Buying Prior to Auction

Yesterday in Victoria 1438 properties went under the hammer and as at last night, just over 75% of them had sold. By any measure that is a strong clearance rate and a very large number of auctions for one Saturday. We bid at six auctions ourselves, yet didn’t secure a single property.

What could we put that down to?

Some could argue that the properties we targeted were optimistic for our budgets. Others could say that we were just unlucky. But we do rigorous comparable sales for each one and while we don’t expect to secure every single property in this current, competitive climate, we didn’t envisage such an unsuccessful auction day.

Pre-Christmas buying energy is very strong indeed, and buyers who have been out in the market for months on end, ….searching, shortlisting, bidding, losing… are digging deep, bidding with gusto, and it seems they are accepting compromise in an effort to secure their home and move on to other things with their Saturdays.

The market has continued to adjust upward, and we can see it and feel it out there, particularly in the inner 12km radius.

Despite yesterday’s disappointment for our clients, we did identify four targeted properties which we could pursue prior to auction and we took the opportunity to pounce on all four. The process is never straight-forward, and there is always the risk that other buyers will  challenge the pre-auction offer.

This can give way to an ‘auction before the auction’.

In all cases we had the threat of a challenge, and one single-fronted Victorian property in Yarraville didn’t go our way. Our offer was submitted, the agent notified other potentially interested parties, and they all came out of the woodwork during the 24 hour close-out period.

But for the other three, luck, timing and success went our way and we were able to secure three houses for clients who had previously felt the brunt of our tough market. Each of the three were particularly important to target prior to auction because we had identified them all as high-competition-risk for thee main reasons; great, inner 7km locations, strong mainstream buyer appeal, and relative shortage of their type on the market at present.

 We proudly secured this three bedroom family home in Yarraville for a family who had previously missed out on others. Offering proximity to schools and situated in a fantastic neighbourhood were important factors for our buyers.

Securing this period styled renovator’s delight in the heart of Yarraville’s village offering a north facing yard and room for car parking on a whopping block of over 300sqm was a proud moment for us and our buyers have already jumped into their design phase with gusto.

And our third pre-auction success was this gorgeous two bedroom period cottage in fabulous Flemington, just four kms from the CBD and surrounded by tram, rail and offering easy amenity to shops and cafes. Our Sydney investors were thrilled to know that their project was finallised before Christmas and they can look forward to seccuring a tenant in the peak rental season.

The market is quite challenging for buyers right now and the desire to purchase this side of Christmas is strong for almost everyone. Chatting to the agents about off-market opportunities, pre-market 2017 possibilities and gaining insight into those 2016 campaigns which may offer pre-auction buying opportunity is imperative for us if we want to avoid the heartbreak of a run-away auction.

Not every agent will sell prior, not every vendor wants to sell prior, and some houses must run to auction.

It is critical to understand this before making offers. Only those which have agent and vendor encouragement are worthy contenders. Otherwise buyers are just merely showing their hand and helping set a reserve for auction day.. On a more serious note, not all lenders are supportive of pre-auction purchases. Valuations are conducted, and without a public auction to support the viability of the price as a ‘market value’ price tag, higher LVR borrowers can put themselves at risk. Discussing the strategy with a broker is a must-do.  Establishing the facts is essential.