Buying Before Auction

From: Andrew S

If I was to make an offer for a property before the auction date, is there any cost savings to the vendor to motivate them to accept the offer. I realise their hope would be to get a higher price at the auction however.

If a house for auction was advertised at 200k+ , is it necessary for an offer to exceed this amount?

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Reply: 1
From: Robert Forward

There is no need to exceed any set price when making an offer. If you throw a low ball price at them then they may start thinking that the property isn't worth what the agent has talked them into (conditioned them to).

An offer is an offer, you set the offer not the agents or the vendor.

So take a chance and see what happens.

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Reply: 1.1
From: Paul Zagoridis

(Do my ramblings actually help anybody or am I just being a bore? E-mail is fine if you want to damage my ego. ;-) )

My experience in the current Sydney market is agents are seeking offers in order to set the floor/reserve.

They tell their vendors "we'll see what the market says". I've actually seen sale campaigns on houses in the Eastern Suburbs move from private treaty to auction after the second weekend of inspections.

Agents are also using offers to gauge market interest. That way they say "we have interest above $500K" when they've receive four low-ball offers below that...

I now tell agents I am not willing to make any offer unless the vendor genuinely wants to sell before the auction to save advertising and uncertainty. I hound them on that point and these days they relent and tell the truth -- they have no idea what it's worth and the vendor will hold out for the auction.

Note I don't make low-ball offers on auctions except in dead markets, I make keenly priced offers designed to get the property off the market. I add that if they reject my offer and the property is passed in to me at the auction for less, I will NOT match the offer as I am obviously over the market.

Paul Zag
Oz Film Biz is at
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Reply: 1.1.1
From: Dave :)

<<Do my ramblings actually help anybody or am I just being a bore?
E-mail is fine if you want to damage my ego.>>

It's ok Paul - I appreciate your ramblings! Always an entertaining and
informative read.



{Life's hard}

p.s. Despite the urge, I'll resist the temptation to post that same
question on my ramblings.

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From: See Change


REALLY like you suggestion on how to handle pre auction bids. Another gem.

See change
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From: Ray .

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From: Ray .

Sorry , hit the wrong button previous post.
Savings to vendor re pre-auction offer
acceptance would be agents auction fee ,
usually around $1200-2000 variable in Vic.
Agents use early offers to establish reserve
price . i.e. they know that they can at least
get your offer amount at auction . Also it
could be argued that if your pre-auction
offer is accepted , then you have paid too
much ! Advertised auction estimates in
Melb are usually understated by 10% -- 20%
e.g. 200--240K will bring 260-- 280K. Only my
observations ---- I hope they help.
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Reply: 2
From: Colin Mills

Encouraging you to make an offer prior to auction is one of the oldest tricks in the book! The agent seeks your offer for two reasons:
1/ To make them look good to the vendor.
2/ To gauge the true value of the property and enable a realistic reserve to be set.

Why make those bastards look good? And why do their job for them? Finally to top it off if you make an offer the bastards will turn round and tell the other purchasers your offer! That happened to me in Sydney back in the 80s! The bidding was going up in 2s and all of a sudden the other bidder jumped $15k to EXACTLY my pre-auction offer.
Never, ever make a pre-auction offer. Make the vendor sweat blood the night before - thats how you get a low reserve.
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Reply: 2.1
From: See Change


one point at the moment is that many houses are not getting to Auction. As many purchasers have missed out on houses and are starting to get desperate , they are prepared to make high offers prior to auction in order to avoid the risk of paying more or missing out at auction.

We are preparing to selling house in the next few weeks. Most of the houses we've been looking at to get an idea of relative values are selling within a week or two of listing. Some owners are waiting for auction but many are getting offers that are to good to refuse. The ones that aren't selling that quickly usually have problems in terms of location or layout. The only ones that aren't selling are the ones where the owners have unrealistic price expectation.

Happy investing see change
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Reply: 2.1.1
From: Andrew S

Many thanks for all the replies.......Certainly has contributed to my 'financial intelligence'....lets see what happens.....

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