auctions and property

  1. 871 Posts.
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    I had to laugh at an auction I went to on the weekend. Real estate agents are getting desperate and sometimes I wonder if they really believe the bull they spin... but these guys proved they must really believe in what they say or are just very good actors!

    It was a dilapidated 1920's house that bordered on uninhabitable. the reserve price was around $320K but the highest bid was $265 (and this is hardly fair but the bidder looked more like a bank managers dream customer than an astute property investor). Anyway the auctioneer seemed to take it personally that no-one would bid up the price. he basically called everyone morons for not seeing the true value and potential of this property. The strain was obvious. Whats worse, I made the mistake of saying I was interested in buying if the price was right and so I had the little lackeys back and forth encouraging me to bid even though I never once raised my hand and told them it was too expensive when it hit $220. When they realised I wasnt going to buy they told me I was stupid as it was the bargain of the century. Some of their selling tactics were probably quite illegal with the promises they were making.

    The funny thing is the place would rent for about $220 per week which after expenses would leave a net profit of around $3000 per year. Now assuming you expect a return of 10% per year (and why not) the property should have been selling for $30K!!!! With rents going down or staying stagnant there should be no "capital gain premium" built into the price either so even $30K is generous.

    Its a lot easier to see why the Japanese and Singapore property markets fell 90% even though everyone thought they were fairly priced.
    Interesting times are ahead.
 
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