Making an Offer on IPs in Hot Market

I have steered clear of Auctions in Adelaide in the present climate of stock shortages, finding that buyers seem to bid with their hearts rather than their heads. I have been beaten by a better offer on several IPs which have had a stated price usually with a range difference of $20k and am wondering how others work out an offer which is accepted by the vendor. The agent always says "Make sure this is your very best offer as we have several people interested" The old adage of offering 10% less than the asking price doesn't work. Its more like 1% less to more than the maximum that does the trick. This seems like a blind auction to me and you dont know if you are successful for up to a week. Tough on the nerves- takes all the fun out of it :(
Regards Ray
 
G'Day Ray,

just think of all the practice you're getting.............and you know what they say......"Practice makes Perfect"

I'm sure you'll be real good at it soon.

regards
 
Ray
In this "hot market" as you call it, we havebought 4 properties for ourselves and clients over the last 4 weeks. - 3 at full price and I still thinnk we did well. I know this becuase similar properties in surrounding streets have sold for more in recent weeks.
So don't always try to knock 10% off theasking price.
It gets back to knowing your market like the back of your hand and knowing what a property is worth. The experience you have gainined will help you recognise a true bargain when you see one, and they are definately still around. When you find one you will know to act with certainty and make a sensible offer
 
Ray,

I agree with what Michael just mentioed... if you know your market, you can always pickout a bargain which may have been poorly advertised, need some minor cosmetic work with the few potential buyers having overlooked it full potential, distressed buyers, etc... by knowing the market all you really need to do is make a reasonable offer (which may be only 1% below their asking price, but actually 10% what it would have fetched if it was cleaned OR properly advertised)...

Cheers,

MannyB.
 
Hi there.

I know exactly what you mean!!! I'm purchasing in Gladstone Qld. Crazy. Houses here are on the market for no more than a couple of days (in my range), and they're gone. I've found that after many hours of travel and legwork and constant hounding the RE agents (who have it really easy right now), they will now contact me if something is coming up, before it is open for other people to have a look at. It has taken a bit of work to do that though. I've had to get a bit smarter. There's even people flying down for a day, just to buy something, anything.

An ad in the local paper advising that you're looking for something and the details of what you're looking for could help, with your mobile phone no. People get greedy and may think they can save an agent's commission by contacting you direct. If you know your prices or have been practicing your negotiation skills, you may get what you're looking for this way.

Hope this helps.
 
I agree with what micheal said, but would like to ad the following. It doesn't always need to be better relationships with agents, getting the good buys first. In fact I think this is a detriment. The most important thing is to see value in something that others don't. 4 times in my life I have set records for prices paid in an area and by a margin of at least 30%. In each case these properties have been massive money spinners. Look for (or learn) what others don't see. Give me a suburb with an average sale price of 600k and I can find you a bargain for 1m+ Also, we are not in a 'hot' market anymore, but a slowing withering one in all except a very few isolated pockets. Spend more and get better value for money. Don't look for what everyone else looks for: - 'bargains'
 
Thanks for the good advice, Guys. Adelaide is in the grips of a buying frenzy at the moment, with record quarterly increases in the median price of houses and townhouses/units.and no sign of an easing off of prices. A large majority of properties are being auctioned, with stiff competition for I/Ps which have a stated price range. Agents say they receive 6 to 8 offers, making it difficult to be a winner. It looks like the only thing to do is to offer $500 or more above the top price to be successful. How do you know? Has anyone had success at making an offer before an auction? What are the things to do to maximize your chances?

Regards Ray
 
Hi Ray,

What are the things to do to maximize your chances?
The best way to maximise your chances apply in any buying situation - make a firm offer in writing and present a bank cheque for the full 10% deposit.

What price to offer? A pre-auction offer is not designed to get a bargain but to cut out the competition. If you want to get a bargain turn up on the day and take your chances. Some vendors actually sell by auction after failing to get their price privately. They hope the competition will lift the selling price. If they guessed wrong you may pick it up for a reasonable price. If I were buying into a particular area I would track every property listed for sale for three months prior to buying just in case a property comes on the market which had been on before and is on again for a second try.

Back to the offer...Ask the agent or auctioneer what range the reserve sits in. Take the middle as your offer. You are willing to take it at or near the reserve with a written offer backed up by a bank cheque. Do you think that may maximise your chances?

A word of warning...the vendor may encourage pre-auction offers as a strategy to get an idea of the likely interest in the auction. If there are a lot of pre-auction offers the vendor may choose to raise the reserve at the auction.

If you do make a pre-auction offer which is unsuccessful, I would suggest you have a bidding partner with you at auction who takes over when you drop out. From the pre-auction offer the agent will point you out to the auctioneer and you will lose a lot of the initiative. To regain the initiative drop out just below the reserve and allow your partner to complete the bidding on your behalf.

Regards, Mike

BTW, some successful investors don't look for properties - they look for motivated sellers.
 
Top