Mal James

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GUEST OBSERVER 
Ferocious bidding on the right homes – despite this being the largest auction start to a year in Melbourne auction history – the market lapped it up, spat out a few and said ”feed me, feed me, give me more.”
 <img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/02/28/expert%20story%201.jpg" width="619" height="410">
At 6.00 pm the James Clearance Rate on Inner Melbourne Homes was close enough to 90% – yep 90% and that was on a Super Saturday (a big test).
James Bidderman was 2.6 bidders per auction, which means that whilst around 170 bought –  an incredible 270 didn’t  – and those 270 wounded underbidders will be back next week to fight it out, against a new wave of buyers; which in turn means the market will be going up, not down, ceteris paribus (all things being equal) over the next little while.
Absolutely no surprises – the market is strong and rising.
What else would you expect the Melbourne auction market to be doing?
No really, what else would you expect of the Melbourne auction market in the current environment.
Hands up if you are expecting the market to fall in the near future?
Can we ask why?
Not because we know for sure it won’t, we just want to know why you think the market will fall anytime soon?
Why will the market bake a different cake, whilst the market ingredients remain the same?
Demand=buyers=people=population is going up and not likely to stop, until change.
Supply=homes=land is going down and not likely to change.
This is a Demand, Supply and Price Interaction outlined by economists a few centuries ago (stood the test of time), tweaked as it applies to Inner Melbourne Home Market today.
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Here are the major political parties increasing Demand/Buyers/Population policies. Google was the search function.
Liberal Party: We could not find a population policy among their key policies. 
Labour Party: We could not find a population policy among their top 100.  At least they were attempting to address the housing issue.
Greens: We found a population policy – well, it’s a commentary. But let’s be fair – at least they recognise that population is an issue. 
One Nation: They do not appear to have an easy to find population policy – they do have a migration policy that states a zero net migration. Dick Smith supports this part – No, not the boat people and Muslim commentary – the population management policy of zero net migration and infrastructure. 
None of the above is designed to be a criticism of politicians, we believe most are sincere and trying and that is not our role at James Buyer Advocates, as we see it.
Anyway back to the Demand=Buyers=Population side of the Home Market.
We hear you – what about interest rates and income and debt?
Yes, they affect (mainly at the lower levels), but the real driver is population demand, mainly from overseas.
Our belief, at the higher level, is the Inner Melbourne market has moved through the phase of infinite demand and supply interactions to a more finite one.
Our belief, at the higher level, is the Inner Melbourne market is slowly moving away from income, debt and interest rates; to an asset wealth exchange. In our opinion, assets not income are now beginning to steer the Inner Melbourne High End market.
Meaning the Inner Melbourne home-with-land market is moving to finite asset to asset transactions within any given time period and an increasing number of the interactions will only involve wealthy overseas investors, local intergenerational wealth and the occasional new-to-the-scene successful entrepreneur/very high salary earner – rather than banks, interest rates and anybody can buy a home.
Melbourne through the internationalism of its market, through Australia’s population and immigration policies (particularly the 2009 FIRB change) is in the process of becoming like Mumbai, New York, Inner London – where homes are exchanged on a different basis and with different players to mum and dad, rolling up to a bank, out to an auction and sign a contract, after they had a idea they wanted a nice house in Hawthorn last week.
Those days are well and truly gone for many and getting that way for others. That is not to say that another GFC would not have a significant effect on the Inner Melbourne market, of course it would, as debt is still involved. However, in our opinion, it would need to be as serious as that, for there to be a significant drop in prices.
Economic cataclysms are not that common and the buyers and sellers that recover best are usually the bricks’n’mortar asset rich anyway.
Our point – the logic of an Inner Melbourne homebuyer waiting for a meaningful drop in prices is, well, seemingly illogical to us.
Why will prices drop when the government and the opposition have no obvious focus on demand=buyers=population policies except full steam ahead – meaning more and more population (read more and more buyers, read more and more demand)? That is the demand side.
On the supply side it’s also just as simple.
Land and Infrastructure – they are not making it any more.
There will be no long lasting significant increase in supply in Inner Melbourne (ever again).
In fact we are losing more and more land to make more and more apartments.
As well, many buyers (local and overseas) are buying and holding and not selling – further reducing supply.
Many of these apartments are being bought by buyers on no stamp duty – so no contributions to infrastructure in the form of new taxes.
And whilst it was a bit of a joke, they are not making anymore infrastructure – it’s actually unfortunately sort of true (governments are not focussing on keeping pace anyway – they are more concerned about welfare and refugees, than new railways and regional living and immigration control).
We are not looking to suggest there should be specific changes on anything, that is for our leaders, whom we support.
All we are trying to do is outline the real issues – the real situations – so as our buying clients can make informed decisions going forward.
Noticed the increased traffic lately?  
That is demand=buyers=population increase and supply=land &amp; infrastructure decrease.
So back to the question we ask our clients/buyers – why do you think prices on good quality homes in Inner Melbourne will fall any time soon – unless there is a major change in …….. something?
Is waiting a good strategy?
Is buy-now a better strategy (if it’s the right home long term)?
Unless you see a major change in population policies, such as immigration and/or a big push to regional infrastructure or ….. something else we can’t see now, then, in our opinion at James, good homes with land will continue to rise and rise and rise in price, in the longer term future (yes of course with hiccups along the way)…….. and interest rates……Mmmm – not sure what affect they might have………. some yes……….but………. that may be history, the game may have changed?
Macro Change – will it come?
Our leaders current assessment is business wealth, turnover, profits, trade and so on is of greater community importance than owning your own home, village atmosphere, culture and so on.
They may be right, maybe its a pipe dream – personally we feel sad about that.
There is talk around the Inner Melbourne home buying market edges like monetary policy tweaking, but there is silence, a vacuum of policy about immigration and population (the real drivers) – and many buyers are just hoping things will be different, so they are not speaking up – population increase is the elephant in the room.
Hope is great, but it is action that changes things.
Are there any signs of action and change coming on a macro level?
If the Melbourne market was Canberra and buyers were kangaroos, there would be some calls for a cull – eg their would be noise in an attempt to reduce the problem – if there was going to be widespread action and change.
If the Melbourne market was the environment, many would be up in arms protesting about overgrazing and looking for strategies for change – there would be noise if there was going to be widespread action and change.
There is no noise on population issues – there will be no change in demand without you hearing the noise.
The macro noise is not there.
So Micro Change – yes you – you still have options.
1) Lie in the foetal position and give up on buying a good home.
2) Keep thinking the same ingredients will bake that different cake for you – knowing that almost every quality home has between 3 and 7 bidders up against you – and that number is increasing and your opposition is becoming better resourced (they are being forced to).
3) Or act now – do something about it – engage with a different idea in a different way – you need to make it happen. You may need to understand there is no magical wand coming from above. Maybe get some professional assistance – just a thought.
James Buyer Advocates – 5 from 5 this February month so far (for normal people/buyers) – but we were very, very picky on which properties we went after.
Suggestion to get you rolling on the MICRO.
Consider making an immediate mindset change in dealing with the population and home buying issue.
Consider moving away from focussing on saving money in the deal and buying cheap to focussing on doing what you need to do ($ prudently of course) to secure a good long term home (for you), that will last you 10-15 years and longer.
Your solutions may well be micro (you) – as macro ones simply ain’t happening anytime soon.
MAL JAMES is principal of<a href="https://www.jamesbuyeradvocates.com.au/" target="_blank" title="James Buyer Advocates" rel="nofollow"> James Buyer Advocates</a>, which advocates on behalf of buyers of property over $1 million. Mal writes auction reports, advice and in-depth market analysis on James' website.
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Let’s face a home truth – the elephant in the room – population: Mal James

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There has been a bit of talk in The Age recently with two articles on underquoting.
Generally speaking The Age’s Alice Stolz – ‘Underquoting needs to be addressed’ (May 2) seems to be most on the money as far as buyers are concerned.
My thought is: let’s reduce the emotional heat in the argument and drop the word underquoting and call it agent ‘step quoting’, as we do.
Why?
Because many agents are not really lying. What they are doing is informing buyers of a number, in a way that best represents their clients’ interests, which are not necessarily the same as your interests if you are a buyer. (Even if you feel they are lying, responding with anger and bad emotions are not always helpful in good buyer decision making.)
So, step quoting from agents is mainly about buyers not understanding what the agents quote really is, and what it isn’t.
Remember that an agent quote:
<ul>
<li>Is a number designed to get you the buyer to visit the property – nothing more. 
</li>
<li>Isn’t a cast iron guarantee of what the property will go for, or indeed what the seller will definitely sell for.</li>
</ul>
Our article on step quoting may be worth a read if you are a buyer and  want to reduce quoting angst by understanding <a href="/expert-insights/investing/13514-a-smart-buyers-guide-to-step-quoting" target="_blank">how agent quoting really works</a>.
Another article in The Age titled: “Underquoting not a big problem” (also May 2), was, we felt, unhelpful if buyers perceived that agent quoting wasn’t a real issue because Consumer Affairs Victoria (CAV) hadn’t received many substantiated complaints.
To us that’s a bit like assuming the chickens are happy with the RSPCA endorsement of chicken meat in supermarkets because there are few complaints. In other words, just because formal CAV complaints are low, this does not necessarily mean that agent quoting is not a problem with buyers. All it may mean is that very few buyers want to go through a formal process of complaining – i.e., what’s in it for them, it’s hard to prove and the government has done little in the past.
In our opinion there is no link between the number of CAV complaints and the level of buyer unhappiness and confusion on agent quoting.
However, this is not an agent bashing exercise. While some have been the cause in the past, all can actually be the solution in the future if they want to be – so let’s keep it civil.
Agents across the board have to want to fix the quoting issue and currently there is no consensus to do so.
Agent quoting is a real and significant problem for buyers because:
<ol>
<li>Many buyers do not understand what the agent quote is actually saying. 
</li>
<li>The agents also do not have a consistent view as to what the agent quote is saying. Is the agent quote an agent guess, a seller reserve, a buyer estimate, or what? This creates much confusion. 
</li>
<li>The agent body, the REIV (of which we are members), has only made a lukewarm attempt to address this issue. In fact they shut down their ethics committee a couple of years ago (I was on it at the time) and little has been heard on agent quoting since. 
</li>
<li>The government has not successfully legislated to make the agent’s quote consistent and easily understood by the public.</li>
</ol>
All four of the above (buyers, agents, REIV and the government) need to be on the same page for anything to work.
The Queensland solution, as we understand it (and we may not fully), of removing all quoting appears to be an attempt to do the right thing. But it appears poorly conceived, impracticable and unpoliceable.
At some stage an agent will have to say a price. He or she is a conduit between buyer and seller and price is an unavoidable discussion point. At some stage, whether formally or informally, the buyer will say “give me an idea on price” and the agent will have to respond. We can’t see how that can be made illegal. But we may not know all the facts on the Queensland solution.
Buyers, sellers and agents all have rights and obligations in the matter of quoting; just like tradesman, Myer and petrol stations do when they are quoting.
One option is that the agent auction quote range (say $3 million to $3.5 million) must include the reserve in it at all times – irrespective of the timing of the quote. Rather than adjust the range during the campaign – just make it bigger.
If two buyers force the price beyond the range to, say, $3.8 million then so be it. That is market forces and no agent can predict that every time (ourselves included). But an ethical and skilled buyer or seller agent can get the range estimate right between 80% and 95% of the time (as we do), depending on the type of market we are in.
If a seller doesn’t want that range estimate restriction then they shouldn’t don’t use the auction process; they could use the EOI (expression of interest) and boardroom process instead.
If a buyer wants more pricing information then they need to do their research and either engage an independent buying professional or educate themselves somehow.
Finally the government and the REIV could be running a “real life and accurate” education campaign to explain what an agent quote is and what it is not. They make a lot of money from stamp duty and could put a little bit back.
Private sales and EOIs also need some attention. Nothing complicated, just a few simple rules around processes.
Auctions can be very transparent buying processes when run ethically for all parties, and they are part of Melbourne’s societal fabric. We should want to enhance what we have, not just complain about it.
Auctions are great!
Mal writes weekly auction reports, advice and in-depth market analysis on <a href="https://www.jamesbuyeradvocates.com.au/" target="_blank">James' website</a>.
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We need to enhance the auction system, not just complain about it

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So, has the market gone pear-shaped? That may be what some of you are thinking.
Others will be thinking what the hell are you talking about? The market is fine – it’s rocking along, check out the results this weekend!
For us the market has changed – especially at the top end. But it’s subtle, more in terms of what’s happening behind the scenes, as well as a dip in buyer enthusiasm and bidder depth on the weaker homes.
Numbers through open for inspections (mainly mid-week) appear down on what they were before Easter. But not on all homes. Bidder depth also appears to be easing on some types of homes – in part due to the large amount of stock and in part due to an increasing number of under-bidders who appear to have decided to move from the April furnace to the May sidelines.
Overall Summary of Melbourne’s Million Dollar Plus Auctions 10 May weekend:
<ul>
<li>$1 million plus auctions with no bidders: 26%</li>
<li>$1 million plus auctions with one bidder: 13%</li>
<li>$1 million plus auctions with two or three bidders: 44%</li>
<li>$1 million plus auctions with four or more bidders at auction: 17%</li>
</ul>
Last week we said May was traditionally a month of change and May 2014 is proving to be no different. It’s intriguing.
Mid week, chatting with agent Philippe Batters, I described the market to him as “having the handbrake being gently pulled on”, and he responded with “it feels more like it’s slipped out of gear and into neutral since Easter”.
Why?
Nobody knows for sure but here are the three strongest possibilities
<ol>
<li>It’s May and the pre-Easter market has soaked up the “urgent” buyers and sellers. With more stock and less urgency, some buyers can often have a pause. So this is just a normal May market.</li>
<li>Budget talk – it has been quite worrying for some and may have put the market into an “election mode”. At election time, many buyers and sellers at the Top End adopt a wait-and-see approach.</li>
<li>This is nothing but a break in the traffic (i.e., it’s temporary), and may well be no more than another platform (a leveling time) in the rising price staircase that we have been experiencing since October 2012. After all, we thought the market was turning a bit in March. But then Bang! April was a near record month.</li>
</ol>
So what does this all mean?
For us it’s still business as usual – just a different tone. A market is always changing.
However for some buyers, no matter what is said, it means an “excuse” to do nothing. They become “maybe buyers” and “maybe sellers”.
If you’re a “maybe buyer” you will keep looking, but you won’t buy. You’ll bid but not quite enough to buy. You’ll go to opens, but you won’t find the right home.
If you’re a “maybe seller” you will put off making that call to the agent for an appraisal. If you’ve already done the appraisal, you’ll decide to wait and not go to market till spring, or maybe you will put it quietly on the off-market but you won’t sell. If you are a seller currently on the market and you want an above-average high price (e.g. pre-Easter) then you will be at an increased risk of pass-in (unless you’re selling an A grader).
But what if you can’t afford to sit on the fence and do nothing? What if you realise your children aren’t going to stop growing and you really need a bigger home.
Best Advice
<ol>
<li>Understand we are not seeing the market in a hole. We are seeing the beginnings of a patchy market, which is often a precursor to a market change – but we also saw that in March and the market bounced back in April. 
</li>
<li>Don’t panic – understand that markets go up and down. Even in the GFC the really good properties had only minor haircuts, and any “lost money” was well and truly recovered within a couple of years (on the good ones, anyway). So stick to your longer term plans and understand what quality is. 
</li>
<li>Realise that on A-graders you will still have to compete against locals who want quality, as well as Chinese buyers from overseas. By this we mean that even if demand has halved, the good properties that pre-Easter had six bidders will still have three bidders, and the market will still produce a strong result. 
</li>
<li>Realise that the subtle changes to the market are more apparent and more relevant at the top end i.e., $3 million plus more so than the $1 million plus homes. Because there are generally fewer bidders at the top end, a decline in demand has more impact - in that, while there may have been three bidders pre-Easter, there may now be just one or two – and that’s when price differentials occur. 
</li>
<li>Understand that B- and C-graders will have less bidders, and in some cases no other bidders. Which means you may end up paying more than if you had adopted a bold bidding strategy only. 
</li>
<li>Understand that when markets drop, stock tends to dry up. When you combine that with the coming winter lull, you may want to think about adopting a wait-and-see short term strategy. However, that inaction may mean you will have no choice until late in the year or even early next year. Therefore you will have accidentally created a long term wait-and-see strategy. Can you wait? 
</li>
<li>Adopting a wait and see approach usually leads to one of three things:</li>
</ol>
<ul>
<li>You lose your patience and end up buying something out of desperation rather than based on logic.</li>
<li>You miss this cycle and buy in the next up cycle instead – possibly paying more than now.</li>
<li>You miss the opportunity forever to trade up.</li>
</ul>
When markets go off, the top end comes back to the pack and trading up becomes a lot more sensible. So a leveling or easing market is a plus for growing families.
Our recommendation is business as usual. Which means:
<ol>
<li>Acknowledge your confidence level change and manage it rather than react to it.</li>
<li>Ask a few more questions rather than just assume it’s going to fly out of the blocks;</li>
<li>Don’t be quite as quick to jump in with a big bold knockout bid;</li>
<li>But above all try and remember the longer term outcomes you are trying to achieve. If it’s a “goodie” we would still be recommending to put your hand up, as life is short.</li>
</ol>
So are you about finding a good long term family home while there is still a lot of choice but a bit of uncertainty? Or are you are about trying to deal with your uncertainty and not much else?
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Has Melbourne's top end market gone pear-shaped?

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We said May was a month of change and boy has it been. Sure, the market changes, but there have been some very dramatic mood swings since Easter.
We can tell just by tracking the activity on our <a href="https://www.urban.com.au/expert-insights/investing/29643-negotiation-council-planning-for-success&amp;sa=U&amp;ei=7TF9U9u_B4_i8AWg74L4DQ&amp;ved=0CAYQFjAA&amp;client=internal-uds-cse&amp;usg=AFQjCNFC-d9c-KeirXiDw1zz-itC-jgAYw" target="_blank">negotiation council</a>. Before Easter the offer board was full. We had 12 active negotiations in the week before Easter in fact. After Easter the offer board was nearly empty – in fact it had an average of two on it for the first fortnight.
Then last Friday suddenly the Offer Board was full again. We now have 11 active negotiations to discuss.  That reflects how the market mood is swinging right now at the <a class="st_tag internal_tag" href="https://marketnews.com.au/tag/top-end/" title="Posts tagged with Top End" rel="tag">top end</a>. Its fluid, it’s dynamic and it’s a little unclear.
Although looking at this weekend’s results, you wouldn’t think there was anything unclear.
You won’t always see the impact of these mood swings in price changes at the lower end. Because the A grader at $1.3 million which has six bidders before Easter will still have three bidders when the market dips and so most observers won’t see any change.
But at the top end, as well as on B and C graders at the lower end, a mood change can cut what would once have been a three bidder auction to just one bidder – and if that one bidder is you, then are you simply competing against yourself.
Key issues at the top end of the market are
<ul>
<li>Agent quoting</li>
<li>Chinese nationals buying</li>
<li>Market vagaries in May</li>
</ul>
We feel it is important for buyers to understand and face these issues rather than just worrying and complaining about them.
Agent Quoting
We have received a couple of responses from readers regarding some of our more recent comments on agent quoting.
We seem to have given some people the impression that we support Underquoting.
Let’s be clear we don’t support underquoting – for the simple reason that markets function better when they are ethically run. In better functioning markets we earn a more meaningful living. So we are not a supporter of agent underquoting.
In our attempt to help the markets function better we tried to explain <a href="/expert-insights/buying/31040-underquoting-problem-auction-system-mal-james" target="_blank">what an agent quote is and what it isn’t</a>.
We pointed out that an agent quote is nothing more than an attempt by the agent to get as many buyers as possible to see the home.
Yes, you the buyer want the agent quote to be more than that, i.e. the reserve or indicative sell price. Consumer Affairs Victoria says it should be this and that – but it is not.
In fact there is a big difference between what an Agent Quote is and what you might think it should be.
Agent quotes are like marriages; we all want them to be good but about half aren’t and so we can stay unhappy or we can do something about it.
And, frustrating as big differences between the agent quote and the actual sell price may be, getting emotional about that can be counterproductive to helping you buy the home you want.
So getting emotional is not what we think you should do. Understand and take alternative action  is what we think you should do.
If you can understand agent quoting for what it really is, not what you want, then you will buy a lot better.
We also pointed out previously the unhelpfulness of CAV’s assumption that just because they have received few complaints about underquoting, that means there is no problem.
Cheerio from us publicly on this subject for a while.
Chinese Nationals
Some people have also expressed concerns about the number of properties being bought by Chinese Nationals. There is perhaps a fear that it has become impossible to compete against a group of people who seem to have very deep pockets.
We even get complaints that we raise this as a subject.
As buyers you need to know who your competitors are and how to maximise your chances of dealing with their strengths and weaknesses in this market. As with underquoting though, there is no point being caught up in fear and frustration at such competition.
The law allows Chinese nationals to buy homes in Victoria, and if you want to buy a home in Melbourne’s Inner East and increasingly in Bayside you are going to have to compete against this group of people.
If you are a buyer then you need strategies. We act for Chinese nationals in buying homes in Australia.  We have also competed against Chinese nationals at auctions and in other negotiations.
So over the years we have learnt through experience to feel comfortable negotiating both for and against Chinese nationals.
This weekend, we had to deal with both issues on a property we bid on.
The property at 27 Dean Street, Kew (Anthony Panayi &amp; Chris Ewart of Christopher Russell) was a basic brick home on a big block – it was a land sale. The initial quote on the home at was $1,500,000, but was raised to $1,800,000 during the campaign. We turned up half an hour before the auction and there was a steady stream of Chinese nationals and Chinese Australians flowing into the property.
Our research indicated that the property was worth a lot more than $1.8 million, and we opened the bidding at $2,200,000. At that point it was announced on the market, and from then on our two main competitors were either Chinese nationals or New Australians (both had interpreters to assist).
We bid in a certain manner to win us the home, and in this instance our clients won.
Was this a case of poor agent quoting? Well, the agent’s original quote was $1.5 million, which he then raised to $1.8 million. The auctioneer got a lot of people to the auction and then put it on the market with our first bid. So in this instance a big tick to the agent – he did his job for his client (the seller).
If you as a buyer were thinking it was not going to go anywhere near that number, then is that the fault of the selling agent (who is not working for you)? Did you do your due diligence to understand what it realistically should go for?
We paid a price that to us seemed strong but not mind boggling. There have been a number of sales of new builds in the area at $4 million for blocks this size. If you work your way backwards, and value the build cost of new home at $1.2 million, then the price we offered stacks up.
On advice received we formed and gave an opinion that it could go above $2.6 million at a strong auction.
You might think we opened too strongly. Well other bidders didn’t think so. It would have been a volcano if bidding started low. Our bidding patterns were designed very specifically to compete against the Chinese nationals or Chinese New Australians we knew would be there.
Summary
If you don’t understand how agent quoting works, you will not give yourself the best chance to buy.
And, if you don’t accept and have a strategy for competing against Chinese nationals bidding, you will not give yourself the best chance to buy either.
Finally, if you don’t understand and take affirmative action in this May market then you will either bring too many people into a bidding war against you or you may pay too much.
Mal writes weekly auction reports, advice and in-depth market analysis on <a href="https://www.jamesbuyeradvocates.com.au/" target="_blank">James' website</a>.
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The key issues at the top end of the Melbourne market

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2014 is still motoring along very strongly. The lull we reported of the last few weeks seems to have been nothing more than another stair landing in the continuously rising price-staircase which began in October 2012.
This weekend was another Super Saturday, with over 150 auctions in Melbourne’s inner east and Bayside. It was a very solid test, in that bidders were spread out over a large number of auctions – i.e. there was significant choice. The bidder depth held up, in fact it increased marginally with over two bidders per auction on average – this is strong.
If you look at the roughly 200 $1 million plus auctions that took place across all of Melbourne, an average of two bidders means that not only were there 200 buyers, there were also 200 bidders who missed out. Most of those “wounded” bidders are not discretionary buyers – they have to buy and next time they will be more aggressive on price, even if only a tad.
<blockquote>
For a number of our Chinese clients, one of the reasons we are engaged is that they are concerned what other Chinese buyers may do and they don’t want to miss out.
</blockquote>
However, after next week it gets very tight for new stock going into the school holidays and Easter. So the pool of choice will diminish. That means many of those 200 “wounded underbidders” may well be competing against you over Easter but on lower stock levels. That means we’re likely to see 200 underbidders competing not on 200 homes, but on, say, 100 good homes which would double the bidders. If that number is spread out over 50 good homes, that will be four times the bidder strength we saw this weekend.
So what to do as a buyer? Maybe it’s time to wait until the steam goes out of the market?
For those buyers still waiting on the edge for a downturn – good luck. I’m not sure that is a proven good strategy.
But surely it can’t last forever!
Why has our market been so good for so long and will it last?
The Chinese community – simple demand and supply
The reason our market has been so good for so long is very simple – the overseas Chinese community.
Here are the top 10 reported sales on Saturday.
The Top 10 reported on Saturday
<ul>
<li>14 Selwyn Av, ELWOOD – Above $3,600,000</li>
<li>
21 Monash Av, BALWYN – $3,520,000</li>
<li>17 Rolls Ct, GLEN WAVERLEY – $3,416,000</li>
<li>
65 Metung St, BALWYN Above $3,200,000</li>
<li>30 Wills St, KEW Above $3,000,000</li>
<li>4 Mt Ida Av, HAWTHORN EAST  $3,235,500</li>
<li>69 Alfred Cr, FITZROY NORTH  $3,140,000</li>
<li>
2 Barnsbury Rd, BALWYN Above $3,000,000</li>
<li>9 Fairfield Av, CAMBERWELL  $2,888,000</li>
<li>
65 Yarrbat Av, BALWYN $2,850,000</li>
</ul>
40% of those sales were in <a href="https://www.urban.com.au/property-observer" target="_blank">Balwyn</a> for new homes or land blocks to build new homes. Where is <a href="https://www.urban.com.au/property-observer" target="_blank">Brighton</a>, where is <a href="https://www.urban.com.au/property-observer" target="_blank">Toorak</a>? <a href="https://www.urban.com.au/property-observer" target="_blank">North Balwyn</a> and Balwyn reported 13 bought from a reported 15 auctions. Brighton had 9 bought from 16 and Toorak and <a href="https://www.urban.com.au/property-observer" target="_blank">South Yarra</a> just 7 from 12.
So how long will it last?
This is my potted history of Chinese involvement in Melbourne’s property market.
1973: I went to Camberwell Grammar in the early 1970s (I’m not sure they want me to advertise that fact – it could be bad for new enrolments). Camberwell Grammar is in Balwyn and a number of my classmates at that time were Chinese.
1983: Chinese start buying into Doncaster and Box Hill, which were then more affordable suburbs. I grew up in Doncaster.
1993: After economic reforms start having an impact in China, wealthy overseas Chinese start buying into premium Melbourne suburbs such as Balwyn and <a href="https://www.urban.com.au/property-observer" target="_blank">Canterbury</a>. Why? Private schools. Chinese people want to give their children the best education (see 1973) and now a few could also afford to buy a home near the schools of their choice such as Carey, MLC, Scotch and Camberwell Grammar. But it was still difficult under Australian buying laws for overseas people.
2000: With restrictions on what Chinese people could buy and Chinese wealth increasing, off the plan properties became popular for many Chinese buyers. There were very few restrictions on Chinese people buying new properties and Chinese people were used to buying new apartments. High rises went up left, right and centre in Melbourne, many on the back of Chinese money.
2005: Chinese wealth had increased dramatically over the last two decades and as Chinese buyers became wealthier they also became more sophisticated in their knowledge about Melbourne properties and Toorak became a place where land banking became popular. It still is today.
2009: Australian government changes the laws making buying “second-hand” family homes in Australia a lot easier for Chinese people. This one decision really brought the inner Melbourne property market out of the GFC a lot quicker than other countries.
2013: By this time, every one of the bigger buying or selling real estate agencies, ourselves included, has at least one Mandarin-speaking staff member.
2014 : At this weekend’s Super Saturday, 40% of our Top 10 $3m+ sales were in Balwyn, rather than Toorak or Brighton.
So in my 55 year history I have seen this equation of simple demand (increasing Chinese buyers) versus supply (no new land in inner Melbourne) push prices up and up and up. I cannot see anything changing anytime soon. So waiting for the market to turn in 1970, 1980, 1990, 2000 and 2010 hasn’t in my mind proven to be a winning strategy. If you see the right home for you (emotionally, physically and financially) then you should buy it now.
You may be interested to know that for a number of our Chinese clients, one of the reasons we are engaged is that they are concerned what other Chinese buyers may do and they don’t want to miss out.
Auctions in Bayside see around half  the number of people attending as in Boroondara. A good auction in Brighton has 40 people while in Kew it would be 80. The Chinese community is nowhere near as well established in Bayside as it is in Boroondara.
Why not? There are some great private schools in Bayside! St Leonards, Haileybury, Caulfield Grammar.
Its a historical thing. But you can see more and more Chinese people considering say other areas such as Brighton when:
<ul>
<li>Chinese people become more comfortable with Bayside as a place to live, and</li>
<li>Demand in Boroondara and then Stonnington forces some Chinese people to consider other options.</li>
</ul>
Over time the Chinese community demand and supply equation will have the same effect in Bayside as it has had in Boroondara, unless China’s wealth begins to diminish.
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Chinese buyers in Melbourne: A simple case of supply and demand

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Valuations are at the heart of property investment – particularly when it comes to getting finance, or being refinanced, with a lender.
You might also just be asking ‘<a href="/news/27120-how-much-is-my-home-worth-judging-a-propertys-value" target="_blank">What is my home worth?</a>’ and a valuation may appear to be the natural way to answer this question.
<blockquote>
MUST KNOW ELEMENTS:
IT'S NOT AN APPRAISAL
THEY'RE NOT AN EXACT SCIENCE
THERE ARE MULTIPLE TYPES OF VALUATION
COMPARABLES ARE HEAVILY RELIED UPON
YOU CAN ASSIST THE VALUER 
</blockquote>
There are also many reasons why you’d want to get an independent valuation – observer<a href="/expert-insights/investing/21919-five-great-reasons-to-get-an-independent-valuation-cameron-mcevoy" target="_blank"> Cameron McEvoy aptly describes five crucial reasons you’d consider this</a> - and so it pays to be aware of what is involved.
Here are five ‘must know’ elements of valuations:
1) It’s not an appraisal
You may have had an appraisal with a real estate agent, and now believe that your home can fetch in excess of $630,000 on the current market. This may be the case, however a real estate agent’s appraisal is not a valuation, and will not be accepted by the bank as such.
While most real estate agents act with professionalism, investors must be aware that it’s not unheard of for real estate agents to alter the appraisal they provide you to match your expectations, and to be fairly bullish with their appraisals to secure a listing.
A valuer, however, is immune to these pressures, tasked with one job and one job alone – valuing your home.
2) They’re not an exact science
It will be of no surprise to any savvy investor that figuring out the price of a property is never an exact science, even for those trained in the valuation field. Similarly, obtaining two different valuations also isn’t an unheard of occurrence, and is the reason many investors will head to a different bank to obtain financing, particularly after a renovation.
Observer <a href="/expert-insights/investing/24155-wednesday-july-3-upper-right-mark-armstrong" target="_blank">Mark Armstrong refers to bank valuations as being ‘murky waters’</a>. “Remember if a valuation comes in too high and the bank loses money on the loan then the valuer maybe legally liable,” he notes, which may suggest why there is also a general impression in real estate that valuers are conservative with their estimates.
Similarly, it has been pointed out time and time again, such as <a href="/expert-insights/investing/13600-home-valuations-can-be-subjective-" target="_blank">by Mal James in this article</a>, that valuers are subjective. This is because they are human beings, and they act with the information provided and their knowledge to come up with the best possible response.
3) There are multiple types of valuation
While we’re focusing on a fairly rigorous in-person valuation, there are a number of different types of valuations. From the DIY desktop valuation (which have <a href="/expert-insights/investing/16329-diy-website-property-valuations-mostly-askew" target="_blank">varying results of accuracy</a>), to the ‘kerbside’ drive by valuation, be aware that not all are created equal.
RP Data lists four different types of valuation that you'll want to understand:
<ol>
<li>Full valuation</li>
<li>Short form or pro forma valuation</li>
<li>Restricted valuation (to include “restricted assessment”, “kerbside” and “drive by” valuations)</li>
<li>Desktop (to include electronic valuer review - EVR)</li>
</ol>
4) Comparables are heavily relied upon
One of the major aspects that valuers look at to come up with a final figure is that of 'comparables'. That is, recent sales in your area that are close to your property in location and type. A valuer will be required to judge whether your property is superior or inferior to these sales, and so adjust their valuation accordingly. If you want to get an idea of how the valuation may stack up, it'd be worth finding out the latest sales that they will be looking at. This also means that for properties in remote areas, or unique style homes, it will be trickier for the valuer to come up with a figure and, therefore, more subjective and down to interpretation.
5) You can assist the valuer 
As with any property, present it with its best foot forward for the best change of securing a good valuation. While valuers do not want to be harassed, told how to do their jobs or provided information that could sway them against the numbers, you can be helpful and provide information about improvements undertaken since purchase.
Be on site, ready to ask and answer questions, and have all the information about your property on hand.
Despite the reasons to get a valuation, there’s always the other side of the argument. If you’re considering a valuation, you may also want to hear <a href="https://www.urban.com.au/expert-insights/investing/19324-tuesday-upper-right-terry-ryder" target="_blank">Terry Ryder’s thoughts on why valuations are a “waste of time and money”</a>. Late last year, Property Observer also covered a <a href="%20http:/www.propertyobserver.com.au/financing/26422-valuation-industry-needs-overhaul" target="_blank">heated debate that asked for an ‘overhaul’ of the valuations industry</a>.
Tips for those wanting to get the best from a valuer:
<ul>
<li>Provide them a list of comparable sales (potentially inside the same project, as well as some that are not). While not all valuers will use them, some will. 
</li>
<li>Apply for finance six months before completion, not six days and if you find the valuation comes in low it gives you time to get a third and a fourth. 
</li>
<li>Attain your own valuation, using a valuer that is on your bank's panel of valuers. 
</li>
<li>Ask to see a soft valuation so you can check the comparables used and the comments made. 
</li>
<li>Bear in mind that the valuer often has a different valuation for mortgage purposes as opposed to sale purposes. But mainly: 
</li>
<li>Do your research beforehand.  Go out and look at 100 or even 10 before you make a purchase decision. If you've done your research you should be confident it will value up.</li>
</ul>
Source: CPM Realty
FURTHER USEFUL READING 
<a href="/expert-insights/finance/15169-property-valuations-get-them-right" target="_blank">How to get property valuations right</a>
<a href="/expert-insights/investing/15397-property-valuation-101" target="_blank">Property valuation 101</a>
<a href="/expert-insights/26499-letters-to-the-editor-valuation-experiences" target="_blank">Letters to the editor: Valuation experiences</a>
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jduke-EHk3XBmHkn

Valuations: Five must know facts

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Agent step quoting is a contentious part of our industry: It’s how selling agents nudge buyers up the staircase towards a price their clients are hoping for.
Done badly it can make buyers feel cheated and manipulated and invite accusations of under-quoting. Done well it’s a legitimate haggling process agents use to get a buyer and a seller to meet at a price point they’re both comfortable with.
We usually only hear of step quoting when it’s done badly as it highlights the low-skilled, unethical agents almost immediately. When highly skilled agents use step quoting successfully it goes unnoticed except through careful examination at a later date. Yet within the inner-east and bayside million-dollar-plus markets it is a particularly common practiced black or noble art depending on your point of view.
How does it work? Well at the top of the stairs in step quoting you have a seller, a mum or dad just like you and they think their home is worth $4 million. At the bottom of the stairs in step quoting is you, the buyer and you think the home is worth early three’s, but your dream price is $2.95 million – you don’t want to admit to a 3 in front of it at this stage.
Both you and the seller are interested in the transaction because the seller feels it’s time to move on and you hoping it’s time to move in.
You’ve seen the home in an ad and you’ve rolled up to the first open for inspection. The selling agent at the door says $3.2 million plus when you ask the “how much” question, while not in any way looking interested under your recently purchased “anti-agent” dark sunglasses.
“Mmmmm, $3.2 million – a bit more than the $2.95 million” you thought it was worth and maybe you will have to concede it’s going to have a 3 in front of it. You’ve moved a step to step two – not that painful.
But hold on, wasn’t that $3.2 million quote underquoting by the agent? Hasn’t the agent committed an offence by quoting at this stage a price much lower than they said the property may sell for?
Let’s press rewind for a minute.
OK Mal, how can the owner realistically think the home is worth $4 million? Trust me, this for many is not a dream figure, this is a cast in stone, almost religious belief and it comes from one of four sources: the agent told her, her mate told her, another agent told her or the tea-leaves told her – but she believes right now her home is worth $4 million when quite possibly in this falling market the home is considered low $3 millions by most serious buyers and even the agent currently trying to sell the home.
How come? Time lag and the well-known leap of faith valuing technique. Ten weeks ago the owner met with a number of agents – some competent, some not so competent and some downright rascals, and the average of what the seller was told seemed to be $3,400,000 to on a really good day $3.7 million. One rascal agent did say $4.3 million, but the two other competent agents said mid-$3 millions. With each of the two “mid $3m’s quote” competent agents the seller asked “do you think I can get more, could I get $4 million” Each agent, who still wanted to get the job replied “it’s possible but unlikely”. Luckily for the seller one of the competent agents was engaged, even though he was not the highest in value estimate.
That was 10 weeks ago, this is now.
The vendor, who is now getting more emotional, is convinced more than ever that the news of the world doesn’t apply to her – when in fact it does and her $4 million was always $3.7 million on a good day – yet the market has dropped 10% in 10 weeks and her home is now worth $3.4 million – on a good day with plenty of bidders. The selling agent doesn’t know yet if the home will have plenty of bidders as this is the first open for inspection and so being professional and with an obligation to the seller’s interest first and foremost they are quoting $3.2 million plus. You tell me – is he dealing morally, legally or ethically?
The first open actually went pretty well and the selling agent put seven names onto their list. As one of my favourite agents and master of the step quote once explained, there are three lists: the door list (everybody who goes through is on that), then there is the engaged list and finally there is the buyers list.
But that’s another story, back to the steps and step quoting. It’s week two and you notice in the papers the home is quoted at $3.4 million plus. “Mmmm,” you think, “they must have interest”. Well, they may and quite possibly they may not. Think about it – the $3.4 million-plus quote would have gone in before the first open to meet printing deadlines, the new quote is not a response to the first open for inspection(OFI) but part of a well-planned step quoting process.
Article continues on next page. Please click below.
<hr class="system-pagebreak">
You are back at the second OFI and you ask about the quote – of course in a manner behind your “anti-agent” dark sunglasses so as the agent knows you’re not interested.
A reply comes either “that was a printing mistake” (one of my favourites if the campaign hasn’t leaped out of the blocks in the first week) or “yes, we’ve had a lot or interest and so we put the quote up”.
At this point a number of things have happened – you the buyer have made it onto the second list – the engaged list – as you are a “repeat inspector”. Second time round you really like this home and you, the buyer, have now gone to Step 4 begrudgingly. Step 1 was your dream price $2.95 million and you blew past Step 2 ($3 million) and Step 3 ($3.2 million) and your teetering around Step 4 ($3.4 million).
Meanwhile back at the ranch the selling agent is also doing all he can to pull the vendor back down from the top step of $4 million – talking about clearance rates, and falling prices and global recessions. The vendor won’t budge. “You said I could get $4 million,” she says.
Week 3 and you are back at another open for inspection – you are now being considered a serious prospect. But the price has gone up again: “We have had some interest at around $3.7 million. How do you feel about that? “ the agent asks you.
Actually you feel sick, but behind your special “anti-agent” sunglasses you trot out, “Mmmm,  guess that puts me out” You think $3.7 million, OMG. What – I’m not paying over $3.6 million”, and so welcome you’ve arrived at Step 5 in the step quoting process.
The agent has deliberately not asked the vendor for a reserve as he is aware of what she “may” want and also aware of the law. Meanwhile the agent is pummelling the seller with reports of how the serious buyers have either fainted or been abusive when they hinted at a price of $3.5 to $3.6 million.
So come auction day; you the buyer are at Step 5 with a lean and our vendor is at Step 7 with a lean.
The home is naturally passed in and the selling agent runs up and down the stairs until a result either happens or the vendor sticks to her guns, and the home is listed for private sale the following week.
So, has the agent acted unethically or illegally?
He would have if he had told the seller that she could get “$4 million, no worries, I promise, maybe even $5 million”, and then once he had “bought the job” given the buyers a quote of $3 million at every open for inspection and never made any effort to work (explain to) the buyer or the seller along the steps.
Such agents are unethical and lazy and unfortunately they are too plentiful in supply through deliberate training or poor supervision.
But are agents who work to bring the buyer up to maximise the vendor’s price, and the vendor down towards what the market will pay, which ultimately achieves what the vendor wants (a sale), doing their job ethically and professionally? In these cases it’s a fine line, but if you are a buyer that moves up the steps and you have been informed along the way then well, are these quality agents not just doing their job very well?
Why you as a buyer may need some professional help? In this market what happens if you are the only buyer on the engaged and buyers list since the first quote of $3.2 million plus?
You mightn’t like being run up the step quoting stair, but that’s how the property market works, and the highly skilled selling agent’s job is to get the best price for his or her client, who, by the way, is not you.
Mal James is principal of<a href="https://www.jamesbuyeradvocates.com.au/" target="_blank" title="James Buyer Advocates"> James Buyer Advocates</a>, which advocates on behalf of buyers of property over $1 million. Mal writes weekly auction reports, advice and in-depth market analysis on James' website.
This article was first published on Property Observer in September 2011.
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Here's how the auction process really works: A buyer's guide to step quoting

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Good Negotiators see lies as actions
What is it we are trying to do? Reach an agreement.
Why is the agent lying to us? To reach an agreement – hopefully with us!
Lies can be very positive things
<ul>
<li>They can be an attempt by the other side to get a connection which they hope will lead to an agreement – they show a willingness to treat.</li>
<li>They are often a way to the truth if that is what you seek</li>
</ul>
Lies are actions designed to get a connection that otherwise (in the opinion of the liar) may not have happened.
Good Negotiators are looking for connections, even with liars
Connection – is the first and last step of any deal. Without connection you have no deal. Connection is the key ingredient of an agreement, more so than price.
Price is a figurative expression, the end product, of a connection of minds that have formed an agreement based on perceived facts and the actions of the parties.
A well-executed lie can get a connection – how many people don’t bid until there is another “offer”, but then bid under threat of one and a deal is struck.
A poorly executed lie can destroy a connection – the buyer will pay the asking price and probably more, but just doesn’t. Why because they don’t trust the agent, based on previous perceived lies and so moves onto another home.
But we’ve found its not always the lie that breaks or prevent the connection – it’s the reaction to it that does.
Good Negotiators and the blunt instrument
If you cannot get connection in a negotiation then you are forced to use a blunt instrument until you get a connection.
And that blunt instrument is?
No, it’s not a club or a fist – its cash.
That’s expensive to you or your client.
Buyers most affected by liars.
<ul>
<li>Out of the market for a long time</li>
<li>Interstate and overseas and different cultures</li>
<li>Not business orientated or</li>
<li>Buyers with egos not suited to best dealing with agents</li>
</ul>
Article continues on the next page. Please click below. 
<hr class="system-pagebreak">
Good Negotiator and the moral high ground
Creating that connection isn’t best served by creating an emotional response and putting yourself on the moral high ground above those ‘lowly” agent liars. You might feel better able to defend yourself against the lies, but it also lessens your chances of connection.
Have you never said something or changed your mind, in an attempt to influence, that you think might be or you know to be different from what you have said. Are you really all alone on that moral high ground?
In Melbourne home buying you are a further away from the action when you are on the moral high ground and that means less chance of connection.
And remember the lesser the connection, the greater the use of the blunt instrument (cash) or you miss out.
Don’t let lies drive you to the moral high ground without due consideration.
Good Negotiators have very few attachments
Yes all buying and selling agents have heard the line “I’m not attached to this home”.  Most times when this is said a neon sign miraculously appears above the speaker’s head and its flashes: Liar, liar pants on fire – I am actually really attached to this home.
The better negotiators, whether liars or not, are good connectors; but they have little emotional attachment to a number of the things they say and you say.
In professional negotiation we have found if you limit the attachment, you limit the emotion and then you minimise the hurdles to connection between the parties.
Non-attachment is not a concept determined by the spoken word. It’s determined by an emotional feeling and only the very skilled can disguise their attachments from professional negotiators.
Paradox: Non-attachment is a characteristic of a good negotiator but also a characteristic of a good liar.
Good Negotiator and reading the play
A lie is good when you are the other side’s intended target of the deal and you read it correctly.
A lie is bad when you misread the lie and/or you are not the other side’s intended target of the deal.
Good negotiators can for the most part read the differences between a lie and a truth.
We (James Buyer Advocates) don’t get every nuance, every subtle ploy exactly right when dealing with liars and we don’t need to – because to do so means the experienced negotiator is focussing on the minutiae. Good Professional Negotiators always have an eye on the big picture – the client’s desired outcomes.
Good Negotiators carry a big stick (if they can find one)
Good negotiators carry a big stick in dealing with liars – please don’t read into this article that we are saying good negotiators should acquiesce to liars and accept lies.
Good negotiators don’t condone lies – after all its not an efficient way for a market to operate.
The big picture – good negotiators hit back in a timely manner (where appropriate) where a lie can be used against the liar. Many, many times a lie designed to increase the price actually lowers it – when used well against the liar by a professional negotiator.
But good negotiators don’t focus on hitting back at the expense of the client’s desired outcomes.
If we are lied to and it’s appropriate (to our clients benefit) we will return a lie with interest, but we don’t do so in a highly charged emotional state.
Article continues on the next page. Please click below. 
<hr class="system-pagebreak">
Good Negotiators &amp; TRUST – lying is not the only way to deal
A number of the better agents, be they buyer or seller agents, do not “materially” lie to their clients – they really don’t.
I’m not on the moral high ground here – its purely business. It’s never a good battle strategy to have mistrust within your own ranks. We don’t buy around 85% of the homes we go after at auction and over 90% of the homes at EOI because we are perceived as liars to our buying clients.
And we didn’t buy over 100 homes in 2013 around the $2 million to $4 million mark because we lied to those above same very experienced selling agents or they lied to us on a regular basis. A number of professional deals between experienced and competent negotiators are based on a healthy amount of trust and to be trusted you cannot lie (to your advantage) on a regular basis to those you represent or deal with (and get away with it).
You may have noticed that we have deliberately avoided a specific definition of what constitutes a lie – we have circled around it. Why? In our opinion, a unilaterally agreed definition of a lie is not the main game in Melbourne home buying. Is it a lie or is it bullshit and is their a difference? It is not important whether or not you and I think that a particular statement is a lie. If you perceive it is a lie, then for all intents and purposes it is a lie to you.
Healthy trust – is not blind trust – scepticism and independent, competent due diligence must always be part of the armoury of a good professional negotiator – after all the other side’s desired maximum outcomes are rarely the same as yours.
So for every liar and deal done on a lie there are many more we do with truth tellers and deals done on truths.
Good Negotiators and culture
In our early days of multi-cultural and international dealings we would get upset if things didn’t go the way for our clients we wanted them to go. And as you know, being upset means getting emotional, which leads to body changes and this was not in our future clients best interests. So we changed. 
As previously stated, successful negotiators often look on a negotiation as a battle situation – they might follow Sun Tzu’s teachings – he would consider as positive, a deceitful move on the enemy if it resulted in a victory.
Different cultures have different ways of looking at what happens within a negotiation.
<ul>
<li>When I’m dealing with Indian sellers, agents or clients, for instance, I perceive it to be a moving goalposts culture.</li>
<li>When I’m dealing with Chinese people the goalposts seem to be very firm – but sometimes it takes me a long time to find where those goalposts are.</li>
<li>Both of those cultures operate in a different way to my Anglo-Christian upbringing – which lets face it has a far from perfect historical past in negotiations.</li>
</ul>
To say everybody who thinks differently to you is wrong and a liar will really only hurt one person in Melbourne home buying – you; or in our professional case, our buying client.
The same goes for the agents' culture. Each real estate agency in Melbourne has its own particular culture and there are huge cultural ‘moral’ rule differences between those companies.
RT Edgar is very different from Kay and Burton and Jellis Craig is different from Marshall White – they all have their own way of operating with people on the other side of their fence (you the buyers).
And as buyers you really need to understand that many agents do not perceive what they do to you as morally wrong and who’s to say which actions are and which aren’t?
Lies or perceived lies are endemic within the Melbourne property market.
Some may say all agents are liars.
Some may say all humans are liars.
The recognition of a lie can affect your body and mind chemically and make you react in ways detrimental to your best interests.
If you want to maximise your options and ultimately your longer term outcomes when buying in $1 million plus Inner Melbourne in 2014 then we feel you need to have an understanding of lies when dealing with agents and multicultural negotiations.
If you cannot deal with lies then your alternatives may well be limited to offering more cash or to missing out.
So don’t get mad or get even, get what you really want!
Stay focused on your longer term emotional, financial and physical outcomes above all else.
At times lies us affect us all – but its the circumstances that surrounds the lie and our reactions to it, rather than the initial lie itself which ultimately determines the damage it does to us.
Mal writes weekly auction reports, advice and in-depth market analysis on <a href="https://www.jamesbuyeradvocates.com.au/" target="_blank">James' website</a>. 
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How good negotiators deal with liars: Home buying in the Melbourne property market

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Lies or perceived lies are endemic within the Melbourne property market. Many dinner party conversations include the “fact” that some real estate buying and selling agents are liars and whether that is true or not is largely irrelevant, as people believe it to be so.
Lies can be very hurtful and we all want to avoid pain if we can; but lies and perceived lies are also part of buying Melbourne property, part of doing business in general and in fact part of living.
If you can deal with lies effectively, then you will have
<ul>
<li>More choice of homes</li>
<li>Buy some homes a lot cheaper</li>
<li>Make a lot better decisions</li>
</ul>
We are involved in several home negotiations each week and we deal with lies to our client’s  advantage.
What does a lie do to you?
You can buy a home at $2,500,000 and you like the agent and you think its good value. Why is that an easier decision to make than when you don’t like the agent because he lied to you and the same home is for sale at say $2,300,000?
Why is that?
Lies chemically affect your conscious and subconscious mind?
When a lie is recognised by you and it emotionally (physically) affects you:
<ul>
<li>The conscious part of your mind pumps in self-protection hormones and</li>
<li>The unconscious part of body starts to put in place defence mechanisms or</li>
<li>Both happen</li>
</ul>
As the defence mechanisms arrive you become more wary (natural human protection instinct) and you are biologically programmed to say ‘no’ rather than ‘yes’.
Our bodies have evolved to react to a lie as a danger. Our bodies feel that the person who is lying to us is trying to gain some advantage over us and this may in fact hurt us and therefore we need to be protected from it.
It’s a natural human survival instinct to avoid first and ask questions later. He who runs away lives to fight another day!
And herein lies the real damage a lie can do to a buyer.
Lies create emotion, which if not managed correctly can lead to poor decision-making.
How can lies really hurt you?
Recently a well known agent liar was marketing a property over $4 million in the Stonnington area and the underbidder in these negotiations was incredibly upset with not buying the home he really wanted to buy.
The buyer could afford it, in the end he felt the price was OK, but couldn’t bring himself to say yes to the agent.
Why not?
Because his fear of being lied to was greater than his fear of missing out? His body was so chock full of conscious and sub conscious protective mechanisms, due to the process that the agent had put him through, that his mind became clouded and ultimately he made a bad decision.
He became frozen by the lie, as a kangaroo is immobilised by headlights. He so regrets his decision now and no court case will ever bring back that one-off lost opportunity.
As we said at the outset lies are perceived as endemic in the Melbourne property market.
Whether agents are liars or not is, in many instances irrelevant, as they are perceived to be liars due to experiences, dinner party stories, the press etc.
Truths when perceived as lies affect your body exactly the same as actual lies. You have the same chemical reactions.
<ul>
<li>How many times has a buyer missed out on a home they really wanted but didn’t act, when they were told there was another buyer and perceived the agent was lying, when in fact he wasn’t.</li>
<li>How many times has a seller missed a great deal when the buyer walked on a perceived lie and the next buyer, a few months later, paid a lot less.</li>
</ul>
This is the one of the real buyer problems of a lie or a perceived lie. Most people can recognise a bald-faced lie on its own; but many cannot recognise a bald-faced truth, especially in amongst a number of bald-faced lies.
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Are lies bad or something else?
In a battle situation, a student of Sun Tzu would consider a deceitful move on the enemy an element or an action or a bluff, more so than a lie. That action would be seen as a good thing if it resulted in victory.
Yet the loser or an observer not connected with the battle may see the same action as a bad thing.
Modern day example: An agent says to you make an offer and you will be rewarded, but then takes your offer and pressures another buyer who offers $20,000 more, which then delivers a higher result to the seller but you miss out.
Has the agent lied to you? A battle strategist would say well done, the seller probably the same; but you the buyer would not think that. And the agent – has he met his ‘moral and ethical and legal’ guidelines by maximising the seller’s position?
Does he think he lied? Should he? Maybe he sees it as poker and it was nothing more than a bluff. In poker is a bluff a lie or is it just a bluff?
On the other hand you have been negotiating with a seller for months and you are down to the last $20,000 on a $5,000,000 deal. The seller asks have you any more money. If you say yes then you know it will mean more negotiations. So you say absolutely no and the deal is done.
Did you lie or was yours a bluff, but the agent’s action was a lie?
They were both $20,000 negotiations – just different long term outcomes for you.
So are all lies bad?
Is the beauty of a lie in the eye of the beholder?
Are you being lied to or are you lying to yourself?
Why do lies affect some more than others?
It is the level of self-interest connection to the lie that determines your emotion, which is turn determines your body’s conscious and sub conscious reaction. If the perception is no danger to you then the chemical reaction is minimised.
From our experience the level of perceived self-interest determines emotion.
When an agent lies to me (a professional buyer advocate) and I recognise it – it is a very different emotional response and therefore very different mind/body response to when an agent lies to you (the buyer) and you recognise it.
The altered state of a competent professional negotiator’s mind would be far less than yours.
As a buying or selling agent we have some skin in the game (our fees) but that is only a minute fraction of emotion compared to you the seller or the buyer.
As well we have the added advantage of having the experience of being able to deal with our mind/body change in this instance.
At the Augusta Masters every year the leaders on Sunday’s back nine all have their bodies pumping in the adrenalin. But some cope better than others – much of it due to golf tournament experience, which allows some to manage their changing mind/body states better and make better decisions.
Tip: Separate the lie or statement from the liar it reduces the emotion.
Let's take the buggers to court 
At those dinner parties we’ve all been regaled with how the speaker is going to deal with the agent liar. First he’s going to sue him, then take him to the CAV and have him stripped of his license, then he’s going to make sure that the lying agent never works in this town again. It’s the principle you know!!
Mmmmm – none of this work for us, not because it is a wrong or right thing to do, but because if your focus is on payback, then your focus is on the personalities of the deal rather than your best long-term home outcome.
We have found the more you primarily focus on your desired outcomes, the more likely you are to achieve them. So is your primary focus payback to the agent or buying the home?
Lets not deal with liars then, lets work with decent honourable agents only!
If this is your thought then your main focus is not the home itself, but an agent who doesn’t lie. You don’t want to buy the best home for you – you want to buy the most pleasant deal.
In this scenario it’s all about how you temporarily feel about the deal and not how you permanently feel about your home. The word “short-sighted” comes into my mind about now.
If a liar is marketing your dream home then to actively not negotiate can be triply bad for you.
<ul>
<li>You are not buying the home you really want.</li>
<li>The liar is bullying you emotionally</li>
<li>You could be missing a better deal than you think. Most buyers can recognise a liar and many buyers don’t like to deal with liars. So a reasonable stretch of this argument is that the “lying” agent may actually remove a number of your competing buyers on the home you want.</li>
</ul>
To buy the dream home that achieves your best financial and emotional and physical outcomes you may have to deal with a liar in order to be the buyer.
Don’t get mad or get even, get the outcomes you really want
Stay focused on your longer term emotional, financial and physical outcomes above all else.
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Negotiating with liars: A necessary part of the Melbourne property market 

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Somehow when we talk about the biggest phenomenon in Inner Melbourne home buying, Chinese nationals, their spending power and the apprehension that is increasing out there among some home buyers when competing against overseas buyers, we get diverted from the main game.
The main game, in our mind, is not the Chinese nationals themselves. It is how they as a group have been changing the face of Melbourne home buying, particularly since 2009, and how you need to deal with the associated price issues that overseas wealth (demand) and reducing housing stock (supply) will have on you and/or your children’s current and future home buying plans.
What has been happening in the market in the last five years (post-GFC) <a href="/expert-insights/investing/29833-chinese-buyers-in-melbourne-a-simple-case-of-supply-and-demand" target="_blank">is more about demand, supply and price than about Chinese nationals</a>. Big picture-wise, the price and supply changes we are seeing would have happened eventually due to organic population growth. However, right now the overseas market, and in particular the wealth and actions of Chinese nationals, are significantly accelerating the price and supply issues through their demand.
<blockquote>
Overseas buyers are not buying every home, everywhere. Their effect is much more like a snowball rolling down a mountain; in some markets this has turned into an avalanche, whereas in others it is still just a small snowball rolling down a mountain.
</blockquote>
As home buyers you need to deal with this, just as you need to deal with agents, auctions and other nuances of the Melbourne market.
Overseas buyers are not buying every home, everywhere. Their effect is much more like a snowball rolling down a mountain; in some markets this has turned into an avalanche, whereas in others it is still just a small snowball rolling down a mountain.
The effect of overseas buyers is best evidenced by the different strengths and bidder depth in the Inner East markets versus the Bayside markets.
The Inner East market is where Chinese national bidding is the most significant.
<ol>
<li>Inner East had a far shorter GFC period in 2008/2009 than Bayside</li>
<li>Inner East had minor price drops compared to Bayside in the GFC and in 2011/12</li>
<li>Inner East has stronger price per square metre land prices across the board (except absolute <a class="st_tag internal_tag" href="https://www.urban.com.au/property-observer" title="Posts tagged with Brighton" rel="tag">Brighton</a> waterfront)</li>
<li>Inner East has changed streetscapes in many areas. with new builds specifically aimed at the Chinese national market, e.g. <a href="https://www.urban.com.au/property-observer" target="_blank">Balwyn</a> and <a href="https://www.urban.com.au/property-observer" target="_blank">North Balwyn</a>.</li>
</ol>
Short-term and understanding the changing market nuances
As buyers you need strategies to compete against wealthy overseas buyers now and to buy well generally now. You also need to understand as buyers that EOIs are set up in a number of cases for Chinese nationals and other overseas buyers. You need to manage that if the home you want to buy is being sold through an expressions of interest campaign.
You need to understand how Chinese nationals and other overseas buyers value land and buildings, so you can compete effectively.
You need to understand how different cultural influences affect private sale and EOI negotiations and you need to know how to prepare and bid at auction when competing against overseas buyers.
If you don’t, or your strategy is to wait, then we think you may have issues, as we have tried to illustrate in the above diagram.
But it’s not just about you buying a home now. What effect will this significant influx of wealth have on your children buying homes?
Longer term solutions and a different strategy
As buyer advocates, a large part of our business has always been buying generational homes for families to live in and pass on. We have acted many times for local and overseas clients, including Chinese nationals, with this as a key desired outcome.
An increasing market segment for us (with a slightly different take, but same desired outcome) is the purchase of smaller, well-located family homes through super funds.
These $1 million plus homes are bought as quasi-investments and sit in super funds with the view they can return some cash and provide some growth in the medium term; but ultimately they are purchased for our client’s children as a hedge against being priced out of the market.
Generational Homes for you and your children
Personally my family lives in a three home estate in Brighton with grandparents and parents and children. This has been set up like this to assist future generations to remain in the area (if they so choose).
It was relatively easy for my generation in the 1970s and 80s to move from Outer Melbourne (Doncaster was then Outer) to Inner Melbourne (Malvern then Brighton).
But how easy will it be for our children to find a home? Our children may well be the first generation that is living in poorer accommodation as adults than they grew up in as children.
Unless our children are rocket scientists with an entrepreneurial bent, or they get parental help, they will be moving further away from Inner Melbourne on affordability grounds. Or they will be living nearby but in apartments.
In moving further away from Inner Melbourne your children will also be moving further away from infrastructure, transport, school choice, the footy, restaurants and you.
We suggest you develop strategies now.
We are not for or against overseas buying, just as we are not for or against first home buying grants or for or against negative gearing. Our job is not to debate. We see our job as raising the issues and helping our clients find solutions. We are buyer agents operating in the Top End marketplace.
We feel this best helps you, the buyer, consider your options now and into the future.
Mal writes weekly auction reports, advice and in-depth market analysis on <a href="https://www.jamesbuyeradvocates.com.au/" target="_blank">James' website</a>.
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Mal James

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