When making an offer can make a mess

In the last two months we have had a surprising number of buyers contact us about assisting with a purchase strategy that has glided off the rails. All have had one thing in common; they have presented offers in the wrong way.

From misunderstanding the process to making verbal offers, the outcomes could have been disappointing for them without a change of approach.

A successful pre-auction buy                    A sale on auction day   Auction ‘pencilling’ 

By the time we get the phone call, some of the negotiations are already well underway with other buyers, or the offer which our buyer made is making things tough for them going forward.

There are three distinct and vital questions to ask once the due diligence is complete and the property is deemed purchase-worthy.

1. Is the contract available with a signed Vendor Statement?
2. Is the Vendor ready and wanting to field offers? (this is particularly relevant if the property is advertised for Auction or a ‘Set Sale’/Expressions of Interest)
3. If I make an offer which is acceptable to the Vendor, how do you deal with competing buyers?

Sadly, it’s quite often the case that none of these questions were asked when we receive the call to step in and negotiate.

Without intending to, Buyers don’t read the cues or ask the right questions and can often find themselves in a position where they felt encouraged enough to make a verbal offer on a property.

The best case scenario for them is that the agent steps them through the formalities and encourages them to conduct due diligence (Contract legal review and building inspection among other actions), and they find themselves signing a contract at a fair and agreed price.

The worst case scenario isn’t particularly nice though and can range from their offer being ‘shopped around’ to other buyers in a non-transparent way, the offer being used as a ‘peg in the ground’ to give the Vendor confidence to set a reserve on auction day, the verbal offer being ignored and not passed on, or the offer being dismissed as ‘non-genuine‘.

In the agents’ defence, an offer is not a real offer until it’s on a contract.

Agents guide Vendors through a sale campaign (and in Melbourne, often the process is an Auction campaign). To expect a Vendor to make a sales decision from a verbal offer in a strong market is a mistake, but the best of intentions sometimes lead buyers into murky water when they don’t understand the importance of making the offer genuine.

The buyer may be genuine, but the offer must be too.

A recent call from a family member of mine reaching out for support was interesting. He was keen to purchase a townhouse going to auction and asked me if he should make an offer which was subject to a building inspection. I asked him to explain to me what sort of encouragement he’d had from the agent to make his conditional offer on a property set for auction. The agent had guided him well on price and mentioned that at the right price her Vendor would sell prior to auction, but aside from him establishing the fact that a pre-auction purchase was a possibility, he’d not addressed the other two questions.

His story ended well. She gave him guidance, he did his due diligence, we arranged his contract review with his legal rep and he was prepared to sign a contract and be genuine about his offer. But not all processes run this smoothly.

Before making any offers prior to auction, buyers need to be clear about the value of the property. Recent Comparable Sales Analysis is one way to assess where the price range may feasibly sit. Looking at auction results in the area of interest is a great way to stay on top of values too.

Buyers who only look at the agent’s supplied Statement of Information are not doing themselves many favours. Not every agency cites the most comparable sales. And people’s perceptions are subjective too. Buyers should carefully focus on the sales which they genuinely believe underpin the possible value of the property they are interested in.

When the time comes to put an offer forward, discussing with the agent how they will present it, when they will present it, what the likely steps are if the Vendor rejects it (ie. counter offer, another negotiation), and how they will deal with other interested parties is critical before the offer is handed over.

If the agent says that they would rather see the property go to auction (or if they advise that the Vendor is keen to go to auction), buyers should be very careful about trying to push an offer at them. There are many occasions where the offer seems suitable to the Agent but the Vendor is likely to resist.

Taking a cue from an Agent is important.

They are the conduit between you and the property.