Gazumping, the Rate Dance, Multiple Occupancy & Community Title
I am going to talk a little bit about gazumping. I was reminded of this because I just recently witnessed two different sets of people disappointed because someone else came in and offered full price on a property. This kind of buying is usually a good indication that gazumping is around the corner. Gazumping only happens in a rising market where someone offers a price above what has already been agreed on. I personally do not have anything to do with or encourage gazumping but when a market is running I can understand the temptation. I am reminded of a situation in Sydney a few years ago in the last boom when someone was offered $250,000 above the price that had already been agreed on. The vendor, someone who obviously valued integrity over money, refused the offer and stayed with the verbal agreement.
If the market in Byron Bay keeps moving and good properties become scarce I can see the practice reoccurring. The thing to do is to try to exchange contracts as quickly as possible so you as a buyer can't be gazumped. What is making this even more difficult now is the practice now of solicitors and agents not wanting to take a "subject to finance" clause to the vendor. If finance is needed they often ask for the loan agreement to be "unconditional" before exchanging contracts. This is understandable but delays the settlement process and puts the sale in danger of being gazumped. In this situation it often pays to have a good finance broker in your corner who can push a deal through asap (plug plug - you know who to call!)
THE RATE DANCE
I was amused watching the ABC news the other night - first story was about how there was no new stock coming onto the real estate market and how this will have an outcome of increasing prices. The next news item was the song and dance about interest rate rise during the election campaign. I could imagine the schizophrenic response this would engender in the viewers. On the one hand, they are saying watch out for a property value increase and on the other hand, watch out as rates are going to bite you on the bum!
The reason why I am discussing this is the other schizophrenic situation that has developed within the mortgaging industry. It seems that the non-bank lenders i.e. RAMS, AUSSIE, MORTGAGE CHOICE etc are having to raise their rates a lot higher than the four major banks. I have been receiving quite a few calls and emails from people saying they just got a letter telling them their interest rates have risen by much more than the accepted .25%. It is also common for these lenders to have a high exit fee component within their loans making it difficult for people to jump ship.
MULTIPLE OCCUPANCY AND COMMUNITY TITLE
This week I was going to write an overview of the present situation with Multiple Occupancy to Community Title (MO2CT). Unfortunately I did not have enough time to research this properly. Many of you may not be aware that the multiple occupancy/land sharing titles that were introduced in the 70's are now in the process of being given community title. Although these shareholdings are not situations for speculating or profiting if may be a good opportunity to purchase acreage in the northern rivers before it gets economically out of reach. At present there are 16 multiple occupancies transferring to community title in Byron Shire. This means 100 or more former MO blocks will have their own title, will be able to borrow against and will increase in value. It is for people who genuinely wish to join a community and build a home.
For those people who were interested in the investment portfolio of NAVRA Financial Services, another one-day seminar is on in Brisbane November 3rd - Saturday. If nothing else, this is a great opportunity to learn some useable financial education in one short, sharp hit.
I had a lot of interest in my HOT LIST from the last article and will repeat the process again. I know of only one good buying auction coming at present. The market is certainly becoming tighter. I notice on my rounds that the properties that are most sought after are getting thin on the ground. These two areas are lower end investment properties around $400,000 that offer a good rental yield. The other high demand area is the "Byron Dream" - a small acreage with rural or ocean views, modern home and pool in the million dollar plus range. There are a lot of properties for sale around the $600,000 to $800,000 mark.
There also seems to be more properties coming on the top end but not realistically priced. It will be interesting to watch this area as it develops. There are probably more than a dozen Byron hinterland properties listed at over $3M at the moment. Wategoes and Belongil are firmly ensconced in the $3M range and it will be interesting to observe when and how frequently this will be repeated in the hinterland. Most of these properties listed now evoke the line from the classic Aussie movie The Castle - "Tell em they're dreaming!" So it will be interesting to watch if there are buyer's out there ready to jump this high. This has made me think on how these properties are realistically valued.