Scotty's Reality Show

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A couple of nights ago I turned on the TV just in time to witness the Block Auction preparations.  There were five couples and 5 homes completed over a three month period.

In my view this was a different product being offered, probably to attract a different clientelle.  These homes were not priced for the faint hearted buyers with a "reserve" price of $4m on each home and out buildings.  I had not followed this series from the beginning, though I do like following the real estate market.  The preceedings went as follows:

1. The first house was slow to reach the reserve price, and finally got to make a $20k profit for the couple who did all the construction as well as painting, landscaping, furnishing to strict deadlines. The mood in the Block camp was glum while Scotty kept a positive attitude, and tried to assure the contestants things would move forward into a worthwhile reward.

2. The second house seemed to have some buyer interest prior to the auction. Bidding was a little slow at first and then took a leap to make a good profit of $1,600. Plus they were rewarded in the end with a $100k bonus; the contestants had mixed feelings about the market and emotions were running high.

3. To get to my point, the next three houses did not reach the reserve price, in spite of the auctioneers trying to encourage higher bids. All three properties were handed back to the Agents/Auctioneers for further negotiation. Understandably this created tension in the camp, and it is likely the first sale may have been passed in for negotiation as well, except the whole auction went so quickly an inexperienced seller, not being prepared, took the low offer with trepidation.

Whilst it was general knowledge the market was slowing down, this auction definitely sent a clear message of no confidence in the current state of the economy.  Those buyers who have CASH will be in a good position to capitalise on a downward market.  If the buyers need to borrow, the lending institution may require additional collateral, such as the deeds of another property, to guarantee they do not lose if there is a CRASH.

Finally, please keep saving and budgeting to build up as much collateral as possible, and purchase real estate within your means.  It does not matter if it is not your perfect house; though it needs to be in a good position with good value; just call it "a stepping stone" for the future!