..When making an offer prior to auction is a good idea…

In our Seller’s market, and particularly over the winter months where supplies of properties for sale are low, many buyers come to me requesting that I help them secure an auction property before the auction.

But it’s not always a good idea to pounce forward with an offer.

There needs to be a sequence of good reasons for an agent to support a sale of a property prior to auction, and if these good reasons don’t exist, a buyer can be left forlorn with their hand exposed, their offer shopped, or worse still, their generous figure used to support the vendor’s reserve. Understandably, Vendors like to know that a buyer may have the right dollars on hand leading up to the auction, and agents love to know that their appraised potential sale price is validated. Just because a buyer is in the mix, and is prepared to pay a price which is acceptable to the vendor however doesn’t mean that the offer will be accepted.

Agents carefully track a campaign and generally have a good understanding of the strong buyers leading up to an auction. At the very onset of the campaign though, it is a challenge for almost any agent to know who the likely buyers will be on the day. Buyers exhibit typical traits when they are keen on a property but these traits can take a couple of weeks to determine.

In our Seller’s market, many auction results surprise even the best of agents. Buyers are stretching, interest rates are low, and Vendors often have high expectations of a runaway result. If the property is sought-after, the neighbourhood is revered, and the target audience is broad, most agents will look forward to their day in the sun and will be justified in expecting a thrilling result for their Vendor.

So when will an agent support an offer prior?

Two of any of these five elements usually need to feature in the scenario for an agent to back a reasonable offer;

– the Vendor being keen for a result prior to auction. They may just be terrified of the ‘what-ifs’ on auction day, they may have a short settlement or specific settlement terms to entertain themselves on their subsequent home, they may need to leave the area quickly, or they may be in financial strife and need a fast result.

– the property may be competing on the market with several others which have similar attributes and likely similar price tags. The fear for the Vendors is that buyers may leapfrog from their property to other properties and buyers could be ‘canabalised’ by the other campaigns at the last minute, leaving a limited buyer pool.

– the Buyer who is the likely strongest buyer could lose interest or find another property between offer time and auction. Letting them walk could be a mistake if the agent is fearful that a better, stronger offer won’t replace this buyer’s offer.

– the price which the emotional buyer has offered is so strong that the agent is confident it will surpass any possible auction result (this is not a recommended tactic!)

– the property is quirky enough to have limited appeal to the broader market, yet matches this buyer’s needs perfectly.

Last week I received a call from a lovely couple who were referred to me from past clients. They’d set their hearts on a beautiful double-fronted, period Victorian delight in Camberwell and were keen to purchase it prior to auction. I cautioned them that patience, sensitivity and agent-communication would be essential. I promptly called the listing agent who was entirely helpful and confirmed that the Vendors were indeed quite comfortable with the idea of a pre-auction sale provided the price was right. Terms needed to be long enough for the Vendors to sort out their next move; and most importantly, I’d done my homework and knew that three other very similarly priced and located homes were also going under the hammer in this campaign period.

There were two elements which supported a move to put in a pre-auction offer. But it had to be a fair one.

I discussed comparable sales and the other campaigns with the agent. We were able to delicately sound out a fair and reasonable price which he was willing to back. It left little else for us to do other than complete our due diligence and document the offer on a contract.

Despite our happy buyers still being in shock at the ease and straight-forwardness of the acquisition, I wasn’t so surprised. A sensitive conversation and respectful negotiation ensured that our 8am offer was accepted and signed off that very same day.

A Vendor got their result weeks earlier. A buyer avoided competition. The home found it’s new owners.

Establishing the facts, ensuring that the Vendor and agent are willing, and being prepared to make a fair offer is the way to secure a beautiful, tightly held property before auction in a Seller’s market.