm

Mary A (cont): You know we have got some really creative interesting people in in the space around here that have done very well so,

Chris: mm-hmm

Mary A (cont): It’s kind of across those levels.

But yeah the the level, which used to be, you know going from a four million dollar home is you know jumping into the ten million dollar, so there there is bigger jumps happening in that sort of higher price point.

Chris: Yeah because I think it’s a bit of a misconception I find with a lot of people who don’t understand why the property value is worth so much. And then they’ve just reinvested in property and they’ve taken out a mortgage, and then they’ve more money in property and then they’ve just reinvested it.

And so there’s this kind of perpetuating cycle so people look at it and go, well why is a house in the eastern suburbs worth two point five million, and they think how what’s the mortgage on that and they’re based they’re thinking well it’s a two million dollar mortgage.

Mary Anne: No

Chris (cont): It’s not, the persons probably got a million dollar mortgage or they’ve got five hundred thousand, and the reason they’ve got two million dollars is they’ve made a million dollars on another property.

And that’s the problem with a lot of people with property values they don’t understand that people haven’t got these huge mortgages, they’ve just made a lot of money on other properties.

Veronica: Yes. Building on the equity they’ve already had and, you mention mental accounting earlier Chris and that one of the biases that we’ve we talked about in our first episode of this podcast, when we’re talking with Simon Russell who’s a behavioural scientist and he’s talking about mental accounting.

And that’s when you’ve basically got like different buckets in your brain as to you know where you pop different amounts of money and so. I see that with a lot of downsizes so they may have sold you know a big home for argument’s sake that they got an extra five hundred thousand they didn’t think they were gonna get and so for them it’s like in a separate bucket that’s like that’s sort of discretionary and, and that they can chuck that, at another property without thinking too much about it because in their minds well it was money they weren’t gonna have in the first place.

So it’s like, it’s still a hundred thousand dollars guys, slow down you know. But it is interesting how people compartmentalise, the amount of money and and the decisions and the justifications they use around buying property often at these very very high levels.

Mary Anne: And a lot of the older people, don’t forget, are very, they’ve had very conscious super saving.

Veronica: mmm

Mary A (cont): So I think a lot of our downsizes have got good super behind them.

Veronica: Right

Mary A (cont): Which will be interesting to see how the other younger generation, go forward especially when you’ve got lots of start-up companies putting all their money into property as opposed to super, whereas in the older generation, it was all about building up for retirement.

Chris: Yeah

Mary A (cont): And I think people are very conscious of their retirement whereas we’ve got a different generation now that may find it different when they come to retirement.

Veronica: Very interesting.

Chris: I mean you’ve in the, mainly in the Bondi, Bronte kinda eastern suburbs market and we’ve had six years of you know tremendous growth I guess.

We’re not very good at remembering long,

Mary Anne: The hard times 

Chris (cont): you know,

Veronica: No (laughs)

Chris (cont): And we’re not, we’re very short term mindset, and we think that you know what’s happened in the last year is gonna continue, but then the opposite with an you know get too, you know concerned about what’s gonna happen in the next few years. 

Can you talk about a time when in the eastern suburbs in your experience where things were tough and things that weren’t selling and, what wasn’t selling?

Mary Anne: Definitely, there was a time actually it was must have been just about the GFC and they announced on of those, it was around Melbourne cup time ‘cause we’d listed the property, and I think the interest rates they generally go up around Melbourne Cup. 

Veronica: laughing

Mary A (cont): And there was a property, it was it was a pretty, it was a deceased estate and it certainly needed a lot of work but the house next door had sold for one point four, we thought this was gonna sell for about one to one point two, sort of area and we had nothing on it, it ended up selling for nine fifty.

Veronica: Wow

Chris: mm-hmm

Mary A (cont): So it certainly was, I mean look not that they had ever made that money but you know the fact that next door had sold for that which was an extraordinary price. 

Veronica: Felt like a loss.

Mary A (cont): It felt like a big loss.

Chris: I mean that’s a really (stumbles) sorry to cut you off there a really important point, you haven’t actually made the money have you?

Mary Anne: Or lost the money.

Veronica: Yeah

Chris (cont): And you know how many sellers you know do you find that, they have even now do they think that their properties worth two point seven but?

Veronica: mmm

Mary Anne: So they lost three hundred thousand because they actually sell for two point four.

Veronica: Yeah

Mary A (cont): But I you know “I’ve lost four hundred thousand”, well you didn’t lose four hundred thousand

Veronica: You never had it

Mary A (cont): Because your property was never actually worth that amount of money.

Chris & Veronica: laughing

Mary A (cont): It might have been if we’d have if conditions were absolutely perfect in June of last year or something like that but we’re not there we’re in this market right now, and the market is what the market is.

Veronica: And this is very interesting because I’m talking to people all the time about this. This idea that market prices are falling well actually are they falling? Or is the perception that they’re falling? Because there’s no parallel universe and certainly in the areas which we, you know, operate in these inner areas of or say within ten k radius of the s of Sydney CBD.

It’s very difficult to get an exact replica of any property. You know there’s such variety which is one of the reasons I love it, I find it so fascinating. But you know even those apartments you know one might be a floor above and they might be exactly the same except for the fact ones got a better view or you know, one’s got a bigger courtyard.

And this is where scarcity is so important in being aware of it in terms of pricing, scarcity is both a good and a bad thing obviously.

 Mary Anne: mmm

Veronica (cont): Scarcity, you can create or manufacture or or create the idea of scarcity in order to get action from a buyer, and then there’s true scarcity when you’ve got a unique property,

Mary Anne: mmm

Veronica (cont): Like a lovely unique apartment in you know Watsons Bay,

Mary Anne: Watsons Bay (laughs)

Veronica (cont): For argument’s sake yeah.

Chris: mmm

Veronica (cont): That whole idea about prices, are they really falling or is the fact that you’ve had to stop increasing your expectations is that what’s falling?

Mary Anne: And it’s probably vendor expectation is still where it was last year and the market has adjusted slightly, so there is a slight gap in for some people, and that’s where communication once again is vitally important between, agent and vendor and then agent buyer, yeah.

Veronica: I’ve got a bit of a theory on this but do you think that the more realistic vendors in this market actually do better than the unrealistic ones?

Mary Anne: Definitely ‘cause they work harder and I think if you are realistic right from the start and you put a realistic guide on your property, you’re going to engage more with buyers and therefore you’re going to create more competition, and so you have a better chance of achieving the prices you’re looking to achieve.

Veronica: mmm

Mary A (cont): Um if you are a quite unrealistic vendor and you start with a really high guide price, so most of the buyers know the guide prices there’s going to be a level of competition above that, but the buyers are going to add on top of what the guide price is.

If your guide is too high your buyers are gonna discount your property,

Veronica: mmm

Chris: mm-hmm

Mary A (cont): By assuming that they’re gonna want another ten percent on top of that. They were not even go near that, therefore you lose your buyers in that first crucial seven days when it’s vital,

Veronica: Yeah then you’re playing catch up.

Mary A (cont): And then that’s it.

Chris: I imagine you know when you get a call or you knock on a door, I don’t know if you do that anymore but,

Mary Anne: Still do.

Chris (cont): And they’ve got this dream place to sell,

Mary Anne: mmm

Chris (cont): You know what in your mind would be that property in the eastern suburbs that you think this is just a beautiful property I’ve got no problems to sell this, what are some of the attributes, of that property that you know is just gonna be so hot in the market?

Mary Anne: Ah

Chris (cont): For an investor?

Mary Anne: Oh for an investor or for a house?

Veronica: Well let’s pick one of each

Chris: No! Yeah!

Mary Anne: So I mean for me and a house I know is gonna sell and I sold one I think it was about seven years ago.

Mary A (cont): It was the last freestanding un-renovated, and Pete Starr sold one, ah last year, Ben Buckler, right on Ben Buckler sort of with coastal you’ve got those full on beach views and that is the ideal dream place, either that or the full finished product. So those two things. Obviously we’ve sold in um Mirimar Avenue that one that um, Alex just sold for twelve million, those sort of properties are absolute, you know, incredible trophy homes that are.

Veronica: And there’s a lot of buyers for them?

Mary A (cont): There is an incredible amount of buyers in that trophy home bracket now, that’s surprising that and you know those those prices only a short while ago used to be the fives and six’s,

Veronica: mmm

Mary A (cont): And were now sort of tens and twelves and probably fifteens coming up.

Chris: And are many of those foreign buyers?

Mary Anne: No

Chris: No

Mary A (cont): They’re local.

Veronica: Yep

Mary Anne: Interestingly enough everyone thinks that we’re gonna see a huge rush of Chinese ah in the coastal markets.

The feng shui of breaking water, is not positive for the Chinese market, they actually love the still water which is why you see a lot of Chinese buyers going for the harbour side properties, but they’re not as interested on the breaking water of the coastal properties.

Veronica: So that’s all up for us.

Mary Anne: mmm

Veronica: We can go for it (laughs)

Chris: And just down to the pure investor in the eastern suburbs because when I’m talking to clients I’m helping them think through well what’s a good asset when they’re coming to the investment point of view.

We’re looking at you know Sydney/Melbourne due to population growth and we’re talking about migration and, you know the limited development in the eastern suburbs, the restriction on supply I guess because of that. If you were gonna look at the eastern suburbs and from an investment point of view what are some of the attributes that you would like to see?

Mary Anne: Well I mean obviously I’m a Bondi local so it’s beach, beach, beach. I think Bondi and Bronte, ah Maroubra to a certain extent Coogee so all of the beach side suburbs just have a huge amount of interest for young buyers and investors, because they rent out so well that’s where the young population are going and that’s where a lot of the tenants are going.

So anyone of the beach side suburbs, parking balcony, views all of those are big pluses. Small blocks everyone loves a small art deco block so that’s half the charm of the Bondi area ‘cause they were all built in the nineteen thirties and forties, it’s, you know, it’s the charm of it.

Chris: And what do you think about garden apartments?

Mary Anne: As an investment interestingly enough and I’ve had this conversation I have a garden apartment on the market at the moment

And I had a lady ring up and say “I’m looking as a pure investment so I’m purely interested in return” I said “well ma’am” I won’t say here name but um “a garden apartment is not going to give you the return, tenants not gonna pay for the garden”.

So if you’re looking for pure return, you’re better off to go for a standard two bedroom two bathroom apartment because they’re not gonna pay that much extra for the garden, whereas a homeowner is going to because they want to have kids or the dog to run around, they view, or that asset of the garden is immensely valuable to them.

Veronica: Which also brings up the questions of what sort or return should investors be looking at?

It always makes me laugh if someone’s going to Bondi asking for a return ‘cause like forget it, ge go somewhere else (laughs) you’re not gonna get return, when we’re talking about yield that is rental return, but in terms of capital growth you’re gonna get excellent return.

And in terms of, who pushes up prices more, investors or owner-occupiers? The garden apartment, has got that owner-occupier appeal you just mentioned and they’re the ones that get emotional and push prices up so in terms of, capital growth and this is the contra, or it’s counter intuitive in terms of the traditional, traditional idea that you’ve gotta get good rental re yield in order to make a good investment you know what I mean. 

So I think um it it’s that sort of thinking that I find... and our also the understanding of real what’s in what goes into a market, what buyers a really interested in, that makes a difference between a good investment and a bad investment.

Mary Anne: mmm

Chris: Do you think she was suffering a bit of an overconfidence that she was out of her depth I guess? Because I think you know a lot of people think they they’ve made money on property and if you’ve made money on property you assume that you’re a good property investor.

Veronica: Or are they using lingo or dialogue that they think is what they should be asking as opposed to the questions, that really matter.

Chris: I mean do you even see that when you see questions and you think you know you’re coming pretending you’re a great you know very experienced property investor but I know you probably invested before so maybe, just work with us.

Mary Anne: Well I love the people who come through and they’re constantly asking about what the water rates and the council rates are and I’m like.

Veronica: laughing

Mary A (cont): They’re the same.

Chris: Yep

Veronica: (laughing) Exactly

Mary A (cont): They’re the same.

Veronica: Very little variance but ask the strata that’s different.

Mary Anne: Yes yeah yeah but it’s it’s you know

Veronica: laughing

Mary A (cont): It’s just some interesting questions and it’s I guess people of there’s a lot websites which give you a lot of checklist questions and so, you know and some people just think they need to go by the book and, those questions are gonna give them the answers that’s gonna make that decision easier for them, and it doesn’t always make that decision easier.

Veronica: Well that’s that’s also about them just trying to make themselves feel better, they realise how how what big risk, that they realise this is an expensive it’s risky that they really should be doing some due diligence, not quite sure what due diligence they should be doing but this sounds about right.

What questions do you find buyers beyond the water and the council rates, what questions that buyers ask you that you just sort of roll your eyes and think “unhh don’t ask me that one it’s useless”?

Mary Anne: Well one of the ones which I find interesting is why are they selling?

Veronica: Yeah (laughs)

Mary A (cont): ‘Cause does it really matter why the owner’s selling? Because it’s there’s a price that somebody’s gonna want to pay for it so, the reason why the owner’s selling is not gonna make a difference at all to the price, I mean unless...

Chris: Does it help, though with the terms of the offer like if you wanted to know, you know if the vendor does want a longer settlement of they want to...

Mary Anne: It’ll be on the contract.

Chris: Be on the contract.

Veronica: Yeah

Mary A (cont): It’s all the information’s there and we make that information clear to everyone, when we’re you know the contracts there and you know if it’s thirty five days we make it clear to everyone that there’s a shorter settlement period, or if there’s a longer period settle settlement period because they haven’t purchased yet and they’re still looking to purchase. We’ll make that clear but it’s just yeah.

Chris: I think, I’ve asked that question before and I it made me really reflect on it and I think why we sometimes ask that question is some...

Veronica: (laughing) Don’t justify it, it’s rooky it’s a rooky error (laughs)

Chris (cont): Well some agents are over sharers and,

Veronica: laughing

Chris (cont): You know, and I’ve I’ve I’ve you know

Veronica: Look it’s true but the sometimes they’re just bullshitting as well.

Chris: Yeah

Veronica: So how can you when you ask a question the problem is, how can you possibly judge the answer you’re getting?

Chris: mmm

Mary Anne: And I think some people think like if it’s a deceased estate you’re gonna get a bargain.

Chris: Yeah.

Mary Anne: Nooo you’re not

Chris: No

Veronica: No (laughing)

Mary A: ‘Cause everybody wants a deceased estate

Veronica: Yeah, ‘cause they think they’re gonna get a bargain (laughs)

Mary A (cont): Yeah yep yep.

Divorce everyone thinks divorce yeah, so they think that forced sale is gonna give them a better deal, because they have to sell.

And and look that might be the case if sometimes coming into a stretched market you’ve got a better, um chance of negotiating harder on the property if there is a forced sale so I kind of get it, but it doesn’t, if there’s competition on the property it’s not gonna make a difference to the price. 

Veronica: Exactly, yeah I agree with you on that

Mary A (cont): Because the competition’s gonna determine the price not the reason why that sale is happening.

Veronica: What are some other questions that the buyers ask? That you think that’s not helpful it won’t, I can give you the answer but it’s not gonna make any difference.

Mary Anne: I think one of the things that, with people who don’t have access to the RPdata is is when did it last sell.

Veronica: mmm

Mary A (cont): Because if the property sold, and it’s this a lot of Europeans do this I find, is if the property sold five years ago, they think there’s an equation, that that price equates to now.

Veronica: Oh yeah

Chris: Yeah 

Veronica: Yep

Mary A (cont): So because it sold for x amount five years ago that means with the price rises and the square meterage, how many square metres it is,

Veronica: mmm

Mary A (cont): Therefore it equals x now,

Chris: Yeah

Mary A (cont): And woah it doesn’t always add up.

Veronica: mmm

Chris: And it’s not gonna work like that if Bondi’s up thirty percent, they bought the property for a million dollars five years ago, it must be worth one point three million.

Mary Anne: Yep

Veronica: Yeah, no it doesn’t equate does it, and also not everything goes up at the same rate.

Mary Anne: mmm

Veronica (cont): So I think that’s a bit of a surprise to people, “oh I thought that the rising tide lifts all ships”.

Mary Anne: Because that yep

Veronica: (laughs) But it doesn’t.

Mary Anne: No

Chris: And how do you feel about the when people say the Sydney market is going backwards?

Mary Anne: I think some of the Sydney market has had corrections and I think that we’ve had probably.

It’s a bit of supply and demand I mean we saw we we look at our stats and say right, the really the best times to sell um is January, May, June and August the best times to buy is March, October, November, December ‘cause that’s when you have an oversupply of property so the prices actually do come down a little bit

So we’ve had a bit of a correction in March, ‘cause there was a lot of property on the market pre-easter because everybody looks to get into that hot autumn market. You know wow everyone came out at Christmas and goes, yes! And and they think of January, February is too early.

Chris: mmm 

Mary A (cont): And it’s like no it wasn’t January was the best time to sell property.

Chris: mmm

Mary A (cont): And that’s where we had some of our strongest results and that’s why we had so many sales early on in the year, because we said to all of our vendors if you’re gonna do it do first block first cab off the ranks, and those guys did really, really well. And March, the guy’s that held on and said no I’m gonna go in March ‘cause I think that’s and it’s like pfft they were struggling with the the rest of the stock on the market, and competing with buyers having more choice.

Chris: But does it make you laugh when they say that the Sydney market’s down point one percent last month and, you know it’s such as pointless statistics because it’s on such a small time frame.

Mary Anne: Small amount yeah, and look you know there there has been an adjustment we’ve seen that in our numbers coming through opens.

So at the beginning of the year we had an average of nine point six I think it was coming through opens, it’s down to about five point seven. So you know we have we’re having sort of between six and seven hundred per week through our open for inspections, it’s now down to about three hundred.

So there’s certainly been a drop in the numbers actually coming through our opens and that does reflect a little bit in that competition and will reflect a little bit in price.

Veronica: Do you measure how many people register at your auctions and those sorts of stats as well?

Mary Anne: We’ve only had ten auctions  

Veronica: Oh of course I forgot about that yes (laughs)

Mary Anne: Laughing

Veronica (cont): I forgot you sell near everything prior

Mary Anne: (laughing) Sorry

Veronica (cont): No no that’s good! 

All: Laughing

Veronica (cont): What’s the point of measuring that?

All: Laughing

Veronica (cont): Oh dear.

And so I think that I you did mention that you do collect a lot of stats what other stats do you think buyers should be relying on that they’re not relying?

Mary Anne: Look I think it it’s it’s one of things is actually I mean look, buyers are looking to buy all year round, but it’s thinking about you know everyone likes to second guess the market, but actually sort of thinking about the good times to buy and and and that’s why we sort of especially for people who are looking to upgrade.

If you’re looking to upgrade think about putting your property on the market in August, put a three month settlement or a four month settlement on your property so it gives you the whole of the spring selling market to make that next move, so you get the top price for the winter months, gives you plenty of cash in your pocket and you can then pick up some bargains because everybody else has got their property on the market in October and November.

Chris: mm-hmm

Mary A (cont): So it’s just trying to be smart and trying to give our vendors and our buyers of course you know advice on how to look at the market and think sensibly about it.

(Music)

Chris: Every week we hear incredible stories of dumb things property buyers do, dumb things that end up costing them a lot of money and or creating a whole lot of stress, mistakes that can be avoided.

Mary Anne can you please help our listeners out here, can you give us an example of a property Dumbo.

We can all learn what not to do from these stories

Mary Anne: I look I think there’s too many buyers, they get the little checklist and the little lists and, and they get too over analytical and and you know what? You’re gonna be living in the home. You wanna love it, you wanna move into it.

And, if you get too over analytical and I’ve seen this with people who, rejected the first property they saw even though it was the perfect property for them. Two years later they’re still coming through our opens and still being over analytical and you think but that, if you’d just open your heart a little bit, let your mind open a little bit to the thought that this could be the one because, a property is gonna speak to you. It’s a big big transaction but it’s also your home.

So if you walk into somewhere and it sings to you, listen.

Chris: So you’re saying your gut’s right?

Mary Anne: I do.

Chris: Yeah

Mary Anne: You know

Chris: I mean that’s that’s the opportunity cost bias there, so that person there’s you know has has still I guess, and loss aversion is still feeling pain,

Veronica & Mary Anne: mmmm

Chris (cont): From that first transaction.

Mary Anne: mmm

Chris (cont): Um and that, that pain doesn’t go away until they buy and the last thing they want to do is, they’ve got this unicorn property in their head that they’ve seen,

Mary Anne: mmmm

Chris (cont): And they know they should have went for it, and they’re hoping that that unicorn,

Mary Anne: And nothing’s better

Chris (cont): Kind of comes back (snorts) two years later it,

Mary Anne: It doesn’t

Chris (cont): It doesn’t and the opportunity costs, is now not only buying that good property, which would have been going for them tax free, they now have to pay the next one ah,

Mary Anne: Ten percent more

Chris (cont): Ten percent more at least and you know they might of even missed the market because they can’t afford to pay ten percent more,

Mary Anne: mmm

Chris (cont): Now they’ve had to move suburbs etcetera so you know.

Veronica: Oh I’ve got the violins out.

Chris: Yeah well

Veronica: Laughing

Mary Anne: I actually ran into somebody the other day, and they were looking at semis with me six years ago.

Veronica: Oh don’t tell me they haven’t bought?

Mary Anne: mm-hmm

Veronica: (Gasp!) Oh look I’ve come across some bad ones but six years,

Mary Anne: mmm

Veronica (cont): That means they missed all the growth, they pretty much doubled in value

Mary Anne: They’re in an apartment

Veronica: Yeah! Oh that’s awful. They finally bought something though?

Mary Anne: No they just stayed in the same apartment

Veronica: Still renting?

Mary Anne: Yeah no they they own, they own, they own but,

Veronica: Oh right, right, right, at least they had something! They’ve got they’ve actually got the growth

Mary A (cont): Yeah they’ve got a toe hole,

Veronica: Yeah

Mary A (cont): But they just never made that move.

Veronica: Yep

Mary A (cont): And and that’s what I say to people now ‘cause there’s a number of people who go “I’ll just buy another investment property ‘cause I can’t make it to the house stage yet”.

Veronica: mmm

Mary A (cont): The gap between houses and apartments is growing.

Veronica: Yes! Exactly right

Mary A (cont): So the longer you leave that time to go in, if you wanna get into a house beg, borrow, steal do whatever you can, to get into that market because it is gonna escape you if you leave it too long.

And buying another investment property is not going to give you a better toe hold into that because the investment property is going to grow at a lesser then the houses.

Veronica: Well, 

Chris: Yeah

Veronica (cont): It also depends on where they buy that investment property ‘cause quite often they’re buying them in those riskier areas that aren’t performing.

Mary Anne: Brisbane, Brisbane

Veronica (cont): Yeah well, oh god yeah anyway let we could that’s another podcast isn’t it in itself.

But yes I find I meet a lot of people and particularly the way that the, and and Chris can attest to this, ‘cause you know obviously in your mortgage broking business, they don’t realise that they’re tying up their borrowing capacity,

Mary Anne: mmm

Veronica (cont): Now in underperforming assets and that pulls them further and further away from that house that they want.

And and you know talk about, you know I find I actually find that heartbreaking,

Mary Anne: mmm

Veronica (cont): I really do because they think they’re making sensible decisions 

Chris: Yeah

Veronica (cont): And they’re actually making really, really,

Mary Anne: It’s bad decisions

Veronica (cont): Bad ones and

Chris: It’s a really tough one I mean the, the they call it the stepping stone strategy you’ve gotta get on the ladder.

Mary Anne: mmm

Veronica: Yeah but what ladder?

Chris (cont): And yeah

Veronica: (laughs) You gotta get on the same ladder (laughs)

Chris (cont): And unfortunately it’s it’s you know especially its first home buyers a lot of the time and,

Mary Anne: mmm

Veronica: mmm

Chris (cont): And they can’t get the home they want so they go and make an investment,

Mary Anne: mmm

Chris (cont): And that pressure is starting from society, 

Veronica: Yes

Mary Anne: mmm

Chris (cont): It’s from the media, it’s from their work, their colleagues, their brothers and sisters are buying and they haven’t bought, their parents um.

Mary Anne: mmm

Chris (cont): The sign of success is to get a property,

Veronica: Yeah

Chris (cont): And all this is leading them to a decision to just buy any property,

Mary Anne: mmm

Chris (cont): To get on the ladder,

Mary Anne: mmm

Chris (cont): Where they really want to be heading is into a home that they can be. 

Mary Anne: Not so much, I wanna just go,

Chris: Yeah 

Mary A (cont): Take little step back, it’s not so much it’s the people who are in an apartment now,

Veronica: Yep

Mary A (cont): And they could make the move up to a home so they’ve got equity in an apartment,

Veronica: Yep

Mary A (cont): But they say I’m gonna buy another investment property,

Chris: mm-hmm

Mary A (cont): Because instead of buying.

Veronica: Instead

Mary A (cont): Instead of buying the home, that’s that’s the tricky thing that I’ve seen.

Chris: Yeah I mean that’s and that’s so they were going for instead of you know selling the investment or even just getting the home, it’s the same thing they probably could of stretched themselves,

Mary Anne: Yeah stretched a bit

Chris (cont): To get the home and, and maybe

Mary Anne: And sold that property that they’re in.

Chris (cont): Yeah and maybe just delayed moving in a few years until they could afford the mortgage, but they’ve just they’ve decided to just to you know I’ll buy the investment and you know in five years’ time I’ll sell that and get the home but they don’t realise that, the the growth on the asset that they want is actually a better asset then the,

Veronica: Yes!

Chris (cont): The investment they buy, and

Veronica: I’ve done loads of projections on this and you know I actually do a presentation it’s called The Truth About Capital Growth because, the simple fact is not all properties are alike.

Mary Anne: mmm

Veronica (cont): And you know I’ve shown examples of about how property, some people have had an “investment” and I’ll put inverted commas around that, my rabbit ears you can’t see on a podcast.

But you know they’ve got an investment it might be somewhere like parts of Brisbane that have absolutely underperformed and are still showing no signs of performing in the next say five to ten years.

And actually they’ve ended up losing money but because they’re showing a modest capital growth ie) they might get you know fifty grand or whatever over the life owning that property, they never take away the cost of buying it and the cost of selling, 

Mary Anne: mmm

Veronica (cont): it and the cost of holding of holding it in the meantime, and they actually made a loss, and it’s terrible that no ones...

Mary Anne: And they’re still behind the back burner in Sydney

Veronica: Yeah yeah exactly and then there’s opportunity cost because they haven’t actually invested the money in a growing market and, and it’s really, really horrible because because people are, well this is the elephant in the room this is the stuff that nobody wants to talk about

Chris: mmm.

Well I mean a lot of people want to talk about it but they want to talk about the other side as you should buy an investment,

Mary Anne: Yeah

Chris (cont): There’s hot spotting and,

Veronica: Yes

Mary Anne: mmm

Chris (cont): You know and we get down this you know and the investors get taken down the wrong path.

And, you know it is an unregulated market that no one’s really, watching them saying actually maybe you shouldn’t be buying that, maybe you should be buying a home and stretching yourself.

The easy options to go and buy the investment and...

Veronica: Well it’s easy because there’s so many people who are experts! (laughs) Shoving this you know advice this well-meaning advice down your throat.

Mary Anne: ‘Cause they’re gonna make money out of you

Veronica: Yes! And there’s

Mary Anne: Sorry I’m not...

Veronica: No! No there’s spruikers absolutely the the this is one of the reasons for this podcast, because we want buyers to make good decisions,

Mary Anne: mmm

Veronica (cont): And often the decision is not to buy in fact probably more often than not a good decision is not to buy something.

And I think we want to really hammer that home that it’s about, getting your advice and your information from the right sources.

So, I mean this is behind our passion for setting this whole podcast up and and for listeners, this is the sort of thing your gonna find and hear more of as we progress through more and more episodes, where we’re going to interview, and we’re gonna have specific episodes on specific topics here so to to impart this sort of knowledge.

Because it’s so true and what you’re saying and what you’ve brought up there, um is something that buyers need to understand when they’re making these decisions, the cost, the ultimate cost to them.

Mary Anne: The consequences.

Veronica (cont): Yeah yeah

Chris: And I mean that it comes down to the, you must see this where you think okay I’ve got this person’s really interested in this property, you know enough about their situation and you know that this is probably not the right property for them, but you know you’re in a I guess catch twenty two, they want to buy it you probably know it’s not the right property for them you know do you see that often?

Mary Anne: I’ve look I sold for a young couple at the beginning of the year they were one of the first auctions of the year and I’ve guided them through a number of perspective purchases that they’ve looked at.

And they live in Bondi and they always wanted to stay close to the beaches, and they then started, they were getting a bit desperate and started looking in Woollahra and Paddington. And they then started they wanted to go into a home and they then started looking at an apartment, ah which was a beautiful, gorgeous, grand apartment in one of those lovely old buildings, there’s a lot of other old people in there.

Veronica: laughs

Mary A (cont): And it was just like, do you, and I actually sort of said look I it’s gorgeous and I’m happy to support you whatever you do but really is this what you want to do when we’ve been talking about getting you into a home, and we’ve talked about the gap between apartments and homes. So, just I want you to think carefully about making this decision

Chris: Was their kids around?

Mary Anne: No

Chris: No okay

Mary Anne: They don’t have kids yet but they want to.

Veronica: mm

Chris: Yeah I because that sometimes I can see that the, the pressure goes up you know the kids are gonna be here at the end of the year we’ve just gotta go find something.

Mary Anne: Yeah

Veronica: Yeah

Chris (cont): And all or a sudden we’ve gone from buying a house, to

Mary Anne: Settling for

Chris (cont): we’re buying a two bedroom unit and they’re gonna outgrow that in the next three years.

You know ‘cause become you know that’s another bias we become very when when there’s an emergency we become very tunnel vision and,

Veronica: (laughing) Yes  

Chris (cont): And we just wanna get a solution, and then so we’ve just got to buy something you know the kids are here and maybe the decision is, don’t buy the unit lets be a bit patient here have the baby and then...

 Veronica: Or remember what you wanted.

Mary Anne: A lady I just sold for and we sold her house erm her ah partner had passed away she was in her fifties and she’s looking towards retirement.

So it was going to be moving into an apartment that she could have a cat in, and we knew what sort of apartment she wanted and she wanted to stay around the local area because all her friends are here. And she we said if you don’t find something go and rent, she didn’t want to rent even though she had a cat and the cat’s are easy to rent with, “I’m not gonna rent can’t afford to even though money is in the bank”, she panicked as it got you know,

Veronica: Oh yeah

Mary A (cont): She was staying with daughter staying with friends and she bought a little terrace with no parking in Rozelle.

Veronica: mm-hmm!

Mary A (cont): And we went oh

Veronica: Out of area everything.

Mary Anne: First one she looked at

Veronica: That ain’t, yeah she probably paid too much,

Mary Anne: mmm

Veronica (cont): Yeah I’m not going there (laughs)

Chris: Well I mean that’s I mean that’s the ah I I can’t possibly rent and um you know

Mary Anne: Yes! Don’t want to move twice

Veronica: Yes there’s worse things than renting

Mary A (cont): Don’t want to move twice. We can help you with the move

Chris: you can pay people a lot of money and they will,

Mary Anne: Exactly

Veronica: Yeah

Mary Anne: Move everything for you

Chris (cont): You know go live in a stay in a hotel for three nights and get everyone else to do it and you won’t even have to see it,

Mary Anne: Yep

Chris (cont): I’m sure that’s not...

Mary Anne: They can pack and unpack 

Chris (cont): Have a great weekend... 

Mary Anne: Yeah

Chris (cont): You know moving doesn’t have to be that bad.

Veronica: Yeah

Chris (cont): I mean you you talked about older generations and they don’t want to leave the area, a big myth I find in the Sydney market is that a lot of people believe that there’s gonna be this huge shift and all these oldies are gonna, wanna leave the eastern beaches, 

Mary Anne: laughs

Chris (cont): they’re all gonna want to move to Jarvis Bay and they um all these properties come on the market. The problem is as Sydney’s population gets bigger and bigger and bigger, even if someone does sell in those areas they stay in the area

Mary Anne: mmm

Chris (cont): And there’s no more houses getting built um so the sup the demand for this housing just keeps growing, 

Mary Anne: Growing, mmm

Chris (cont): and growing and growing,

Veronica: Scarcity

Chris (cont): And there’s only so many house and and beautiful apartments.

Mary Anne: mmm

Chris (cont): So and then when you add in you know migration and things like that that’s why we’re seeing these you know ridiculous prices to

Mary Anne: Strong prices

Chris (cont): People who aren’t from these areas,

Veronica: Yep

Chris (cont): This it’s gonna this pressure cooker will just keep on growing.

Mary Anne: And we’ve got I mean the ageing generation is in this area is very fit I mean that’s why you look at the pacific development, they were all downsizes from Dover Heights and Vaucluse they’re fit, healthy people who wanted to get out of their big homes into a place right on the beach, the Mark Moran up in Vaucluse.

Veronica: Yeah

Chris: mmm

Mary A (cont): You know they’re paying two and three million dollars for retirement homes up there it’s it’s a different type of downsizes we have in this area I think.

Veronica: Yeah. 

Well you know Mary Anne you have given us some great insights and certainly some insights into your market as well which have been fantastic.

I think also what you talked about in terms of the pre-auction offer process I think that’s something that buyers need to be very much aware of. And I’ve certainly enjoyed out chat so thank you so much for coming along.

Mary Anne: Been an absolute pleasure

Chris: Thank you Mary Anne.

I mean a few amazing things you talked about there about buyers and the mistakes they are making from a strategy point of view I think that’s very insightful there, um where you know buyers aren’t really conscious that they’re making these big decisions from strategy point of view, just unconsciously because they’re just investing into the property and, just thinking it’s gonna keep on going one way so, I think that was very, very, very cool. 

Thank you

Veronica: I think also what you talked about in terms of the pre-auction offer process I think that’s something that buyers need to be very much aware of. And I’ve certainly enjoyed our chat so thank you so much for coming along

Veronica: How can our listeners find out more about you if they need to?

Mary Anne: Ah well I’ve got the Bondi Snapshot on YouTube which is my little fortnightly segment on what’s happening in the market, plus I do like this interviews with some people not to do with real estate um to do with the Bondi market, ah fashionistas and things like that and also go to our website ppdre.com.au

Veronica: Fantastic well we’ll put the links into your YouTube channel as well and anything else, that you think our listeners should be able to get access to we’ll pop those in the show notes, so thank you very much once again.

Mary Anne: Fantastic, wonderful.

Chris: Thank you.

Veronica: Well thank you that was great.

Chris: That was really good, there was some really, really good points in that.

Veronica: Excellent stuff and you know what, I could have these conversations, I could pretty much do them every single day because you know like we just.

Mary Anne: There is so many interesting things.

Veronica: Well everyone brings something new.

Chris: We want to make you a better rider. This week’s elephant rider training is.

Veronica: Is really about what questions are important for buyers to ask and if you think about it, it’s anything that is going to give you an understanding of the real estate agent’s process okay. So if you want to make an offer rather than just say “oh will they take offers prior to auction?”, it’s a bit of a vague ah question.

If you ask something more specific like, well “I’m in a position to buy this prior what happens if I make an offer?” And then listen, listen to what they say, some agents will have very clear process and they will explain exactly what happens, other will bumble and fluff around.

Anyone that bumbles and fluffs you’re gonna have to take control or just go to auction, but anyone who has a clear process, don’t try and buck the system, follow that process because trying to buck it is not gonna win you friends or influence people.

 Chris: So Veronica what have we added to our elephant memory bank this week?

Veronica: Well one of the things buyers are always after is understanding when the best time to buy is, so I’ve got a video on this very topic and we’ll pop it in the show notes. 

Chris: The Elephant in the room property podcast is recorded at the Sydney Sound Brewery, this week’s podcast was recorded and edited by Gordie Fletcher.

Veronica: Until next week don’t be a Dumbo

Chris: Me again, we’re looking forward to spending more time with you and uncovering what’s really going on in the world of real estate. 

Please subscribe, be sure to send us a message, leave an iTunes review and tell your friends. 

Veronica: Now remember everything we talked about on this podcast is general in nature and should never be considered to be personal financial advice. If you’re looking to get advice please seek the help of a licensed Financial Advisor or Buyers Agent who will tailor and document their advice to your personal circumstances with a statement of advice.

Chris Bates