Make an Offer before Auction or Wait ?

[smule]

So after searching for a while I've found a property I'm extremely keen on.

I from my (rather limited) experience value the property in the low to mid 500's

However the agent has listed the property at 460+ and on the first day of inspection there was literally a line 50 metres long for people to view the house.

Speaking to the agent afterwards he admitted they where off the mark at 460+ but they were factoring in the house needed minor renovations, he said we will entertain any offer with a 5 infront of it.

So the question I have is it best for me to make an offer now or wait till auction day?

My concern is they will knock my offer back regardless and use this as a gauge of where interest if for the house.

Any thoughts please?.. for the record the property is a free standing single fronted house within 10k's of the CBD

 

[Propertunity]

he said we will entertain any offer with a 5 infront of it.

'Entertain an offer' is completely different to 'accept an offer' - which is what you want.

So the question I have is it best for me to make an offer now or wait till auction day?

You'll need to do more than this. You need to talk to the REA and find out the vendor's motivation for selling and if they would be open to selling to you without going to auction. Only act once you have the full background

My concern is they will knock my offer back regardless and use this as a gauge of where interest if for the house.

That's pretty much my concern also.

Put yourself in the REA's shoes. With a 50 m line up wouldn't you be recommending that the vendor go to auction?

The only way you might be able to do this would be to say to the agent "I never buy at auction" because I don't want to spend $'s on P&B without knowing I'll be successful. I am a serious investor I have x number of properties.....I'd be prepared to make a serious offer and I'll buy it - but I won't attend an auction..............and if it comes off - so much the better. If not - then keep your word and don't go to the auction. There'll be other places to buy and the REA will know you don't play games.

 

[vbplease]

Trouble is, offers made before auction usually need to be unconditional as well don't they? Especially since there was a 50m line... All the best with your offer smule!

Another point, is it standard pracitce to have a list price for an auction in Victoria? its illegal in QLD..

 

[Jonathon]

In VIC you can make conditional offers before the auction, there's no problem with that. However if you make an offer within 3 business days of a public auction then there's no cooling off period.

Indeed you can arrange with the vendor in advance that your auction offer is itself conditional, many are conditional on finance and the standard REIV contract has a subject to finance clause in it.

Most (probably 90%) REAs in Melbourne will give a price range pre-auction. As I understand it, this needs to be a max 10% range (eg. $600k-$660K) and the reserver price should lie either within this range or within 10% of this range, I can't remember exactly.

From memory, REAs in Vic aren't allowed to market a property as $450k+, or offers from $450k, or my favourite - "Opening offer $450k", but many do it all the time.

In Melbourne you tend to get to know which agents give a true range and which agents are 20% too low on a consistent basis. For example, Miles RE in Ivanhoe tend to be quite honest in their price ranges, with ther reserve price being in or very close to their quoted range for most auctions I've been to. (I'll refrain from naming the agents who are consistently underquoting, but they always seem to have two words in their name!)

In the past year or so there have been some convictions of REAs in Melbourne for underquoting, and it's definitely got better, but you still see examples of it all the time. I think the largest fines were about $20k, which is less than the commission on a median sale in most eastern suburbs, so perhaps it's not much of a deterrent?

 

[smule]

Thx for all the tips folks, let me clarify though that I attribute the long line of people to the quoted price of 460k, the house is in an area where you rarely see anything under 500, so I'm thinking (or hoping) to myself theyre merely curious neighbourhood stick beaks as I did also notice that most people arriving and leaving where on foot and not in a car..lol

Regardless I've set a price in my head of what I believe the property is worth and what I'm prepared to pay for it, I'll sit it out for another week before I speak to the agent to gauge interest and take up some of the advice offered by propertunity

 

[AUSPROP...]

be wary. If property comes off 50% how will you feel about paying even $400k?

 

[asdf]

be wary. If property comes off 50% how will you feel about paying even $400k?

Not to worry, Rudd 09 and 10 will help us all pay for it with the soon to be Australian BBB- credit rating.

 

[smule]

be wary. If property comes off 50% how will you feel about paying even $400k?

Hi Ausprop, you raise an interesting and valid point.

I've been watching the market for a while now and prices have marginally levelled off, but my thoughts are they wont drop much further in particular areas that are close to the CBD/Transport, the are I'm looking at is about 7k's direct from the CBD

My theory is based on my beliefs that the economy has bottomed out, the chinese are starting to buy up our commodities and bring up their stockpiles, the stock market is looking healthier (we're no longer witnessing the massive dow/xjo drops of Q4 08) confidence is slowly returning imo.

Interest rates are at an all time low and until the US starts raising them we'll continue to see low %'s for quite a while. Lets not forget Krudd's FHOG. Yes the rates and FHOG may be creating a false sense of security for FHB but I dont believe the issue is big enough to kickback on us one day to force prices down.

I definitely feel we will have a long sideways movement in prices but not a dramatical decrease adding to the fact that this place will be my PPOR so its not a property that I will be looking at flipping in a couple of years.

Lending has tightened but money is still freely available for those with a solid deposit and anincome

Just my 2c worth

 

[Jonathon]

I'm an employer in the Melbourne CBD (financial services) and I expect there will be lots more redundancies in the next couple of months amongst financial services companies.

Not to the extent that it'll severly reduce housing demand, but I don't see any increase in demand for a while yet, particularly for anybody working in financial services.

 

[BayView]

It would seem that the actual sale price is more likely to be in the mid $500's.

Therefore, about 99% of the prospective buyers will be blown out the water most likely.

Problem is, with that much interest at the opens, the Vendor probably thinks he'll get a good price, and therefore won't accept an offer before hand.

I reckon just turn up on the day and wait until the very last call for bids before making one.

If it's passed in; you wanna make sure you are the last bidder if it is still within the price range, or don't bid at all and then approach the agent afterwards and make an offer.

Keep a close eye out for the dummy bidders.

 

[Bushy]

Make sure you register your interest with the Agent, If he gets an offer before auction he is obligated to inform you. We missed out on a house that sold prior to auction and we would have paid more than what they got, simply because we didn't register our interest.

Bushy

 

[smule]

Well the agent came back to me today and said we're not taking offers .. "we're taking it to auction"

When i prodded him on interest levels he said low 500's but no actual offers in writing had been made.

So what do I take from this move? He has genuine belief fromt he inspection turnout that he can negotiate a better price for the vendor on the day ?

 

[Propertunity]

When i prodded him on interest levels he said low 500's but no actual offers in writing had been made.

Well he's not likely to get many offers in writing if he's saying "we're not taking offers .. "we're taking it to auction""

So what do I take from this move?

He's taking it to auction.

He has genuine belief fromt he inspection turnout that he can negotiate a better price for the vendor on the day ?

Possibly sounds like it. Plus he gets an auction fee from the vendor. Plus vendor pays for advertising the auction. Plus he can put his smiling face on the newspaper adverts that the vendor pays for. Plus he does not have to keep putting offers to the vendor from purchasers like you - just takes the higest bid over reserve on one day........etc

 

[pully]

re offers before auction

just wondering re the process/legality/ethics etc. if a purchaser approaches an agent re a property for auction and says they want to buy before auction, is the agent duty bound to pass that info on to the vendor?
i bought a prop before auction without any probs. it was just made clear that if accepted by the vendor there would be a deposit to be paid and so on.
regards

 

[smule]

Foranyone that was following this thread the auction was today, they were quoting for 460+, house sold for 542 .

So i missed out as my limit for this house was 520, the hunt goes on

 

[Propertunity]

Thanks for the update & letting us know.

 

[bradje]

Foranyone that was following this thread the auction was today, they were quoting for 460+, house sold for 542 .

So i missed out as my limit for this house was 520, the hunt goes on

That's OK...According to your research, they paid too much. U didn't miss out on anything. The next bargain will be right around the corner and given all the doom & gloom, prices wont be rising much in a hurry.
John Bradshaw

 

[Jacque]

Foranyone that was following this thread the auction was today, they were quoting for 460+, house sold for 542 .

So i missed out as my limit for this house was 520, the hunt goes on

Bad luck smule- but there'll be others, I'm sure.
So how many bidders were there in the end?

 

[smule]

Well the house opened at 470

All quiet, Vendor Bid went in at 500

Then 3 parties took it to 530

2 parties took it too 542.5

Agent rang me on Monday and asked me how I thought the auction went.

Excellent result for the vendor, but I told him I wasnt impressed with their valuation of 460 +, almost 20% under the selling price.

 

[Jacque]

Sounds like the guide should have been $500k+ esp with a VB of that amount. Better luck next time