While property markets across Australia are generally following a downward trend, auctioneer Tom Panos believes that opportunities to buy good real estate assets and sell for a good profit are still available for investors. How can buyers and sellers in auctions make the most out of ‘downward markets’?
As major markets continue to soften, Mr Panos advised investors to consider all factors that may affect the growth of their portfolio, before ultimately jumping into auctions. Have a discussion with your real estate agent about the best strategy moving forward.
After all, auctions are not always the best avenues for buying and selling properties, especially when market movements are going down.
He said: “I do not think that every property is suited to go into an auction in this market. Auctions are about creating an environment where there's competition, creating a buyer frenzy and fear of missing out and social proof.”
“There are certain properties in this market that will have very few people bidding at auction and it may not be the best choice for some people to use auction as the method of sale.
“As a proportion, there should be less properties going to auction in a market that is trending down,” the auctioneer added.
For investors who want to take advantage of lower prices in downward markets by buying at auctions, Mr Panos advised sticking to a walk-away figure.
Due to the hyped-up environment at auctions, it may be easy to get excited and make rash decisions, particularly for buyers face-to-face with a persuasive auctioneer or a convincing salesperson.
Before going into an auction, write down your walk-away figure on a piece of paper and have someone by your side to make sure that you actually stick to the number.
According to Mr Panos: “You'll normally make a more rational decision away from the auction than at the auction.”
“The environment is perfect for you to pay 10 per cent more, so I would say write a number down and have someone to keep you accountable to that number,” he highlighted.
Moreover, he also encouraged buyers to look into as many properties as possible.
There will be a lot of attractive assets on sale at auctions. Don’t be afraid to consider all the properties that check the boxes on your list of fundamentals, so you’re not limited to a single option. Take time to look into them and visualise how they will fit into your portfolio.
At the end of the day, it pays to have a Plan B, C and D than to go home without an asset added to your portfolio, or pay too much and miss out on other opportunities because you ‘fell in love’ with your Plan A.
Mr Panos said: “You should not be sitting there deciding on 12 Smith Street, spending all week visualising 12 Smith Street, driving around 12 Smith Street, emotionally falling in love with 12 Smith Street and then sitting at 12 Smith Street on the day knowing that an agent will say, ‘Listen. You've come this far. What's another 50,000?’ ”
“I think great investors have 12 Smith Street, 13 Brown Road, 27Road and 47 Balfour Street. They can sit there in front of an agent at an auction if a property's been passed in, saying, ‘If you don't take this offer, it's all good. I'm just letting you know I have other options,’” he highlighted.
Meanwhile, for sellers of properties who prefer auctions over private treaties as their method of sale, Mr Panos said that your success lies mainly in the hands of your real estate agent and the auctioneer.
Most of the time, the auctioneer is selected by the agent based on previous transactions they have done together. Other times, the vendor chooses the auctioneer based on recommendations or after seeing them in action.
To get the best results, Mr Panos advised investors to work with auctioneers that have a long-time track record of good sales.
According to him: “Generally speaking, my preference is always for a vendor to actually go with the auctioneer that the agent suggests to them because there's already a working relationship there and they know how they work together.”
An agent-auctioneer team that has established a good working relationship through the years is most likely to beat a duo working for the first time, he said.
“It does make sense because there's this intuition that is happening between the agent and the auctioneer. The worst thing that can happen is to have the perfect marketing campaign, the perfect strategy, then on the day of the auction, you have a bad auctioneer in front of a good buyer. That's very expensive,” Mr Panos explained further.
However, do not fall into the trap of agreeing to the first thing that your real estate agent says.
Get to know for yourself how the recommended auctioneer works by asking for at least three videos of them before they sign off.
You want an auctioneer who has a deep understanding of property investment brought by attending auctions regularly, as well as an appreciation for the property being sold, instead of a professional wedding emcee moonlighting as an auctioneer in two to three auctions on Saturdays.
Mr Panos said: “You don't want to be in for a bad surprise—all of a sudden comes across a very smart, savvy buyer like yourself and your auctioneer gets thrown a curveball, like, ‘Is there land contamination here? Can you please disclose it?’”
“An amateur auctioneer will become weak and create fear against all the other buyers. That can destroy the great work of an auction listing that may have had $20,000 in marketing spent on it. It's not worth the risk,” the auctioneer added.
Considering the downward trend across property markets in Australia, is it still a good time to invest in real estate now?
Simple answer: Yes, it is a good time to invest in real estate, according to Mr Panos.
In fact, now is a better time to buy a house than earlier this year, as the stocks in the market will continue to increase in the coming months.
After all, it’s better to buy properties when there’s more competition than lesser stock.
“I think it's a pretty safe strategy to say, ‘Hey, I'm going to gear myself up to hit this market in Spring when there's a plethora of listings coming on the market,’ ” Mr Panos said.
At the end of the day, it’s always a good time to invest in real estate if you have the capacity to buy and shoulder the costs of holding a property, as well as the skills, knowledge and patience necessary to navigate an ever-changing landscape.
Tune in to Tom Panos’ episode on The Smart Property Investment Show to know more about the best ways to invest in ‘downward markets’.