Hold out till auction or place offer?

[Tsea]

Interested in an apartment in the inner eastern suburbs of Melbourne. Auction is in 2 weeks and the price guide is $475K +
Agent has stated the vendor would be willing to sell prior to auction and indicated it would need to be over $500K to move it on.
He explained the strategy would be if an offer was accepted everyone else who attended the opens would be contacted and given to close of business to put an offer in.
Is this a common and fair strategy from the agent?
I think I could pick it up at a price I'd like but not sure if it's better to hold out till auction?

 

[pickle pickle]

No harm in putting a pre auction offer on the table before the auction. It will have to be a big offer though to get it pre auction but u could get it cheaper than at auction. See how u go. Nothing wrong ethically in my opinion as to what the agent is doing. He works for the vendor not for u. Expect the agent to try and get the best offer on the property, not to get u the property.

 

[S.T]

I wouldn't play that game personally. But go to an inspection and put your name down anyway, if you're worried someone else might put an offer in.

I'd just bid at auction without showing your hand prior.

 

[vtt]

Interested in an apartment in the inner eastern suburbs of Melbourne. Auction is in 2 weeks and the price guide is $475K +
Agent has stated the vendor would be willing to sell prior to auction and indicated it would need to be over $500K to move it on.
He explained the strategy would be if an offer was accepted everyone else who attended the opens would be contacted and given to close of business to put an offer in.
Is this a common and fair strategy from the agent?
I think I could pick it up at a price I'd like but not sure if it's better to hold out till auction?

Right so the agent is quoting $475K+ yet he tells you that it won't sell unless it's over $500K. Hmmmm... why doesn't s/he change the price guide to accurately reflect the vendor's expectations?

The strategy of accepting an offer and then opening it up to others to effectively 'gazump' the original offer is to me, very poor taste but at the end of the day he's trying his best to make maximum commission. But that is by the by. So, my advice is if you don't want to go to auction then make the best and strongest offer you can, but don't overpay. If it opens up this secret closed auction strategy and someone pays more than you well so be it, wasn't meant to be. If not, then the property is yours.

Good luck!
vtt

 

[pickle pickle]

The advertised price for an auction is always lower than what it will sell for.

There is very little hope that you can get the property for under $500k before the auction or at the auction. If it is a deceased estate that is selling the property you may have a chance. Read the Section 32 if you are in Victoria before placing an offer. The only hope you have of getting it for under $500k would most likely be if it is passed in and negotiate after the auction.

You really need to look at what similar properties are selling for to get an idea of what it will sell for (not the agent's price). Not knowing the property or area, I wouldn't be surprised if you would need to put an offer of around $550k to get the property, based on my experience of the auction process. But check the sale results of similar properties in the location.

 

[S.T]

If you want to go down the pre auction offer routine, make sure you give a very firm timeline that your offer expires so he doesn't have time to shop it around and call everybody who attended, plus get them to submit serious offers. You will want to make an offer that's unconditional too, with the vendors terms of quick or slower settlement.

 

[jrc]

Very frustrating auctions for someone who is ready to buy. Case in point - travelled to a large regional city to purchase a PPOR. One property 20 ks out that met all our requirements was listed the day before we travelled but to be auctioned in four weeks. Did our due diligence and looked at the property. Estimated property to be worth $500000 max. Other local agents reckoned maybe $480,000. Replacement cost of land and house and pool maybe $520,000. Listing agents said the owners had a taste for building and had bought land and were going to build again. But you wouldn't do that unless you expected to make money. These agents a few months earlier had listed a property for auction - vendor bid $1,000,000, passed in at $1,050,000, sold for $850,000.

So on this basis it was not even worth putting in a pre auction offer, so instead we made and had accepted while we were there an offer on another property which had its first open the day before we got there and which will settle in our required time frame.

 

[tone1]

I say no. Request a contract with the agent to show you're interested, if someone else puts in a pre-auction offer, you will be notified, otherwise wait for the day. I see the appeal of avoiding the auction, but generally you will not get a sale (and especially in the current state of the Melbourne market) unless there is significant risk the offer will not be beat at auction. That means you need to put something in high and strong and run the risk yourself that you could have paid less by waiting for auction. It is a double-edged sword.

I agree the comments about shopping around for better offers by agents is in poor taste. If it's a good pre-auction offer, you generally only get until the end of the day to put something in, and in those instances, the offer is significantly above the price guide.

 

[Big Will]

Right so the agent is quoting $475K+ yet he tells you that it won't sell unless it's over $500K. Hmmmm... why doesn't s/he change the price guide to accurately reflect the vendor's expectations?

The strategy of accepting an offer and then opening it up to others to effectively 'gazump' the original offer is to me, very poor taste but at the end of the day he's trying his best to make maximum commission. But that is by the by. So, my advice is if you don't want to go to auction then make the best and strongest offer you can, but don't overpay. If it opens up this secret closed auction strategy and someone pays more than you well so be it, wasn't meant to be. If not, then the property is yours.

Good luck!
vtt

To sell the property before auction when it is 2 weeks from auction would need to be good. Maybe the owners would like 480k but there is a lot of interest and the vendors might want to run it to auction but if you pay 510k they will sell it as it is a great offer. Remember we don't know anything about this property except the intro price. However I would guess with intro price of 475k they vendors might want 520-540k, really need to check comparable.

With the offer prior it would be gazumping if they don't come back to the original buyer who put the offer in. It is a normal practice and basically they take the original offer and ask other buyers if you are interested in buying as there is an offer taken and might be sold prior to auction. If no one comes back then it is sold or negotiated further the buyer.

If someone comes back with an offer then they should go back to the original buyer and let them know another offer has been taken and if they want to change their offer.

If they have laid out the plans (like the OP has been told) and they don't change their offer and it gets sold to the second purchaser then it isn't gazumping but rather they lost to a better offer as everyone was working with the same information.

If they don't come back to the original offer then yes it would be but it would be stupid for the REA not to go back to the original party as they would have lost a buyer on future properties and future listings.

 

[Big Will]

I agree the comments about shopping around for better offers by agents is in poor taste. If it's a good pre-auction offer, you generally only get until the end of the day to put something in, and in those instances, the offer is significantly above the price guide.

How is it poor taste? the REA is working for the vendor to maximize the price and has explained the process.

Even if it is a good offer lets pretend 550k and they accept it how pissed would you be if a buyer knocked on the door and said I was going to bid 600k at auction but wasn't told.

The REA is merely doing his/her job and in my eyes is doing a fantastic job for their vendor.

Remember a REA isn't your friend trying to get your home for the best price possible that is a BA. They are trying to get your home for you and get the best price possible for their vendors.

 

[neK]

No harm in putting a pre auction offer on the table before the auction. It will have to be a big offer though to get it pre auction but u could get it cheaper than at auction. See how u go. Nothing wrong ethically in my opinion as to what the agent is doing. He works for the vendor not for u. Expect the agent to try and get the best offer on the property, not to get u the property.

The agent works for themselves and whatever gives them the commission the fastest so they can move onto the next property.

 

[Big Will]

The agent works for themselves and whatever gives them the commission the fastest so they can move onto the next property.

Then why don't properties sell after 1 day? I am sure I can email 50 agents right now and offer them 50k for each property and they would tell me no.

Vendors of today are vendors of the future, same with the purchasers of today will be vendors of tomorrow.

You burn a lot of people and it is a struggle for them to earn a living.

The cowboys might be in it for themselves but you wouldn't be in 10 years if you had to find a new purchaser and vendor each and every day.

 

[tone1]

How is it poor taste? the REA is working for the vendor to maximize the price and has explained the process.

Even if it is a good offer lets pretend 550k and they accept it how pissed would you be if a buyer knocked on the door and said I was going to bid 600k at auction but wasn't told.

The REA is merely doing his/her job and in my eyes is doing a fantastic job for their vendor.

Remember a REA isn't your friend trying to get your home for the best price possible that is a BA. They are trying to get your home for you and get the best price possible for their vendors.

It's in poor taste when the offer is well below what the vendor wants and is being used to entice larger bids under a misleading pretext. In my experience, the agent couches the offer by saying that the property is going to sell pre-auction due to the offer, providing a misleading inference that putting in a higher bid will result in a sale because the lower offer will also result in a sale. In my view, this process is only done properly when the offer is actually high enough for the property to be sold. You are usually given to the end of the day in the instance where the offer is high enough. If I'm not given a tight timeframe to contact, that's usually a sign that the offer is not high enough.

This has happened to me countless times. I get a message, person A has offered X, will sell pre-auction, contact if interested. A significant period later, the property is still advertised as going to auction, usually does, because nobody bites, and the original offer was too low. Agents shouldn't say the property will sell pre-auction if it's not going to based on the pre-auction offer, and some unfortunately make that claim. That's why my preference is to wait until auction or look for signs that my pre-auction offer will buy the property if no better offers come through. It's the same with an auction, some people only bid when they know the property is on the market and they are bidding to buy, not to just increase the sale price towards the reserve.

I also think that shopping around a lower offer is a sign that there is low interest in the property and the misleading pretext is being used to indicate to other purchasers that there is a lot of interest to fool them into spending more. In that case, I'd prefer going to auction, with low interest there you probably have a better chance of scoring a good deal when the vendor is under pressure to decide whether to take the lower deal or face post-auction private sale on the auction day. The vendor is generally not under such pressure before the auction.

Of course, I understand agents want to get the best price for their vendor, but I'm looking at it from a purchaser's perspective, which is what the OP is.

 

[Big Will]

The REA isn't the person calling the shorts they can only maybe influence it.

What if the vendors want 600k and the agent knows 520k is a great price for the property. The agent gets an offer of 550k which is an amazing result but it isn't sold as the person who makes the final decision wants 600k.

One you need to listen to the words of the REA as they shouldn't/wouldn't/have been taught not to say anything will be sold unless it is sold and both purchaser and vendor have a copy of the COS.

As it isn't technically sold until both parties have the signed COS, until then a purchaser can actually pull cancel their offer (without cost) if they have not received the sign COS. However they will burn the vendor and REA for future purchases...

As my advice was before wait until auction don't reveal your hand. If a REA comes to you saying they are taking offers prior to auction it is usually an indication there is little interest. If they say they have an offer you either put an offer in or don't it is your call. You cant get angry if it gets sold cause you don't believe them.

 

[neK]

Then why don't properties sell after 1 day? I am sure I can email 50 agents right now and offer them 50k for each property and they would tell me no.

Vendors of today are vendors of the future, same with the purchasers of today will be vendors of tomorrow.

You burn a lot of people and it is a struggle for them to earn a living.

The cowboys might be in it for themselves but you wouldn't be in 10 years if you had to find a new purchaser and vendor each and every day.

There is something called perception. You need to weigh it up against bragging rights.

Assuming you base 1 day on the day they appear in online advertisements, know that some properties sell before they are even advertised. So yes they do sell before 1 day.

However in this kind of market we are experiencing (Sydney), most are sold within 1-2 weeks. Unless the offer given was stupidly high - ie offers over $700k, someone calls to offer $1.2m, it would sold in a heartbeat.

On the other side, its about perception, if the offer is good, but not outrageous, then they would hold out for a few days and use that offer to coax higher offers, if there aren't any, agents will work on the vendor (also known as conditioning). People are driven by greed, they are also driven by Fear of Missing Out - comes down to how well the agent can balance it.

 

[neK]

The REA isn't the person calling the shorts they can only maybe influence it.

Hmmmmmmm.... ok then.
I'm guessing you haven't sold property via an agent before?

 

[Big Will]

Hmmmmmmm.... ok then.
I'm guessing you haven't sold property via an agent before?

Who signs the COS next to vendor? Vendor or REA (excluding others).

Typically REA doesn't actually sign anything on the COS.

 

[Big Will]

There is something called perception. You need to weigh it up against bragging rights.

Assuming you base 1 day on the day they appear in online advertisements, know that some properties sell before they are even advertised. So yes they do sell before 1 day.

However in this kind of market we are experiencing (Sydney), most are sold within 1-2 weeks. Unless the offer given was stupidly high - ie offers over $700k, someone calls to offer $1.2m, it would sold in a heartbeat.

On the other side, its about perception, if the offer is good, but not outrageous, then they would hold out for a few days and use that offer to coax higher offers, if there aren't any, agents will work on the vendor (also known as conditioning). People are driven by greed, they are also driven by Fear of Missing Out - comes down to how well the agent can balance it.

Well aware of properties selling before advertising through mediums.

Also I have seen properties sell for less than another offer that was submitted, not always the price

 

[neK]

Who signs the COS next to vendor? Vendor or REA (excluding others).

Typically REA doesn't actually sign anything on the COS.

I'll let you in on a secret, the person signing only needs to think they are making the decision.

 

[neK]

Well aware of properties selling before advertising through mediums.

Also I have seen properties sell for less than another offer that was submitted, not always the price

If that's the case, why would ask the question "Then why don't properties sell after 1 day?"

Seems rather redundant if you are already aware that properties do sell before advertising. Unless it is was meant to be a rhetorical question which you received an answer that you did not expect.

Also you comment about calling agents and offering $50k for a property (assuming you're referring to any of the capital city markets is just plain absurd, though i'm sure you were only trying to demonstrate for dramatic effect, that said, add an extra "0" and offer $500k above their expected and see how that changes).