Buying Property Before Auction?

Been looking for a while and come across a particular property that suits our profile. It is a townhouse (~5yr old), 14 km N-NE of Melbourne. It sis due to go on auction in a couple of Saturdays from now, but was hoping of a way to potentially purchase prior to the auction, that can lead to emotion and have it go for a higher price. The agent says the est/asking price is around 500K, and that the owner just wants to get out, just making sure he gets his money back, plus interest etc. The townhouse was previously leased - from what I gather by the owner(he was a student), and he subleased to others also. He now lives somewhere else, and the place is vacant. The RE agent estimates the rental to be $500-550 / week. There is a place a few doors down that is renting for $530, but it has an additional courtyard (all else is similar). The townhouse directly next door only leased for $420/week, and when I spoke to that agent, she mentioned that the timing was bad over Christmas, and the landlord just wanted some in there - it was also mentioned that the place was left in a bad state by the previous tennants. This townhouse, however, is in quite good condition, the wife even refering to it as having an new house smell about it.

Looking at, it appears that the original owner purchased the place for $490K it 2009. I've also noticed from oldlistings websites that the rental per week has gradually reduced in the area - there has been a lot of apartment development in the area over the last few years, but it looks like there is hardly any more land for this to continue happening on. In saying this, the areas looks as though it hasn't seen any growth in units over the last 3-5yrs (based on figures from API mag), and in some instances there's been negative growth.

In a nutshell, the area is appealing, and my belief is that with the scarcity of land, prices will begin to move.

I have 3 concerns/questions:

1. We did an inspection on Saturday Morning and we noticed some "wet spotting) on the bricks on the bottom courses of the garage, adjacent to the external wall of the building. I know that on Friday night we had a major storm where it rained heavy for quite some time, but is this a cause of concern that should be investigated further?

2. In The stairwell, between floors, most of you would be familiar that most builders have a visible line between the plaster from the lower level, and the plaster from the top level of he wall, (i refer to it as an expansion join, but I don't know what its called. I believe its there, so there is no noticeable cracking when there is movement?) Anway, the plaster at the top half of the join(ie from the top floor) appears to noticeably bulge out at the join, ie if you were to run your hand up the wall from below the join, you can feel (and see) that the top plaster panel sticks out about 3-5mm. The horizontal length of the join is about 6 metres, but the are in question is about 1 mtre long. I also noticed that the plaster was patched/painted about 30 cm above this join - I don't know if this was something that may have been like that from the builders or otherwise? (the area in question is to high for a tennant to have knocked something into it, and also, upon pressing on the plaster where the patch is, the plaster does move somewhat. My wife didn't pick this up perhaps I'm pedantic, but nonetheless, didn't look right?
This is on the same wall that had the wetting on the brick in the garage.

Anyway, these two issues may not be anything, but now that I've noticed them they are in the back of my mind. Do any SS members recommend what should be done in this situation? Is it worth getting some form of official inspection done? Can anyone be recommended?

2. Speaking to my father ( he was a RE Agent in the late 80's- early 90's, but quit because it was hard making ends meet - particularly due to high interest rates), he mentioned the best way to negotiate and purchase prior to an auction is to make an offer with a bank cheque at 10% of your price to purchase. He said that by doing this, the RE agent takes you seriously, and then tries to push the sale with the vendor. What are your thought?

- If I was to do this, I would go in with a price in mind of 450K, so a bank cheque of $45?
- This would probably open up negotiation afterwards, ad then i would have an upper limit that I would possibly go up, tied in with the potential rental yield as a guide.

Your thought and criticisms please. What would you do different or better?

Thanks again,

Get a building report done. Go to the Auction.

Don't be the guy they used to set the reserve. Hold your fire.

Unless you go in with a strong offer prior to auction you will get no where in this market.
500k sell price with $500pw is rather high yield for Melbourne.

I live in Watsonia which could be around the area you are looking at and for a $500k property you would normal get 400-450 pw, which is more inline to the second place.

It all depends on the amount of interest they have if they will take it to auction or not. If the REA comes to you saying they are willing to take offers prior to auction then chances are there is very little interest. However if they have 4+ parties seriously interested why would they take your offer now unless it is a beauty.

Also if you do put an offer in the REA will/should go to the other interested parties and give them a chance to put their offers in which makes you blind as to what they are bidding.

How would you like it if they sold the property to another party and didn't ask you?

Get a building report done before the auction day so you can bid with confidence and then wait until auction day or for the agent to come to you about offer prior.

Meanwhile find other properties that are around the same area that are similar and hopefully with the same agency so you can say you are not 100% sold on the property as you are still looking.
I have access to rpdata for some of the NE area of Melb, which suburb is it in as I might be able to pull the old rental advertising price/sold price.
A low-ball offer won't convince the vendor to cancel the auction. If the agent has said $500k then it'll need to be better than that.
Anyone Else?

Building inspection:

Finders 2 Keepers

Scott Benton
ph. 0431 202 910

Ian Benton
ph. 0407 946 269

I've seen plenty of building inspections, these guys write excellent reports and will discuss the outcomes with you, giving straight up answers.

The problem with pre-auction offers is in the current market, it's going to have to be a strong offer. Low ball offers only work when the market is slow.

The other problem with B&P inspections prior to auction is that odds are you won't buy the property, but you'll spend money on the B&P. I've seen plenty of people fork out for multiple B&Ps only to miss out at the auction every time. I don't think there's a reasonable solution however, it's either take the chance without the inspection, or be prepared to spend money for nothing.
As the place is relatively new, and living nearby, and having seen the townhouses go up, I'm fAirly convinced they are structurally ok, apart from the water and plaster issue mentioned in my first post. How much does an inspection roughly cost, or can you just get a partial I spection done on the problem area?
Depends on what you want them to do.

Some will just walk through and charge $100 or so and only do main features/problems.

Others will charge a couple of hundred and will do a full inspection including crawling into tight spaces under the house/roof and test every tap (water flow/hammering), drain that there is no partial blockage (a drain should be able to drain a 10L bucket in a certain amount of time), striker plate where the door locks into, etc etc.
I noticed a successful pre-auction offer earlier this month for a property I was interested in and yep, it was a very high offer. It was about 15% over the top-end price guide for the auction. Property had one open for inspection and it was gone. Didn't even get a chance to inspect.

Why not wait to the auction and see if its a fizzler? Then you might not need to pay as much.
living nearby, and having seen the townhouses go up, I'm fAirly convinced they are structurally ok, apart from the water and plaster issue mentioned in my first post.

What exactly can you ascertain structurally from just driving by a building site? I'm intrigued.

From what you have described it sounds like the building could have waterproofing issues. Not uncommon. Is there soil pushed up against the other side of the wall? Regardless you shouldn't be seeing damp seeping through.
I've seen many of the newer properties / project homes built to a fairly low standard. On average they are worse than the 50-80 years old houses... I wouldn't risk it.

In my experience buying an investment property prior to auction rarely works. I do buy properties prior but that is almost always for owner occupiers (e.g. in case I find something that ticks 9/10 of their boxes, which is rare).

It's best to go to auction - if you worry about the emotions get a buyers agent (fees are usually $550 attendance and $550 success, small money by comparison).

Good luck.