Process can be intimidating for homebuyers, he says
While a mortgage adviser’s service doesn’t typically extend to property negotiations, one adviser is taking his service to the next level, accompanying clients to auctions.
Jamie & Co director and principal adviser Jamie Sanderson (pictured above) said that knowing when and how to bid at an auction sale could be intimidating for homebuyers.
Over the past four years, he has made a point of attending auctions to support his clients and says that as an added benefit, it gives him an understanding of activity and values within the property market.
Property sales can take many forms (auction, tender or negotiation), and as each part of the process is not necessarily explained, Sanderson sees his role as filling that void and pointing his clients “in the right direction”.
“It’s not every day that people buy a house and even if they’ve bought one in the past that doesn’t mean they know the process,” Sanderson said.
While he’s quick to add that he doesn’t bid on his clients’ behalf, Sanderson said that having an adviser at the auction who could discuss their strategy before the auction starts and understands their financial situation (including their upper limit), gave clients an added level of comfort.
“I’ll meet with people 10 to 15 minutes before the auction and [ask them] to decide what the maximum number is and how they’re going to bid,” Sanderson said.
Maximum lending sought and auction figure discussed
Sanderson said that he liked to challenge clients on how they came up with a maximum figure for a particular house. As a mortgage adviser, his role was to get the maximum loan amount available for a client, but he also acknowledged that it could benefit clients to “have some reserve in the tank”.
Sanderson, who commented in April that in hiking the official cash rate by 0.50%, the RBNZ would need to tread carefully with signs of a faltering economy, said he also didn’t like to see clients missing out on a house by a minimal amount.
“[For example] if someone says to me that the maximum they want to pay is $1 million, we might look at the maximum lending to start with of $1.1 million,” Sanderson said.
“Not that they want to spend up to that, but its giving them some confidence that when they’re in [the auction], they know they’ve got that little bit extra.”
In this type of situation, Sanderson said that having a mortgage adviser close by could be useful for clients, as they were able to discuss how much extra their loan could cost them over a set number of years if they did decide to go beyond the limit they had set for themselves.
As a lender wants to know the maximum price that a borrower will pay for a property at auction and provides a validation at that price, Sanderson said that it was worthwhile applying for the maximum amount of borrowing upfront. He communicates the amount to the client upfront, on the understanding that they may not spend up to that level. This avoids overpaying and being required to provide a registered valuation and "takes out any surprises", he said.
Attending the auction also supports clients around payment of the deposit, he said. For example, if an auction was held in the evening, Sanderson said he would reassure a client that payment could be arranged for the next morning, confirming this with the real estate agent.
Sanderson said that he advised homebuyers intending to bid at an auction to find out where the auction would be held and to watch one the week before, to understand the different calls and the movements of the auctioneer.
Above all, Sanderson said that attending auctions helped him stay in tune with developments in the property market.
“If you don’t go to the auctions and see that, you’re only seeing the listings that come onto the market and not what houses are selling for,” Sanderson said.
As a mortgage adviser, Sanderson said that prospects and clients were always asking whether it is a good time to buy, including pricing and demand.
“That’s the kind of value-add that people ask us all the time,” he said.
