In the Media

BEHIND THE BIZ // Highlands Arrivals

Interview Transcript

Lindsay McDougall (00:01):

ABC Illawarra, a couple of more texts coming in about Dutch auctions. Someone here saying about eight years ago, my daughter was house hunting in Dunedin, New Zealand. Looking there, I kept seeing these deadline sales, which seem really common and similar to what we're calling Dutch auctions. Bob from Carmel's raised a point, which I don't know: "It's a bit of a conspiracy. I dunno what a scam. The practice is wide open for dishonest phantom offers that artificially inflate the market value and should be illegal" says Bob. Yeah, I dunno. I mean that would be a real scandal we're talking about, and you may have seen this on the Southern Highlands Community Facebook page, a huge response there, the Dutch auctions. This is also known as best and final offer scenarios where an agent has multiple interested buyers. Maybe they've already gone back and forth and asked them to increase their offer, but now they ask all parties to put in their best offer by a certain time, and the winner takes all. As a buyer, it can be a really difficult thing to navigate. As someone selling, I'd love to hear from you. How does this benefit you? Give us a call 1300 973 300. I've got an expert on the line to talk more about this. Suzi Bryant, Director of Highlands Arrivals Buyer's Agency in the Southern Highlands. Hello there, Suzi.

Suzi Bryant (01:19):

Hey Lindsay,

Lindsay McDougall (01:20):

Can you just start off, we sort of skirted around this, but can you give us some more detail on how these Dutch auctions work?

Suzi Bryant (01:26):

Yes, they usually happen, well, they always happen when there's more than one person interested in a property at the same time. And so it's basically the agent and the vendor chat and they're like, "okay, we've got two people who are both interested. They're both prepared to pay the price guide for the property. What are we going to do?" And so what happens is they say, okay, everyone's got till Monday, five o'clock or whatever the timing is, to put in either an email or a sealed bid that only the agent will see and they'll only be opened at that time. Then the vendor goes through them and they include not just the price but the terms. So for example some people might say, "oh, I really want to buy this property. I'm prepared to pay this huge amount, but I can't actually settle, so pay for the property in full, for six months."

(02:18):

Whereas other people might be six weeks to settle, which is more normal. So they put in their terms, they put in their price, and then the vendor goes through them all and chooses, and then after that point, no one can increase their offer. So people have to know what they're prepared to pay, what they're going to be happy walking away from. They're going to be going, "yep, I put in a fair price and I'm happy to just walk away and not get it and not be like, oh, oh, I wish I put in more", which is really difficult. That's the really hard thing to work out - where you're going to be happy and where you think the properties sits in value, and where the other potential buyers will go as well.

(02:58):

Yeah, and that's the thing. There's some homework you can do to try to work all of that out. And that's so important to do because you don't want to be, like Stefan was saying, you don't want to be paying $20,000, $30,000 above the next person.

Lindsay McDougall (03:12):

Yeah, well, this is, someone on this post is saying that we paid too much for a house in 2021. It was the peak of the market and they could pretty much do what they wanted. We put in our bid and then we upped it by $10K to ensure we got the property. We only had one chance to make an offer, and if we're out bid, it was too bad. You need to know what you can afford and what you're willing to pay, as you were saying.

Suzi Bryant (03:38):

Yes, absolutely. And I mean that's important. So the big thing is rather than doing it blind it's really important to actually get from the agent a clear understanding of the process. And I think it's a bit like when you're going to doctors and things. People are a bit afraid of asking questions, and I really think you need to talk to the agent and say, "well, how many other people are involved?" Get an understanding for the process and get clear communication. There are three people involved. They're all going to be putting in bids. You can also say, well, who are these three people? You won't get their names or anything, but are they families? Are they investors? Are they treechangers or seachangers? Who are they and what's their high-level story? And also an understanding of the vendors because do they desperately need to act quickly? Do they want to buy another property? Is it children selling on behalf of their parents? And in which case, how many children are there? How are they splitting it? All of those kinds of questions. Or even does the vendor have anywhere to move to because they might not, they might just be selling to try to get a great price and don't actually need to sell. So in which case it's going to be much tougher.

Lindsay McDougall (04:58):

Because they don't need to sell it. Why do agents do these Dutch auctions instead of just going to auction? Or what kind of happens up to a point in Dutch auctions where they just back and forth, this is what they've offered. Would you like to offer more? Why go to this Dutch auction?

Suzi Bryant (05:14):

You mean "This is what they've offered. Do you want to offer more?" You can only legally do that if the vendor and the other people bidding all agree to disclose their pricing and people just don't. So that's really hard. I've only been involved in one of those in the years I've been working. And actually we were all negotiating for six hours in 1 thousand dollar increments. That was the most painful process in the world. It was horrible. But I mean, it was kind of good that we all had visibility. So the question about auction, there were a lot of auctions s mid 2023 because the market was changing so much and people didn't really know the value, but properties do take a little bit longer in the regions to sell. And so it was quite rare that they sold at auction because it was quite rare that there were one or more people ready to buy at the four week mark.

(06:11):

And so what tends to happen is they sit on the market for a month or two and then all of a sudden it's like traffic bunching. It's like all of a sudden there'll be a couple of people interested in a property. And that seems to be the way things are done. And what used to happen if that ever happened, when things were much quieter, I guess before the peak of the market and before Covid, it was quite common to say, "well, okay, first person with a signed contract at this price gets the property." And I guess what's happened is the market's gone up and up and now it's dropped, the value's getting harder and harder to determine, and it's actually the vendor that instructs the agent to say, "oh, can you get any more, try to get some more money." And so this is sort of the fairest solution to come up with it and to say, "okay, well let's let everyone give it a go and you accept one of them."

Lindsay McDougall (07:08):

This is the agent job, of course. To maximize. Yeah.

Suzi Bryant (07:10):

And that is, the agent has to work in their best interest. What I'm always slightly worried about, and it's never happened in all the times I've been involved in this, is that then someone who's missed out will come back and go, "no, no, no, I want to put in a higher bit after this best and final, "

(07:26):

I'm so glad that doesn't happen. That would be painful.

Lindsay McDougall (07:30):

Well, Jim has sent a message saying that vendors agent did their best and final offer thing. We put in our bid as requested. Then the agent started negotiations as if the Dutch auction hadn't happened. Now, that sounds like a very much of a double dip. I know that Dutch auctions aren't illegal, but is this, or at least unethical?

Suzi Bryant (07:49):

There's no law against agents getting a best price, but when you're going into best and final, you need to stick with it, I mean, they've probably had the vendor say, "oh, oh, oh, try to get more money," but you really need to stay with best and final. Yeah, it is unethical. I mean, with Best and Final, you've got to stick with that. And even if there's more money out there that you could get, you've got to be like, "no, we agreed this is what we're doing," and accept the best offer and be happy with it. Because that's hard, that's heartbreaking for everyone.

Lindsay McDougall (08:16):

This is for at least a lot of people, this is where you are going to live. So you've obviously, in your mind, you've projected your life, your family, your world into this

Suzi Bryant (08:25):

Place. Yeah. You're emotionally invested in it. Totally.

Lindsay McDougall (08:28):

Absolutely. What about, Bob suggested this, and I don't know, Bob says, the practice is wide open for dishonest phantom offers now. Now that sounds like it's illegal. You can't invent a potential buyer that's bidding more than the real buyers

Suzi Bryant (08:42):

You can't. No. So that is illegal, and the agents would lose their license. Because I help people buy property, twice we've called the agent's bluff with said, "no, no, it's not true. We're going to stick with this." And both times we've missed out to another buyer.

Lindsay McDougall (09:00):

Real buyer. You called their bluff and you lost.

Suzi Bryant (09:04):

Yes. We

Lindsay McDougall (09:04):

Lost. You got to know when to hold them and to fold them, I think.

Suzi Bryant (09:07):

Well, exactly. And look, I mean, this is specifically in the Highlands, but even in the Illawarra, they're small communities. And I mean, you do stuff like that and you're run out of town, you have to act ethically, of course, with integrity.

Lindsay McDougall (09:25):

Suzi Bryant is with us, the director of Highlands Arrivals, buyers agent in the Southern Highlands. So you mentioned to know as much as you can about the house, about the people selling the house, the vendors, if there other potential people who want to buy this as well. Is there any other advice for people who find themselves in these best and final office situations?

Suzi Bryant (09:43):

Yes, so understand all of that and write a letter. People want to sell to people that are going to love their property and aren't going to bulldoze and build apartments. You know what I mean? So write a letter saying how much you love it. "Oh, my children want to stay here, or I've always wanted to retire here, and it's my dream. I love your garden, your trees, gorgeous." People don't want people cutting down trees, so write a really emotional letter to go with it and say, " am really, really passionate about this property." And that's okay for them to know at this point. You don't hold back at this point. It's okay to say that. Also make it an odd number. So rather than just guess a price, look at comparable properties like properties that are similar that have sold around the area. And so say, "okay, so we know that there are two other people bidding. They're going to have looked at this. They're probably going to have worked out, this is where the value sits for this property." And so sort of do those smarts and then go, "okay, I'm going to go $7,227 above that, and that's because that's a combination of my children's birthdays." Just sort of pick a number that you are,

Lindsay McDougall (11:00):

That they're not going to pick. Yeah,

Suzi Bryant (11:02):

Yes. That they're not going to pick. But also try to be a bit smart about that. For example, I had one case and it was children selling a property that had been their parents, and there were three siblings. And so we worked out, oh, once the agent fee comes out, they want a really nice round number that's divisible by three. And so we did that. So you could work things like that out as well and just sort of go in with something that is solid in that respect.

Lindsay McDougall (11:33):

It's a balancing act with a bit of magic, with a bit of art and rhythm to it.

Suzi Bryant (11:37):

Yes. But also you can call the agent afterwards and say, "how'd we go? How close were we?" And I mean, if you do that and you really look at the comparables, well, usually you end up within a few thousand, pretty close to the next. If you are successful, you're not that far ahead.

Lindsay McDougall (11:59):

Oh, that's good to know, yeah.

Suzi Bryant (11:59):

Yes. Do all of that, because what everyone else is doing.

Lindsay McDougall (12:03):

I ask on another note, as a buyer's agent in the Southern Highlands and you talked about the different types of buyers. I'm interested here, are your clients mostly people looking for a place to live where they've put their self into that house? Or is it investors at the moment?

Suzi Bryant (12:16):

Mostly people that are buying to live in so a home and either local people who just are a bit unsure about the market, and it's hard at the moment to work out value. But yeah, either local people or a lot of people also moving into the area. A lot of people moving from Tasmania actually!

Lindsay McDougall (12:35):

Really? Yeah. They must love fog. They must love fog, but they just want it slightly warmer.

Suzi Bryant (12:42):

Yes.

Lindsay McDougall (12:43):

Oh, that's good. Suzi Bryant, thank you so much for speaking to us today. We're getting a lot of people talking about this as well. So thanks for your text. Great to talk to you, Suzi. Cheers. Okay, thanks. Bye. Thank you very much.