Friday, 21 October 2011

The Renovators auction results

Television bright lights short-changed The Renovators auction results

By Chris Gray

reblogged from Thursday, 13 October 2011
It was a good result to get six properties sold on last night’s finale of The Renovators in current uncertain market, even though we were expecting a much better result as all properties had been transformed significantly and renovated to a very high standard.

The fibro cottage at 85 Harold Street, Blacktown, made $68,000 profit on a $310,000 property or 18.28% on total costs.

The half-done house at 5 Frederick Street, St Peters was the biggest bad shock, as it sold for $770,000. This was $130,000 below the agent’s expectations of $900,000.

The shop, at 146 Addison Road, Marrickville, which was transformed into a three-bedroom, one-bathroom abode, was the biggest good shock selling at $700,000 –  $30,000 above the agent’s expectations of $670,000.

The weatherboard, at 51 Franklin Street, Parramatta sold dead on the agent’s expectations of $575,000.

The ‘60s suburban at 15 Anthony Road, Castle Hill, which is no longer stuck in a timewarp.Castle Hill, sold for $730,000. This was $40,000 below the agent’s expectations of $770,000.

The inner-city terrace, at 12 Hegarty Street, Glebe sold for $925,000 – $12,500 above the agent’s expectation of $912,500.

Some people will not go to a televised auction under any circumstances, even though there was a large level of interest in the properties. Bidding at an auction is like public speaking, and most people fear it more than death. To be put on the spot in front of such a large audience and on national TV would be a nightmare to a lot of people, and so they will not turn up or bid under any circumstances.
Selling property by auction is not just about that night, it's about pre- and post-auction negotiations. A lot of property at the moment is being sold pre-auction, as agents know it's an uncertain market, and they will happily take a good offer before. For most of the properties that sold at a loss, in reality the auctioneer would have used a vendor bid or passed the property in and then negotiated afterwards and would have got a higher result.

As it's a TV show it was better to get a result on the night.
Many properties sell within days of the auction night and at a much higher price. For example on The Block the second property sold that same night and the third and fourth sold within three or four days at a profit.
The contestants had to spend a 20% budget to keep everyone on the same playing field.

In reality some properties might have been better off spending less as there is a point where you start to overcapitalise.
Due to time constraints, they also had to hire in and pay for trades where they would normally have done the work themselves effectively for free, so they wouldn't have spent so much cash.

They had to pay to furnish their properties rather than renting styled furniture. A lot of buyers may not value what they had spent on interiors as they have their own furniture.
It’s a TV competition and not 100% reality of how someone might make commercial renovation decisions in practice.

Buying, renovating and flipping is different to buying and holding The Renovators had to do things properly, e.g. replacing sewage systems, and they had to get guarantees in place. If they were selling they wouldn’t necessarily improve things that didn’t need immediate attention or didn’t need to be fixed immediately.
Chris Gray is CEO of Empire Property Portfolios and was a judge on Channel Ten show The Renovators.
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