Interesting Approach

[vwvroom]

Hello,

I made a unconditional offer with cheque attached at a good price(above asking) on a property that I attended a OFI for on the weekend with a expiry date of 2 days. There was some interest at the OFI however most were FHB.

I received this email from agent...

""
Thank-you for your interest in this property.

After a meeting with the vendor, we have decided on the following selling approach:

If you wish to buy you are invited to submit your best offer to purchase.

Please take into consideration that there are multiple interested parties, and that an unconditional offer accompanied by a letter from your solicitor (indicating that you have had the contract reviewed by them, therefore waiving any cooling off period) will be viewed most favourably by the vendor. The vendors ideal settlement period is 30-60days.

We are not conducting an auction campaign, therefore we will not be accepting bids or multiple offers to purchase.

We appreciate for some potential buyers that a building inspection and/or finance approval may still be sought, hence we will be accepting offers by no later than 5pm on Tuesday 28th July 2009 (approx one week from today) - providing time for potential buyers to finalise these details.

Offers will only be accepted in person on the Contract of Sale, accompanied by a deposit.

The best offer/s will be presented to the vendor, we do not intend going back to other parties once accepted. The final decision to sell is the vendors.

Please contact me directly anytime to discuss your interest and to submit your offer. Good luck! ""

My thinking is
1. It is a auction
2. They wish to wait to have another OFI
3. They are hoping I will increase price if I fear there is additional competition

What would you do?

 

[JamesGG]

This is common practice by many larger agencies, especially when there is a lot of interest in a particular property. It is possible, admittedly (and I'm sure there will be many sceptics here who will suggest it's the most likely option) that the agent is lying, there are no other offers yet and he is simply trying push up your price.

My experience, is that there is likely to be at least one more interested party, if not another offer already, and the agent is doing a fantastic job for his vendor in encouraging multiple offers in a panic scenario where often someone (typically a FHO) will offer a higher price than they might have otherwise. But, it's not an auction as such, as each person only gets to make one offer and none of the other buyers knows what those offers are.

As a former agent, I loved this scenario. We sold countless properties for more than a reasonable buyer would pay, because it just takes one buyer to become unreasonable.

As a vendor myself from time to time, I also love this scenario - for exactly the same reasons

As a buyer from time to time, I usually walk away from this scenario. If the agent is bluffing, they might call back. If not, then there's always plenty of other opportunities around

Now, in your circumstances - if the vendor has agreed with the agent's plan, then the agent does not need to present your offer to them as the terms - namely, your expiry date - do not match the vendor's current criteria.

So, it's your call; you can withdraw your offer and wait for the agent to come back to you (and, they may not), or, submit it as part of the process with everyone else next week.

As the agent said to you in that email - good luck!

 

[wylie]

It looks, smells and tastes like a "sale by tender".

I really hate sales by tender .

 

[Dazz]

Standard "Offers to Purchase" scenario.

We have bought the last 6 properties just like this, cos there is no such thing as the Seller conveniently popping a price on their property. They want as much as you can possibly give and then a little bit more to make it painful.

Seller has 100% of the power in the contract negotiations. Buyer has 0%.

If you don't like that arrangement, then you need to move on to another property wherethe Seller isn't quite as savvy.

 

[RightValue]

It looks, smells and tastes like a "sale by tender".

I really hate sales by tender .

I agree on both points.

 

[willair]

.

We appreciate for some potential buyers that a building inspection and/or finance approval may still be sought, hence we will be accepting offers by no later than 5pm on Tuesday 28th July 2009 (approx one week from today) - providing time for potential buyers to finalise these details.

Offers will only be accepted in person on the Contract of Sale, accompanied by a deposit.

The best offer/s will be presented to the vendor, we do not intend going back to other parties once accepted. The final decision to sell is the vendors.


What would you do?

The only person that wins in this game is the vendor, and the sales agent
either way they will collect big or get nothing,imho..willair..

 

[wylie]

The only person that wins in this game is the vendor, and the sales agent
either way they will collect big or get nothing,imho..willair..

Exactly..... the time we put in a tender (sealed bid - no second chance) we were the lowest of the three tenders they received. The vendor didn't accept anyone's tender, so that agent missed out completely.

 

[vwvroom]

Yes I agree with all posts. Dangerous position to be in and no real way to motivate seller to accept an early offer when this promotes emotional competition.
This is a good ploy by the agent to get the highest price possible, however still a little skeptical that they would not go back to other offers and ask for a counter offer.
My only option I think is to walk away and keep looking at other possible properties.
Thanks!

 

[Collector]

Exactly..... the time we put in a tender (sealed bid - no second chance) we were the lowest of the three tenders they received. The vendor didn't accept anyone's tender, so that agent missed out completely.

We used the same method on a property on Saturday - new listing we wanted to auction - vendor didn't - property listed on RE.COM last Thursday with open on Sat. we asked all that attended to submit there best offer to us by Monday 5:00pm.

Property now under-contract for $40,000 above list price.

This is the first time that we have sold a property using this style, I don't know if we will go down this path again - that all depends on the conditions - as a REA I think that we did the best we could for the vendor in this case and achieved a result that would not have been achieved by conventional means.

There was a post on here a couple of months ago from a Queensland REA, the post was about Ray White not puting prices on properties - at that time I got stuck into him as I did not agree - the thead turn slightly nasty - I still to a point disagree but in saying that I now see merit in that method.


This property is not considered to be in the FHO category - we are finding a lot of activity in the 2nd tier category $600k to 1.1m with 6 sales in the last 2 weeks.

 

[Propertunity]

I agree on both points.

x 2 for me as well.

 

[wylie]

Getting $40K over the list price could mean the market was more bouyant than expected, or it could have been the tender process pushing an emotional buyer into paying more than the house is "worth".

Personally, I prefer auction where at least you have the option of paying a little more. With tenders, you could miss your dream house by $1K.

I saw an English property show where the "offers over" Scottish system ended up with one lot of emotional buyers paying 80 thousand pounds more than the next buyer.

They ended up somehow getting out of the contract, which is difficult in that system apparently.

Even as a vendor, I don't like tenders, and as a buyer I wouldn't even bother putting in a tender unless it was for a PPOR that I fell in love with. Then I suppose I would go higher than I may have with a standard contract but I would always feel cheated and wonder what the next person under me offered. Actually, I probably would only go as high as I thought the house was "worth" and perhaps a tiny bit more, so I understand why they can work.

But in the one situation where we did tender, nobody ended up buying it, so it was wasted OFI, advertising etc.

Even though I understand that sometimes it can pay dividends, it can also backfire and I just don't like tender as a method of selling, at all. Thank goodness it is not very common in Brisbane.

I also don't particularly like properties marketed without a price, but at least in that scenario, you can have the option of going higher if it ends up in a dutch auction scenario.

 

[craigb]

i hate buying like this, and i would look for other props, if it comes back in your favor go with it but , untill then look for other doors to open, it might be you that pulls your bid, and that would be great!

 

[marg4000]

Neighbour over-the-back sold their house by tender.

They were VERY happy with the price received, well above expectations, both theirs and the agents'.

I would not like to purchase by that method, but if I was selling .........
Marg

 

[vwvroom]

Great posts, thankyou.
I can see so many positives for the seller this way.
I think i will walk away as in this price range 300's I don't think you will end u paying fair market value.
Just hope other decide the same and walk away too

 

[jrc]

You can always tender at $X above the highest other offer if you want to avoid missing out

 

[wylie]

You can always tender at $X above the highest other offer if you want to avoid missing out

That is a great idea, and as long as you had "out" clauses I wonder if it would be accepted?

You would want add a clause to ensure you get to see the highest contract in case someone tries something underhanded.

This vendor wants people to ditch the cooling off period, so perhaps he/she is looking for cash unconditional contracts though.

I like the idea though.

 

[evand]

Or the agent isn't lying. Agents know a property will sell eventually, that's why they like to play these games.

I'd walk. Unless there is something about the property that is special and you want it badly. Otherwise, you'll most likely end up paying over the odds.

If you don't like that arrangement, then you need to move on to another property wherethe Seller isn't quite as savvy.

 

[MTR]

I know how you feel.
I am currently dealing with this scenario in Melb as well not sure whether it is only Melb market, due to the lack of stock, lots of competition and a rising market. My competition are investors/builders/developers who are now happy to pay above market value.

I am now looking at placing my best offer prior to auction on Monday and I aware that there are at least 5 other interested parties.
Lucky vendors I say.

I am prepared to play by their rules as I don't want to miss out, this is how I managed to secure 3 properties. Have had to do quite a bit of ground work with the agents to get them on side and help me with the deals.

I am hoping that this is a good sign and evidence of a strong market and it will continue to rise.

All the best.
Cheers, MTR

 

[VeeDub]

I have a feeling that this sales approach may be based on (or a variation of) Jenman Real Estate.

I should state that I don't know this for a fact, but recently I was doing some research on "How to Sell" and what to look out for etc. as I have a PI which I may decide to sell in the next year and I came across the Jenman site.

The sales approach outlined seems consistent with many of Jenman's observations. The reason why I don't know for certain, is that Jenman provide a certain amount of info in material which is freely available (which was enough for my needs at this point). However if you're actively looking to sell, to get the full explanation of the Jenman "process" (my word) you're encouraged to contact Jenman directly.

VW

 

[Jacque]

Selling by tender is best used in a sellers market, which we are currently experiencing with many buyers and high demand. It may not be fair, and buyers may hate it, but it's been proven by many agents to get results. However, it can have it's downsides in that certain buyers refuse to participate and the vendor may well end up with less competition than if they'd proceeded to auction. If the agent is being too "clever" and also has only a few genuine buyers, it can also stuff up as 1-2 refuse to play. The other important point to remember is that the vendor isn't going to sell at any old price and will obviously have a minimum price, which you're within your rights to at least know. Ask the agent as you don't want to waste your money on inspections when you never had a chance in the first place.

The Jenman technique is similar to a tender process in that buyers are asked to sign a "declaration" form stating that this is their maximum limit and they forfeit the right to re-negotiate based on this offer. I've dealt with such agents on behalf of my clients and have never signed one- simply continued on with my preferred method of negotiation (depending on the circumstance, the property, the individual agent etc) to secure the property. If the agent is uncooperative and is refusing to take your offer to the vendor, you can always contact the solicitor and submit that way.

Emotion certainly plays a part when it comes to home-buying, and the effective selling techniques of the particular agent, as some home owners will get caught up with the creation of urgency and end up paying more than they ideally wanted to. Buying property is a very emotive process and when buyers fall in love, well, they forget that other houses exist
However, if the home is really your dream, you can afford it, the price being sought is within your budget and it's not unreasonable, then it may not hurt to go a little higher (it's what vendors rely on, after all!) to secure it.

Buying a PPOR is not an exact science. The trouble arises when you're paying too much above market when compared to recently sold comparable properties and allow your heart to rule your head. It's also about being smart enough to see what the agent (or vendor) is up to, and play the "game" if you have to, to get results. There's no one ideal strategy when it comes to purchasing as there's so many variables and each sale is individual, but don't lose out on a property if you think you have a good chance- you may well just be successful. Best of luck