Saturday, May 05, 2012

Going, going, gone

We went to the auction today for this house. This is the first house we actually saw sell at auction - only the second auction we've been to. No-one even bidded at the previous auction. The opening bid today was for $750,000 and that bidder never bidded again. I wonder if they were a friend of the owner just trying to get the bidding started? The price rose to $850k, which was my estimate of what the house would sell for and seemed to stop. One of the three agents at the auction then went inside the house to talk with the owner on the phone. When she came back she said "it's on the market", which apparently means that $850k would be an acceptable offer. I would have thought there simply was a reserve price up front that the owner had given to the agent. But after this the bidder who had bid $850k and a young couple started bidding again, sometimes in increments of $1,000 until eventually $870k was reached and the young couple gave up. There was a round of applause after the auctioneer said "Going, going, gone" and hit a pile of paperwork he was holding with his hammer.

Snork Maiden asked me whether I'd be willing to pay $870k for this house when my estimate was $850k (I know all these numbers will sound crazy to many of you in other parts of the world...). I said the best way to think of it really was thinking how much extra your mortgage payment would be for each $10k. For a 30 year mortgage that is currently $63 a month. So the extra $20k would cost $126 a month. Snork Maiden didn't think that was much. I feel that that is quite a bit.


PoorGrad said...

Need to see pic of house to comment on how crazy it is. The auction seems like quite an experience.

mOOm said...

The pictures of the house are linked to the linked post... Or you can get them here:

The land value for tax purposes is $411k. These re AUD but the value is almost the same in USD at the current exchange rate.

mOOm said...

PS -I see you are in SF. In that case these prices won't seem that crazy :)

Ray Clarke said...

I've always been sceptical of auctions since late 1983 when I spent a Saturday with a work colleague in Melbourne. We went to 3 auctions that day:

1. The first was the house of a friend of my colleague. The friend didn't trust his agent and asked my colleague to put in a couple of bids which he did. The house was passed in to another bidder. Straightaway the agent walked over to my colleague to try and negotiate with him. My colleague said I'm not the losing bidder. The agent said don't worry that guy was mine.
2. The second was an auction of a property that my colleague's brother in law was interested in. Nothing interesting happened there.
3. The third was the house of my colleague's father in law. His brother in law was bidding genuinely, but had reached his limit. While the auctioneer adjourned to consult the vendor, my colleague was urging his brother-in-law to go up a couple of thousand. I heard an onlooker say to the guy who currently held the bid. Watch it that's the vendor's son in law they're trying to run you up. The auctioneer came out announced the house was on the market the brother in law made one more bid, the other party did not bid and the brother in law bought the house

Financial Independence said...

The house looks very nice buy it is expensive place, taking into account your net worth.

Investing $800K today, surely you get enough dividends to rent a place out. What is rationale to buy such a big house just for two people?

Even on a smaller scale I could not find compelling arguments for owning one, apart from confidence in tomorrow :

mOOm said...

Snork Maiden wants to buy a house with a garden and maybe her parents will come to stay, or even live here... and children aren't ruled out yet. Most smaller freestanding houses aren't in such good condition. The trend has been to build bigger in Australia. New houses in Australia have been the biggest in the World - even bigger than the US on average.