If rain doesn’t deter bidders, what does?

Yesterday’s auctions in Melbourne were a challenge for agents and auctioneers when our skies turned grey and rainfall struck. Some auctioneers battled the rain as it came in sideways, with staff offering umbrellas and buyers taking cover under eaves and garages. Others chose to take the buyers inside, with their auction calls held in vendor’s living rooms while prams and umbrellas were left at the door.

Funnily enough, at both of the auctions we canvased, buyers still bid and the properties both sold under the hammer.

When we are bidding for clients, they will often tell us mid week that they hope the weather is forecast to rain or hail. I tell them that despite their optimism that bad weather could drive buyers away, it’s actually not the case. Bidders will bid, regardless of the weather. I’ve seen dedicated buyers stand out in 43 degree heat under a scorching sun, and likewise I’ve battled hail hitting my face at one Northcote auction two years ago. 

The bad weather may adversely impact auction attendance numbers, but only those who are spectating, as opposed to bidding. Nosey neighbours or property observers may decide to stay in when the rain starts, but buyers will brave it.

Weather doesn’t drive bidders away. 

There are however some other aspects that will deter buyers, and they are the things that can create feelings of fear, skepticism, restrictive settlement conditions, or likely defeat. They aren’t always real though, and buyers should be prepared for them if they want to maximise their chances of success at auction.

The fear aspect could be based on the apparent condition of the property. Cracking, peeling paint, unlevel floors and bad presentation can lead buyers to wonder about serious structural or immediate-fix issues. Vendors who have conducted significant works and have failed to provide permits or certificates can disadvantage themselves if buyers have concern about the validity or legality of their works. 

Rather than turn on their heel, if the buyers have interest in the property they should investigate the severity of any issues (or request certificates and permits from the vendor; sometimes it is actually available, but the vendor’s legal representative may not have included it in the contract for whatever reason).

While some issues are worth walking away from, there are plenty that are either superficial issues (ie. cracked plaster work, mild movement cracking), or there are some that could be easily fixed with a modest budget.

Buyers often walk away from issues that appear more significant than they actually are.

Skepticism can strike when buyers feel that the vendor, the vendor’s legal representative, or the agent are hiding something or placing them at a disadvantage.

This may include an inadequate answer or explanation to a concern about the property, an unjustified price expectation, some special conditions in the contract that seem unreasonable, a resistance to additional inspections or building inspections, or the absence of information provided upon request. As shown in this photo, some special conditions can be negotiated for removal, but in some cases where a vendor or solicitor rejects a request to strike unfair conditions, buyers may walk away from the sale.

I recall a negotiation last year where the agent resisted a building inspection being conducted on the property. He claimed that the vendor already had an unconditional offer that they were prepared to accept, and our increased price with the building and pest inspection was not acceptable unless we could strike the condition and proceed unconditionally. Ultimately there was no reasonable price that we could offer with the accompanying clause. 

The vendor did not want a building inspection conducted.

Whether it was based on a reluctance to lose the other offer, the fear of a fussy builder, or the vendors hiding a significant issue they knew about, we couldn’t proceed without the inspection.

Restrictive settlement conditions aren’t as common but we do still come across them from time to time. They are usually in the form of an unmovable settlement date. A vendor who has purchased and needs to settle on a particular date, or a mortgagee auction sale with a fixed date can sometimes spell concern for a buyer, particularly if the date is too soon for them to sell their home and release funds for settlement. Many assume that bridging finance is an option but in this current lending climate it’s a naive and risky assumption. Not only is bridging finance very expensive, it’s not granted to everyone. Current banking credit assessment rules preclude many buyers from what used to be considered a commonplace option.

Buyers who are too anxious to meet a short-range settlement date will often decide not to bid.

The last element that often deters buyers is the most fickle. It is the feeling of defeat before the auction has actually transpired. This feeling can be triggered from information gathering, here-say, or perception, but it’s not always reliable, and it should never put a buyer off bidding.

We have experienced countless situations where we were told that buyer interest was strong on a property, and then had either limited or no competition on the day. While counting buyer numbers, contract requests or building inspections can give an impression of likely competition, we can never be sure of genuine competition. Some inexperienced agents may believe that they have strong buyer interest when in fact they have just had impressive buyer numbers through the door. Pending how the property is marketed, what price guides are quoted, and what other similar properties are on the market at the same time, inspection numbers won’t necessarily indicate bidder numbers.

Even if a campaign appears to have multiple buyers preparing to bid, things can change quite suddenly. 

Buyers may miss their finance approval deadline, a committed bidder might identify and purchase a newly listed property in the final days leading up to auction, a contender may lose their job, a partner may change their mind about the house… all number of possibilities can strike.

Staying in close communication with the agent, being prepared for any kind of competition, having a firm walk-away figure, and never assuming you have competition that will beat a reasonable budget is the key to tackling this element.