hot market buying prior to auction

[bumblegoodie]

Hello all,

What type of strategies and method have you employed to convince the seller in selling so that you can buy at market value?

as all of you may agree as a buyer in a hot market you want to buy at market value and not excessively over paid.

any advice on how to approach the agent and what type of strategies will work in a hot market?

 

[Propertunity]

What type of strategies and method have you employed to convince the seller in selling so that you can buy at market value?

You don't have to convince the seller - that is the the selling agent's job. You have to convince the selling agent, so he can do a sales job on the vendor. As BAs, I suppose we have a bit of a relationship advantage with agents as we deal with them all the time.

any advice on how to approach the agent and what type of strategies will work in a hot market?

Yesterday, we purchased a property for one of our clients, the night before it was due to go to auction. We pulled out all stops, had a contract review done by a soli at 2-3pm who then issued a 66W by 4pm, had a P&B done at 4:30-5pm. Exchanged contracts after negotiations at 9:30pm.

We estimate we picked it up for at least $100K under market value, but we'll never know since it did not go to auction.

 

[womble66]

We estimate we picked it up for at least $100K under market value, but we'll never know since it did not go to auction.

Well done and this is why BA's can be good but what % of the sale price is the $100K?

My guess would be less than 10% and at those prices in a hot market your guess is about as relevant as the estimate the Agent told the vendor as your regular see and read about properties in the upper price range selling for similar amounts above reserve.

To accept the offer the vendor must have been happy or they would have gone to auction so in reality you probably paid market value except you maybe avoided an emotional competing bidder therefore didn't pay overs if your client really wanted the property.

 

[Richard Feynman]

An unconditional, market value offer as early into the campaign as possible would be your best shot.

I pulled this off in Marrickville in 2014 when things were pretty nuts.

An apartment was listed mid week with a 4 week auction campaign. I knew the area and what a great buy it would be, and how many buyers would be interested so I had to get it off the market asap.

I immediately requested a contract, has my conveyancer look over it, write up a Section 66W and turned up at the first open house on Saturday with a signed contract, S66, cheque for 10% (which I signed in front of the agent from dramatic effect) and also informed the agent (truthfully) that I had my eye on other properties and would need to know back on my offer that afternoon or I'd withdraw it so I could offer on other places.

We had a deal a few hours after the first open.

 

[Propertunity]

Richard makes a good point. It used to be that the best approach was to make an offer after the 2nd Open. But in a hot market, your best to make an unconditional offer before the campaign launch (if you know) as it avoids the need for prepping the property every week for inspections. The next best time is the same day as the first Open as selling agents can advise a vendor that many times the best offers come from motivated buyers in week 1-2. Alternatively, if the vendor is set on going all the way to auction, then attempt to buy the night before (like we did), with the threat that you will not be attending the auction.

 

[bumblegoodie]

Thanks guys

If the owner is aiming for the highest price then he prefers to wait till auction? Am I correct?

 

[Propertunity]

Thanks guys
If the owner is aiming for the highest price then he prefers to wait till auction? Am I correct?

In a hot/boom market - yes.

In any other market, the vendor would be wise to heed the advice of a good selling agent running the auction campaign - as it might be better selling prior, if the buyer's offer is good and the buyer won't wait until auction day for whatever reason.

 

[Propertunity]

..... but what % of the sale price is the $100K?

All the comparable sales we had, (and there were plenty) suggested a price of up to $100-150K more was easily justified.

.....except you maybe avoided an emotional competing bidder .....

This is a BIG thing at present in Sydney auctions. It only takes one desperate emotional buyer (and there seems to be at least 1 of them at every auction, and sometimes more). We have to avoid getting into that scenario if at all possible.

 

[vtt]

I'm no expert by any means, but we bought an investment property around this time last year with a Buyers' Agent and the property was going to auction.

At the time Sydney was 'hot' (it's gotten hotter since), we did not want to go to auction, and neither did our Buyers Agent - we had just missed out on another property that sold for $400K over estimate at auction and we weren't ready to be burnt again.

The strategy the BA used was to get the contract early, and be as amenable as possible to the terms. In our case, the seller wanted a long settlement. Our view was if we got it for the price we wanted then fine, have the long settlement. If it was going to auction, then we wanted the clause adjusted to the normal settlement period. We later found out that it was the long settlement that turned others away and others had tried to negotiate with the seller for a shorter settlement period

Remember, the quick brown fox jumps over the lazy dog!

We were also cashed up and ready to go, with finance pre-approved so that was helpful.

vtt

 

[womble66]

All the comparable sales we had, (and there were plenty) suggested a price of up to $100-150K more was easily justified.

I am not doubting you but at a $700K sale price its a ~12% under your assessed market value but at $1.4m its ~6% and then your claimed under market value purchase just does sound as impressive when no one actually knows the starting point.

Only commenting as you actually didn't answer my question but happily quoted me

 

[bumblegoodie]

In a hot/boom market - yes.

In any other market, the vendor would be wise to heed the advice of a good selling agent running the auction campaign - as it might be better selling prior, if the buyer's offer is good and the buyer won't wait until auction day for whatever reason.

thanks. so the only way to convince them is probably 66w? and a $100- $150K more than the market price.....

I was quite upset today when i received a text from a RE about another property. On a sunday he sent me a txt to say an offer of X amount with unconditional contract to be signed monday and ask for counteroffer.

I thought they cannot disclose the price?

 

[Big Will]

thanks. so the only way to convince them is probably 66w? and a $100- $150K more than the market price.....

I was quite upset today when i received a text from a RE about another property. On a sunday he sent me a txt to say an offer of X amount with unconditional contract to be signed monday and ask for counteroffer.

I thought they cannot disclose the price?

They shouldn't be as it is against the privacy act as you are not part of the transaction between the vendor and that purchaser.

either 1 the REA is lying or really stupid as he would have to disclose your price to the other party (thus doing the wrong thing again) and at the end of the day he/she is burning two (or more) buyers to only get $1,000 more than the other person.

 

[bumblegoodie]

They shouldn't be as it is against the privacy act as you are not part of the transaction between the vendor and that purchaser.

either 1 the REA is lying or really stupid as he would have to disclose your price to the other party (thus doing the wrong thing again) and at the end of the day he/she is burning two (or more) buyers to only get $1,000 more than the other person.

thanks big will.

fyi, within the interval of 45 mintues the updated text said it had increased $10K.

Are you sure is in the privacy act? i have it in sms ..... i guess they are just pain lying!!!!!!!!

 

[Big Will]

thanks big will.

fyi, within the interval of 45 mintues the updated text said it had increased $10K.

Are you sure is in the privacy act? i have it in sms ..... i guess they are just pain lying!!!!!!!!

Your call to make, either you don't believe him and you may miss out or if he was you are in a strong negotiation position as you would be able to assume there is no other buyers.

or

You do believe him and put an offer in, however if I put an offer in what would stop him from going to the other party and saying I have another offer of their original offer + 1k...

Also talking price yes it is the main thing on the sale however conditions still have an impact.

When does the property go to auction? As it would be stupid of him to say his has an offer during an auction campaign.