Making an offer before auction?

[McBrain]

I'm looking at a house in Melbourne. It is up for auction and I would expect it to sell for around $540k-$550k.

I'm thinking about putting in an offer in writing before auction, at $20k or so less with the offer open for three days.

Has anyone done this? Is it a good idea? What have I got to loose?

Cheers

 

[lizzie]

i've done it - unsuccessfully - but as you said "what have you got to lose."

put in your offer as early as possible. if they are only 1-2 weeks out from auction then likely they will go to auction. put in a time limit for a reply (perhaps day before auction) and leave it at that.

 

[willair]

What have I got to loose?

Cheers

McBrain,
I have done this before several times,but it has never worked out for me
the vendors will have a set price in their head and most will stick to
the price that the agent or someone else has put in their head..
The only item for you to understand is what risk factors will you face
if they like your offer you put to them,do you know the property value
is rezoning part of your plan,up front maintenance and repair always
come into play with auctions,paint hides everything and if your area
is in a rising or falling market then that will dictate the bidders on the
day.
What have i got to lose,imho everything if you don't know more about
the property than the vendors and the REA that handle the sale of this
property,all markets affect each other..
good luck
willair........

 

[ok180]

ive put in many offers before auction but never been sucessful. I think the only way to get it prior to auction is to put in an offer above market value. you may have a chance then.

If you really like it and it's to live in it could be worth the extra $$$ i guess..

 

[McBrain]

There's only a couple of weeks before the auction, I guess if the vendor only have a couple of weeks to go they would want to wait.

I'm not surprised that there aren't many stories of people sucessfully doing this - the vendor will always hope that they're going to get a good or excellent price.

I guess I was thinking that maybe if they need to sell quick, a firm offer with the option to settle when they choose may sway them. But to be honest, I would be very surprised if they took the offer. Mind you I was on my way to see a house the other week when I found it had been sold before auction.

This house would be an IP so I don't want to pay big $$$. I'm happy to pay anything up to market price. I missed out on one at auction a month ago because I was bidding against a couple that really wanted it to live in - you can't compete with that!

Regards

 

[geoffw]

It's always worth a try.

I have seen places go before auction- one time, just a few hours before. The agent was there telling everybody to go away. Some people were muttering "this is unfair"- but it was all completely within the rules.

Having a property for auction soon, I will listen to offers. Though I'd prefer to wait to find out the interest levels before I'd consider seriously.

 

[Ricardo29]

what does an auction cost, if unsuccessful/choose not to sell ?

 

[ok180]

Like others have said you can always try but it's unlikely they will accept unless it's really good. You will find people who want a quck sale dont go to auction they usually just give a price and start taking serious offers.

You have to be carefull if you offer to close to the money too soon. Say you think it's worth $550 and offer $540, the vendor may then think "hang on i have this guy interested at $540 others may also be interested at that level, lets wait and see if we can get a bidding war happening at the auction, after all i really really want at least $562,900"...

Save your bid till the auction unless your prepared to pay above market. If you lose prior it's more than likely gone for a price you werent prepared to pay anyhow. I have found exactly this lately as ive been looking to purchase in Sydney.

 

[geoffw]

what does an auction cost, if unsuccessful/choose not to sell ?

I don't know what is typical. For the flock of bats, I will be paying $2.5K regardless. That's to cover advertising, auctioneer expenses, and the like. There is a discount there because I bought and managed the property through them.

The agent will be looking for a sale before, during, or after the auction.

 

[doreilly]

what does an auction cost, if unsuccessful/choose not to sell ?

Most auctions don't cost any extra in REA fees, but all advertising costs still need paying and peoples perception of the property if it doesn't sell can be affected (if the house is so good why didn't someone buy it at the auction).

You can reuse plans/photos/web listings, but not newspaper adverts.

 

[Nanuq]

why would the vendor sell the property right before the auction? The only reason they would do this is when they think your offer is very like to be the highest price he can get from the auction. I am sure the agent will contact all potential buyers who came to the inpection and ask them if they are willing to pay anything higher. If thats the case, why would you want to do this? why not just wait till the auction and you can probably buy it at a better price?

I just dont see the logic behind making an offer before auction. The vendor is in a win win situation.

 

[BUNDY]

Some vendors and buyers do not like the auction system or the associated stress.

Personally, I don't see why you shouldn't put an offer in prior to an auction. Numerous properties sell pre auction. You may just miss out if you are serious on buying the property and leave it until auction day. Pay for a valuer to go in and value the property prior to submitting your offer, then you are in the driving seat.

If you are serious about buying the property, do your research, know how much you want to pay for it, then submit your offer to the vendor.

Problem is everyone wants a bargain, hence wait until the auction. Submit your offer prior to the auction and put a 48hrs time frame on it. If the vendor turns it down and proceeds to auction, you can then bid at auction (higher/lower) than the original offer.

I have friends who did exactly this pre Christmas and bought the property pre auction. They dangled the carrot for a settlement pre Xmas, which wouldn't have been achieved under a 30 day auction contract.

An agent's commission on $20k is negligible, if you are close to the price a serious vendor will negotiaite pre auction.

Let us know what you decide.

Bundy.

 

[McBrain]

Thanks for the comments guys.

I had another look at the property on the weekend with a view to get a building inspection this week, then perhaps making an offer.

I noticed a few more things than last time, so now I'm having second thoughts. At present I have to decide if I'm even going to go ahead to pay $300 for a building inspection.

1) The first thing was there were a number of faint brown stains on the ceiling which suggested to me a leaky roof. This was present in about 3 of the rooms.

By the way, this is an 80 year old solid brick semi.

2) Previously I had noticed a bit of movement in the front corner of the house but I didn't consider it a major concern considering the age of the house. Further inspection of the rest of the house has revealed more movement.
There are a few internal wall cracks that have been plastered over - pretty normal. However on the external wall I can see where the brick morter has been recently re-pointed, I'm assuming it's recent because I can see where the excess morter has been washed off the bricks but they have been unable to reach between the drainpipe and the wall, leaving a thin film of excess morter - if you know what I mean. Some of this re-pointed morter has already cracked.
It looks like the foundations on that side may have had a good watering over the years.

3) The tenant is getting really pi$$ed-off with house inspections, I've seen her there and she's NOT happy. The agent now says that I can't arrange a building inspection except during the open inspection times, due to the tenant. This doesn't suit me because I think that the builder needs at least an hour to do a proper inspection, and can't do this with a house full of people.

I think this last point is going to make it more difficult for the vendor to get a good sale - possibly there would be a good bargin there at auction, but to be honest I'm thinking of letting it go - I'm just trying to decide if I should get a builder's opinion first.

Cheers.

 

[Twitch]

Hi, don't get emotional about this decision, and I don't mean "don't fall in love" with it.

Taking emotion out of an IP decision means identifying real versus possible downsides, and putting actual $$ against a properties real downsides (and all properties have downsides). The downsides you've listed are very minimal IMHO.

So it has a leaky roof - to fix that might be $1k (wild guess). To right the ceiling damage another amount, from $0 to a couple of thousand depending on the extent of the damage. Brown stains on the ceilnig can have multiple causes by the way, and a building inspection will at least rule in or out a roof leakage.

What 80 yo sold brick house does not have cracks? Figure in some extra maintenance $$. My tip would be a chat with the building inspector to get their feel on an appropriate budget for this item.

Who cares if the tennant is put out? BTW, in Victoria the maximum time allowed for a building inspection is 45 minutes, so it's quite conceivable a good inspection could be done during the open time.

Good luck.