68 Kensington Road Summer Hill
Why the highest bidder paid $200,000 more than they needed to!
The property
68 Kensington Road Summer Hill is a free standing property. In theory, it has 3 bedrooms, 1 bathroom, a kitchen and sits on 462sqm. The issue is it was not in a habitable position at the time of sale. You could not live in while you renovated (at least until the first few things were fixed up), and it definitely would not pass to have a tenant move in.
Part of the property which was a throughfare from the ‘living’ area to the bathroom was also on a visible lean. The floors would have made for a great game of marbles there was so much movement! The bathroom was the only part of the property that was actually somewhat useable. Unless you wanted to pitch a tent in the backyard.
The property was also south facing, which for older style homes makes it hard to ever encapsulate great natural light. Kensington Road is a lovely road though!
For the record, 68 Kensington road was not heritage listed at the time of the sale.
It was listed as a distressed sale / “must be sold” - likely a deceased estate. Price guide of $1,750,000.
Recent comparable sales
In the last six months, there was only two other 3 bedroom homes that sold in Summer Hill. This is largely due to the current market conditions where stock levels are down 17% year on year.
27 Regent Street Summer Hill, a 3 bedroom, 1 bathroom well presented and move-in ready home on a smaller 268sqm block. This sold two weeks earlier for $2,150,000.
1 Edward Street Summer Hill, a 3 bedroom, 1 bathroom, 2 car spot home liveable, with scope to renovate and modernise. 354sqm. This sold six weeks earlier for $2,200,000.
The Auction | ~2 registered bidders | 2 active bidders
The opening bid came in at $1,500,000. Fair play to the bidder because they knew they were in for a lot of work and probably there to try and snag a bargain.
What happened next was surprising though. There was a very small crowd, and it was evident, only two registered bidders. Bidder 2 came in with a bid of $1,750,000. I am all for knock out bids as a strategy - but an auction with two registered bidders and only one bid placed so far, is not the time, or necessity, to try and pull out a knock out bid.
In fairness though, their bid of $1,750,000 did knock out bidder 1.
You’d think that was it for surprises… but wait for it!
The agent then went to consult the vendor about whether the reserve had been met and was the property ‘on the market’.
Turns out it wasn’t.
If I was bidder 2, and the agent came back to me and said, “You need to increase your bid to $1,800,000 and we will sell”, this is how I would have responded.
“There is only one other bidder here, who bid $1,500,000. The property has been on market for four weeks and no one else is here to buy it, let alone, even close to the $1,750,000 of my current bid. The market has indicated this is actually over fair market value. I am not in a position financially to pay any more than $1,750,000 given the work required to make the property habitable. I’ll leave it at that if the vendor is not open to meeting the market.”
That’s what I would have said! Fully prepared to walk away. (Note: you can always come back tomorrow if things don’t go in your favour)
What did bidder 2 do???
INCREASE THIER OWN BID BY ANOTHER $50,000!!!
Completely unnecessary. Not only did they pay $50,000 more than they needed to - it is actually highly likely bidder 1 never had intentions to pay more than about $1,600,000.
Imagine what bidder 2 could have done with an extra $200,000 in their pocket - renovate the whole property - or at least make do on the floors, painting, new kitchen, new bathroom lighting and fixed the structural lean on the outside wall.
What this result says about the market
Renovation properties
Stock on market in Summer Hill for houses is down 17% year on year, similar to stock across the whole Inner West. However, I don’t actually think stock levels played a big factor in this sale given there were only two registered bidders.
Sales agent tactics
The biggest learning of this auction is that sales agents have a range of tactics they use to get buyers to pay a premium price for property. This is a clear example. If you are not in the industry and across these tactics, you may just find yourself $200,000 out of pocket for no reason.
I strongly recommend you employ a professional to bid at auction on your behalf. Appreciating you may not want to pay for this because you have no certainty you will be the end purchaser, but can you afford not to? If you would like auction representation, please feel free to give me a call or drop me an email and we can discuss.
Overall
Bidder two, in my opinion, could have bought the property for $1,600,000 or fairly close to it. The market conditions are just not in a place right now that justified paying $1,800,000 for the property. I’m sure once renovated it will make a lovely home, and in the long run it will still perform well.
