PHOTO: Australian property market. AAP Image/Lukas Coch
An expert on property and financial markets warns real estate Nervous Nellies that house prices are on the way up, not down! And how would you like to be an expert on auctions, so if you’re a seller, you pocket the best sum possible but if you’re a buyer, you pay the least possible?
Yep, that sounds good!
Real estate agents better beware, as two US economists are going to help us avoid the winner’s curse. This is when you win the auction and then the elation of the victory is replaced with the numbing question: “Did I pay too much?”
Over-payers are good for sellers and the agent’s commission. Expert under-payers are threats to sellers and agents.
Australians have a passion for property and I’m told we’re the only country in the world where million-dollar assets are bought and sold on the front lawns of suburban homes. Who hasn’t turned up to an auction for just a sticky beak or because you had nothing to do?
Well, auction-loving Aussies will be interested to know that this year’s Nobel Prize for Economics went to two US economists from Stanford Uni, Paul Milgrom and Robert Wilson, who’ve worked out how bidders can avoid the so-called “winner’s curse” of over-paying. Better still, they’ve determined how you can be an under-payer at an auction. It gets down to doing your research, including what your rival bidders think represents value.
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