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Vendors choose fairness over higher auction price

A couple turned down million-dollar offers for their house because they wanted to sell to another family. But they are the exception, writes Geraden Cann.

Simon Oosterman and his wife refused to take their Auckland home to auction when it hit the market this year, even though it could have scooped them another $50,000.

They are among a shrinking number of sellers resisting the increasingly popular selling method, which experts say disadvantages first-home buyers.

‘‘We had a lot of people say how great it was to actually come in, meet the owners, [and] not have to go to an auction where you have to compete with investors,’’ Oosterman said.

Their Henderson home eventually sold to a family for $952,000. He and his wife turned down offers over $1 million, and they and their two children are now living in a caravan while they wait to build their new home in Oratia.

‘‘We know the people who bought it otherwise wouldn’t have got a foot in the door,’’ he said. ‘‘They’re not investors, they’re not seeking capital gains, they just want a home.’’

There’s been a significant rise in property auctions in recent years.

In 2018 and 2019 only 10-20 per cent of property sales were through auction, according to CoreLogic data.

Today, that figure has jumped to around 60 per cent in Auckland, and in Christchurch roughly half now go under the hammer.

Wellington is the only main centre resisting the pull, with fewer than 5 per cent sold at auction in the past few years. In the capital, the most popular method of selling was via tenders inviting ‘‘inquiries over’’, according to CoreLogic head of research Nick Goodall.

The reason for the boom in auctions is simple: In an overheated market, it encourages competition between buyers and gets the seller the highest gain.

‘‘I’d say the nature of the market is the key driver of listing method,’’ said Goodall. ‘‘If there’s

significant growth and strong demand then taking the property to auction helps to encourage competition, which should generally lead to a higher price.’’

Oosterman said he had convinced a friend to sell by tender, but it fell through.

‘‘So they went to auction and got maybe $80,000 more than what they were being offered. There’s no doubt at all that auctions are what get you the money.’’

For Oosterman and his wife though, who bought their home in 2014 for $516,000, a tax-free capital gain of $436,000 was enough.

‘‘We’ve made a lot of money,

and there are people struggling out there, and if everyone just keeps on being highly competitive it’s just going to go around and around.’’

Those struggling were all middle class, Oosterman said.

‘‘I’m worried about people who can’t even go to auction, who can’t afford to buy a house at all, and have no choice but to live in substandard accommodation.’’

Oosterman said the Government needed to do more on housing policy, and said he believed a capital gains tax was the only way to quash investor demand and create fairness.

Real Estate Institute of New Zealand (REINZ) chief executive Jen Baird said agents had a fiduciary duty to their vendor to achieve the best price possible, as set out under the Real Estate Agents Act.

‘‘In a market where prices are rising in excess of 10-15 per cent annually, we usually expect to see an uplift in the number of properties being sold at auction.’’

The most recent figures from REINZ showed prices rose nearly 29 per cent last year.

Baird said traditionally REINZ had seen a high percentage of auctions in Gisborne, Auckland and the Bay of Plenty.

‘‘Now we’re seeing a good number of auctions in places such as Northland, Waikato and Canterbury.

‘‘Even the more conservative Wellington market has seen an uplift in auctions in the last few months, and in the last six months we’ve seen three properties on the West Coast sell by auction – prior to this, it was three years ago that a property had been sold by auction in the region.’’

Mortgage broker Tracey Topp is an administrator for the Kiwi First Home Buyers Group Facebook page, which has more than 35,000 members.

She said that for first-home buyers – particularly those without a 20 per cent deposit – the popularity of auctions made finding a home harder.

‘‘I think auctions have their place in the sale process, but for first-home buyers I don’t think it’s a particularly fair way to go,’’ Topp said.

Those without the 20 per cent deposit often had to commission expensive valuations in order to satisfy their bank and fulfil the unconditional sale requirements of auctions.

One client spent about $5000 on a series of valuations before getting a property, she said.

‘‘That was money that could have gone to their deposit.’’

As a general rule, first-home buyers should have a number in mind and be prepared to walk away if the auction went above it.

‘‘On the other hand, don’t be afraid to spend an extra $10,000 more if you think you’re going to secure the property, and you can afford to do that,’’ she said.

‘‘I had a young guy who went to purchase at auction, and he refused to pay $10,000 more and that would have got him that property and that means he’s been looking for another four or five months.’’

Real Estate Authority chief executive Belinda Moffat said that in the year to June it received 14 official complaints about estate agent conduct at auctions – two less than the year before.

The complaints were from vendors feeling pressured to accept an offer lower than they wanted, potential buyers feeling pressured to make a higher offer than they planned to, and bidders feeling confused about the negotiation process if the property had not reached its reserve.

‘‘The people who bought it otherwise wouldn’t have got a foot in the door.’’ Simon Oosterman

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2021-07-25T07:00:00.0000000Z

2021-07-25T07:00:00.0000000Z

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