Nestoria Interview: Lindsay Warner, 2010 Harcourts Australia Auctioneer of the Year
Last week's mini-dissection of the Australian housing market's penchant for an auction left quite a few of the topic's stones unturned, so the Nestoria Australia Blog has tapped into another expert source to find out a bit more. That source is Lindsay Warner, 2010's winner of Harcourt's Auctioneer of the Year award. This is by no means the first time Lindsay has been recognised for being handy with the hammer, in 2005 he won the Golden Gavel, the award reserved for the top auctioneers in Australia.
Thanks for sharing your award-winning expertise, Lindsay.
Auctions seem to be far more popular in Australia than they are in other housing markets, do you have opinions on why this way of selling seems to work so well in Australia?
There is no doubt auction in Australia is very popular howeve Australia can be broken down into regions or states and auction are more popular in some areas than others. Auctions are most popular in Qld, NSW, VIC and SA. These states all have a culture of auction, however there's still a difference: in Victoria I understand approx 60% of properties in the greater Melbourne area are auctioned, whereas in Adelaide this figure is only about 20%. For the company I work for is rises to about 25 to 30%. In states such as Tasmania and WA auctions are more unusual. In WA this appears to be because the legislation does not create a major difference between auction and private treaty and in Tasmania it's currently similar, but is gradually moving towards more of an auction culture.
Where auctions are very popular in the greater city areas, the percentage of auctions decreases as you move into the regional and country areas for “normal” residential properties. However auctions remain the most common and popular method of sale for deceased estates, mortgagee sales and unique properties which may attract a strong amount of interest.
I do not fully understand the legislation for other countries and how the legislation specifically compares between auction and private treaty sale, however in a majority of Australian states, the auction process allows for a cash unconditional contract which is not subject to “cooling off”, finance, building inspection or any other condition which may not be in the best interests of the vendor.
Over the last 20 years, during which time I've been involved with the industry, the percentage of properties auctioned in the Adelaide metro area has varied from about 10% to about 40%, depending of the Real Estate cycle. When it's been a buyers market, e.g. 1988 to 2001, the number of auctions has reduced because there is a lot of properties on the market and there is not a lot of upward movement in prices. During a sellers market, there is high demand, reduced choice and therefore the auction process helps establish new bench mark prices.
New real estate legislation was put into place in most states of Australia in about 2005, to put an end to undisclosed vendor bidding. This caused some confusion to both agents, buyers and sellers and auction numbers were reduced. During the last 2 years or so there's been continual education of agents, vendors and purchasers on the auction system and how it works, which has meant another increase in the number of homes going at auction.
Irrespective of the real estate cycle, the auction clearance rate (percentage of homes sold on a cash unconditional basis) on each given weekend remains a thermometer of the market, giving almost immediate feedback of market activity and pricing.
Do you think there are any other differences between Australia's property market and other international markets?In 2006 I undertook a world tour and looked at the real estate industry on most continents. From what I saw, it does not matter where you live, the principle of real estate does not change. People still need somewhere to live and depending where they are in their own life cycle they require a home for shelter either for themselves or their family. There will always be growing families, downsizing families, deaths, divorces, bankrupts, marriages, work movement, holiday movement etc. which requires some form of accommodation. Geographic location does not alter this requirement.
Do you think that technology has had a big impact on the market? (My parents just sold their house by auction and their buyer came in from intestate because he'd seen their house on a website.)There is no doubt that facebook, google, ipad and other technologies are changing the way real estate is marketed. There are many examples of buyers moving from interstate and overseas to buy properties and generally the first contact they have with the home is via a search on the internet.
I recently sold a property in Phillipps St, Somerton Park to an ex-pat couple living in Darwin, who saw it on the internet, had their brother bid at auction, and ended up buying the home without ever coming to South Australia. They intend to rent it out and then move into it when they return to South Australia sometime in the future.
Generally purchasers are not going to travel a significant distance to buy a home in a place they are not familiar with. As noted they are an ex-pat moving home or moving because of work. But, a savvy investor either commercial or residential may be on the move looking for opportunities far and wide.
We also receive a significant amount of enquiry from overseas students studying in Australia who are feeding information back to family in Asia who will invest in real estate here.
As well as conducting auctions yourself you also train other people on how it's done. Can you give us your top points for future Auctioneers?To be a successful auctioneer requires a “passion” for the real estate industry because you have to enjoy what you are selling but more than that have an understanding of what vendors and purchasers are thinking during this time. Most people attending an auction only see the auctioneer at the front of the crowd saying “lets bid”, but as well as requiring knowledge regarding the legal issues surrounding property exchange, there needs to have been a substantial amount of activity and information gathering leading up to the date of auction.
There has been a series of discussions:-
Discuss with vendors the benefits of auction
Discuss with purchasers the benefits of bidding at Auction
Discuss with vendors the setting of Reserve
Discuss with purchasers how to bid at Auction
Discuss with vendors what happens on the day
Discuss auction day strategy with the auctioneer
1. Sells the property or
2. Makes it saleable.
Remind vendors or potential vendors that an auction is a process and the property can sell in:
Stage 1 Prior to the auction,
Stage 2 At the auction or
Stage 3 For a market driven price based on the results of Stage 1 or Stage 2.
There is no doubt a vendor (and agent) wants a property to sell on the day for a “record price” however this can lead to an emotional roller coaster for the vendor (and the agent). Yes it may sell on the day however always remind the vendor it is a process that needs to be conducted thoroughly and professionally.And what about on the day? Do emotions often run high?I cringe when I watch a reality TV shows on Auction. It highlights the tears and pressure that a vendor may go through, however this normally only happens when not enough time has been spent on education and information. As agents and auctioneers we are involved with auctions on a regular basis. Our Vendors Are Not. This is quite possible the Only Auction they will be involved with In a Lifetime, so ensure you spend the time and educate them What is going to happen and When and Where you need them to be at what time.The following is an example of an instruction you need to give sellers on the day of auction:1. Required at the house 10 mins before the opening up for a quick chat2. Go for a walk in the park or down to the local coffee shop to relax
3. Return to the house 10 mins before the auction for a final briefing
4. Its OK to stay in the house or be in the front yard for the auction but we need to know where you will be. (Do not wander off for a smoke or a chat with the neighbours)
5. If having a meeting before, during or immediately after the auction, we only want the vendors (No family, No best friends, No “well meaning” advisors).
6. If the property sells (No alcohol until the contract is signed and No party poppers).
7. Vendors sign the contract after the purchasers so they need to wait (somewhere else) for at least 15 to 20 minutes after the successful purchasers have entered the home until they get to sign.
8. Ask them if they wish to meet the purchasers (they don’t have to or may not want to)
Do not take anything for granted. Keep your vendors Informed and Educated to the process and Maintain Control. You are the professional they have employed to make it work on the day. Do you job.What do you see happening to the Australian housing market in the future - I don't just mean will values go up or down, I also mean what sort of changes can you envisage in the way we buy and sell our homes?Australia has to be considered the lucky country with a generally great climate, many natural resources and multicultural communities that are welcoming to other cultures etc. My biggest fear at the moment is that our real estate is too easy for a “foreign” individual or companies to buy. There is a growing trend for foreign countries and companies to buy our agricultural land, and this is due to an obvious need to supply product to outside of Australia and Australian interests. This will present very obvious dangers to selling “the farm”. Residential properties are also relatively cheap compared to overseas and therefore selling homes to non Australian citizens may increase prices and make it very unaffordable for our fellow Australians. As much as I disagree with legislation for legislation’s sake, I feel that foreign ownership of real estate in Australia should be strictly controlled.
I also see both state and federal governments treating the taxes associated with real estate sales as a major cash cow. The stamp duty on a reasonable priced home is substantial, let alone the costs associated with a $million properties. To have to pay anywhere from $30,000 to $200,000 stamp duty on a residential property appears significantly unfair.
And lastly, if you could invent one piece of technology that would help you do what you do, what would it be?
As previously discussed technology is a significant part of our present and future, considering when I started in Real Estate just 22 years ago, computers, faxes and mobile phones were all but non-existent. I strongly believe that no matter how much technology you have, the best personal and business relationship you have is based upon the quality of face to face contact. The best performing practitioners in our professional are also the best at creating long term personal relationships.
However, as I think about one piece of technology that would help me do what I do would be a “hindsight” machine which allowed me to have all the “hindsight” at my fingertips as necessary to overcome all of my personal and professional shortcomings.
I love your idea about a hindsight machine. I wonder if we ould build a hindsight predicting app. in the mean time? Thanks again for sharing your thoughts in the Australian property market, Lindsay, and congratulations on your win.
