Is selling by auction still a good idea?

Selling your home in an auction can be stressful. Will it meet reserve? If so, did we set reserve too low? And is now even the right time to be selling by auction? Jaimie McDonald shares his recent personal experiences.

We sold our house recently. It had been a while since we last sold and that was in a completely different market to now. So, in going to market, we based our decisions on a mixture of advice from our real estate agent, a semi-educated "gut feeling" based on what we were seeing in the market ourselves, and the rest we left it up to the gods!

One of the biggest decisions we thought we needed to make was where to set our reserve. Do we go higher with the expectation of achieving the ridiculous prices many of our neighbours seemed to have been cashing over the last year or should we set a lower reserve in the hope that more buyers will be engaged once they knew the auction was "live"?

To our surprise, it turns out it was actually possible to adjust our reserve with the auctioneer we used during the live auction process. During the heat of the moment this added decision may not suit everyone. Personally, we felt it gave us the opportunity to be flexible yet still set a reserve based on the market price of the day and also ensure we weren't about to give our property away for a price we weren't happy with.

We sold our property, but this isn’t the case for many other sales by auction at the moment.

There was an article in The Herald last week citing that of the 130 Auckland properties sold by one particular auctioneer in the first week of October only 39 per cent of these properties were sold under the hammer. The article also went on to state recent figures by another auctioneer who passed in 45 per cent of homes on the North Shore, 40 per cent in central and eastern areas, and 28 per cent in south Auckland.

Speaking with other members of the industry, there does seem to be a higher percentage of auctioned properties currently going unsold. However, there also seems to be a considerable variance to success on the day between auctioneers overall. This made me think, how much of a difference does it make when you also have the ability to "move the posts"?

Is the auctioneer really better than another or does it come down to the experience and advice of the real estate agent before and/or after the auction?

One thing I can say is in our situation we were armed with good advice and possibly a little help from the gods. We were fortunate enough that we didn't need to worry about what would happen next if it was left unsold.

Jaimie McDonald is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

Fixed Vs. Floating: Don’t Just Rely on Hindsight

Benjamin Franklin was once quoted as saying, “In this world nothing can be said to be certain, except death and taxes." Of perhaps equal certainty, is that interest rates will always go up and down. Jaimie encourages us to make some deliberate steps in uncertain times.

Hindsight is a wonderful thing, but sadly unavailable to us when it comes to projecting into the future to see what interest rates will do before choosing to fix or to float. Of course you will feel very good about yourself if rates increase after you’ve fixed, but how will you feel if they moved in the opposite direction?

Putting the crystal ball aside, the very best answer to the dilemma of fixing versus floating will most likely come from your own gut feeling. What I mean is this: If you fix, you are giving yourself certainty over this period. You might be in a position where you need to plan your finances and need the assurance that the cost of your mortgage will remain the same.

However, if you are expecting a short-term windfall, maybe a work bonus or an inheritance, or if you are the person who likes to take a punt and believes that rates will continue to trend downward, then maybe floating (or at least a percentage of your mortgage on floating) is the right option for you. If you are considering selling in the immediate future then the floating rate or possibly a short-term fixed rate may also be the answer.

These are the motivations that might cause you to fix or float aside from the current climate of interest rates, but what would should you do right now?

Debt reduction is always at the forefront of my mind and, with interest rates currently at an all-time low, it would be a shame to not make the most of it by knocking off as much as you can.

Even if you’re only able to pay a little beyond the minimum payments you will be amazed how much of your loan you can pay off while rates are low. And, if you think you’ll also be in the position to make any additional lump sum payments, it’s important to have a portion of your loan in a facility that allows you to do this without penalty.

There may be a lot happening in the financial world both internationally and domestically, but it’s still unlikely there will be any drastic movement in mortgage rates here within the next 12 months. So having a portion of your loan fixed short-term will give the certainty of a good rate now and the benefit of re-evaluating again in the near future … perhaps with the assistance of a little hindsight.

If you would like further advice, as always, don’t hesitate to contact your Velocity Adviser.

Jaimie McDonald is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.

Will You Receive Your Full KiwiSaver Member Tax Credits (MTC)?

Whether or not you receive your full KiwiSaver Member Tax Credits (MTC) is an important question, but you’d be surprised how many people don't know the answer. Jaimie helps bring some certainty and explains why you need to act on this before the end of the month.

If you're 18 or over, for every $1 you put into your KiwiSaver account, between 1 July and 30 June the following year, the government will put in 50 cents, up to a maximum of $521.43 per year.

The government puts aside enough money to cover the Member Tax Credits for everyone who is eligible. However, can you believe that over $300 million went unclaimed in 2015 alone? Who said, "I'm not going to worry about it, the government can keep my money?" NO ONE EVER!

It doesn't matter whether you are an employee or self-employed. If you are employed and are in a KiwiSaver scheme you will be contributing either 3, 4 or 8 per cent of your before-tax pay and your employer is required to match this with a minimum contribution of 3 per cent.

This essentially means that as long as your before-tax pay is more than $8690.50 annually OR you are self-employed and contribute at least $1042.86 before 30th June you will receive your maximum Member Tax Credits (or what I like to call FREE MONEY).

For self-employed folks this works out to making a minimum contribution of around $20 per week. And if you haven't done this yet, and have some funds set aside, you can also make a lump sum deposit before 30 June.

Where else can you receive a guaranteed extra 50 cents on the dollar?

If you would like to dig a little further regarding your KiwiSaver benefits or you just want sound mortgage advice on what options are available to you please give us a bell.

Jaimie McDonald is a Registered Financial Adviser with Velocity Financial. No investment decision should be taken based on the information in this blog alone. A disclosure statement is available free of charge upon request.