Fans of Channel 9 show The Block were left reeling when one of the renovated properties offered to market was passed in – a first in the popular television show’s colorful history. The subsequent media fallout focusing on contestants Ronnie and Georgia’s pass-in has caused a stir in the real estate community – highlighting concerns over Melbourne’s auction culture. In today’s blog, Tim Gaspar opines on The Block as a concept, and explains how the exciting reality television show is a far cry from fairly representing Melbourne’s auction market.
The Block Debunked: For Vendors
Considering selling your home? Worried – or elated – by the experience of those selling their homes on The Block? Don’t fret – vendors have far more control over their experience than The Block suggests.
You and Your Reserve
The Block contestants are identified ‘vendors’, but unlike real vendors, their decision-making power is minimal. The reserves on The Block show are set by Channel 9, leaving the contestants (aka vendors) powerless when market demand is at odds with their given reserve. In the real market, a motivated vendor will take feedback from the market via their agent and amend their reserve accordingly – there’s never an artificial reserve imposed on a vendor by another party.
The concept of The Block is to sell a property as far above reserve as possible. In the real world, vendors obviously want to achieve the best result for their property that the market will offer. On The Block – should a property sell at $10,000 above reserve – it is viewed as a poor result in light of the show’s prize structure. With contestants pocketing every cent the property yields above reserve, The Block’s auction results are only considered truly successful if they soar well above reserve. Reality TV reality check – it’s actually quite rare for properties to sell for hundreds of thousands of dollars above reserve. In the real world, that’s usually cause for buyers to complain about underquoting! On Saturdays across Melbourne, vendors are happy when they reach their reserve – pocketing $30,000 or more above your reserve should be considered a boon!
That Infamous Pass-In
When Ronnie and Georgia’s house infamously passed in, it was the first property on The Block to fail to sell under the hammer on the ten season-strong series. The media coverage around the property being passed-in further muddied the waters of understanding for vendors and buyers, leaving many confused about what really happens in a pass-in situation. To be clear: when a property passes in at auction, the highest bidder wins the right to negotiate exclusively with the vendor. Should the buyer choose to reject the vendor’s reserve price and the two parties fail to come to an accord, the property is then offered to the wider market. It’s worth noting that properties regularly pass in. It’s not a failure at all – and in some cases, it’s a strategic decision to maximise price for the vendor. Properties that pass in will often be sold within hours or days of the auction – so don’t avoid choosing auction as your method of sale because you’re alarmed about the potential of ‘passing in’ your asset. The Block’s representation of a property being passed in is not an accurate representation of post-auction negotiation, nor vendor success.
The True Impact of an Auctioneer
On The Block, quoted price ranges for properties and corresponding reserves are set for maximum entertainment value. The audience wants to see competitors squirm and cheer – high reserves create this tension and narrative. Will they win – will they lose? It’s unmissable telly! The Block also unrealistically hypes up the role of the auctioneer – with hosts quipping “That auctioneer’s going to make you some money now! Come on!” In reality, auctioneers can’t make a property sell if it is overpriced. No matter the amount of media coverage or magazine spreads – if a purchaser isn’t in the crowd with the will to buy, no amount of witty auctioneer patter will get the job done. The real work of a successful auction campaign is done by an experienced sales agent, who will accurately quote a property and educate the vendor on the best reserve to set. The auctioneer is important – but they’re only as good as their vendor’s reserve is realistic.
The Block Debunked: Buyers
Concerned that you won’t have the deep pockets or bidding prowess to successfully purchase a property at auction? Don’t be spooked by The Block – property in Melbourne is still within your reach.
Research Market Value
Market hype around The Block’s properties is not indicative of true buyer demand across the wider property investment community. When you consider purchasing a property, undertake research to ascertain market demand and comparable sales in the local area. Such ‘deep dive’ research gives you the knowledge to set maximum budgets in collaboration with your broker, and the confidence to bid robustly at auction.
Using a Buyer’s Advocate
Over The Block’s past ten seasons, buyer’s advocates have become a key feature of the show’s heated finales. Advocates have established themselves as signature ‘characters’ in the popular gameshow – but in the real world, you don’t necessarily require a buyer’s advocate to successfully purchase property. You may choose to use one if you’d like the additional support, and consider you’ll benefit from the advocate’s research, off-market property connections and capacity to bid on your behalf. Generally, a buyer’s advocate will work with you throughout your purchasing process, sourcing opportunities both on and off market and assisting in the negotiation process. Buying a hyped property from a TV show doesn’t put an advocate’s talents to their best use. Rather, the skills of a buyer’s advocate lend themselves to investors looking to achieve a certain property investment goal – or expat or interstate purchasers. In the case of The Block, each of the premium properties on offer sat at the very top end of the market: advocates were most likely used as a device for purchaser privacy rather than for negotiating their prowess or acquiring the asset beneath market value.
In this most recent season of The Block, each of the five Elsternwick homes sold above reserve – and despite the show’s first pass-in, every team walked away with a large cash prize. Watching The Block certainly makes for great entertainment, but remember that it’s just a TV gameshow: buying and selling real estate in the real world is a very different experience.