The Sun Wasn’t Shining on me in Sunshine on Saturday…

We recently decided to pursue a property in arguably one of Sunshine’s best streets. Not only was the property in a great street, but was a stand-out, period property. This gorgeous, three bedroom, period Californian Bungalow stole hearts, but not ours.

We remained pragmatic, because after all, this asset had to do just one thing; be a great investment.

The draw card which our Sydney investor was excited about was the fact that this gorgeous, character-filled Californian Bungalow featured a free-standing, kitchenette/bathroom inclusive bungalow.  Not only did the bungalow offer an incremental rental opportunity, the bungalow was leased to a tenant who was paying $850 per calendar month in rent. This meant that an investor or home owner could enjoy the benefits of a side-income.

We spotted this property some SIX weeks ago. In an auction campaign, this is an exceptionally long time to inspect, assess and approve a property… so we did the obvious thing – asked the agent if we could perhaps buy it prior to auction.

The answer was not clear-cut – we had to wait for several weekends of inspections before the agent could endorse us putting forward a fair and reasonable offer. We had assessed the property and felt that $630K-650K was fair and reasonable given the median value for Sunshine was significantly below this level, and recent comparable sales were all in this vicinity.

In week four, the agent declared that they’d had so much interest that they’d definitely be running the property to auction.

We arrived at 1.20pm for the 1.30pm auction. Buyer nerves were obvious… couples nervously stood together with their hands in their pockets, intermittently glancing at their watches.

The agent started his preamble.During his spiel, a guy in a red Ferrari cruised past, revving his engine and labouring his five-point turn. He swaggered out of his (possibly hire) car and took his position in the crowd just as the auction started. It was clear that his intent was to overwhelm the audience and steal the show. Funnily enough, I lept in with a bid of $610,000 and he was fast to disappear. The Ferrari was not as loud leaving as it was arriving. But Mr Ferrari, myself and the property’s strongest bidder all felt similarly about the property. The bidding stalled at $655,000 and the property was still not on the market. I was perplexed. Maybe the agents were too?

The property passed in at $655,000. Later negotiations ceased at $665,000.

The vendor’s final position was $685,000 – some $85,000 above where the agent’s initial estimate sat. We had received intel that a prior offer of $650,000 had been made and rejected. Surprisingly, and with multiple buyers in the crowd, the vendor did not complete the transaction at $665,000. This gorgeous, highly prized house in a great street in a growth suburb passed in. We could only deduce that expectations exceeded value.

It’s so rare for a buyer’s advocate to bid to their limit and find the property is still not on the market.

But what happens if the buyer who has offered $665,000 declines to proceed further and finds another house in an otherwise affordable suburb? The vendor will face a situation where the prior-to-auction offer may exceed the offer which remains on the table.

Sometimes optimism, combined with an awareness of strong auction clearance rates can spell disaster for vendors.

We wait with keen interest on this property update…..