Newbie / Negotiation tactics

[schebib]

G’day all,

Whilst I have been lurking around this forum for a while now, I am finally game enough to introduce myself and hopefully contribute my two cents worth were possible. Also, a big thank you to forum members who post such brilliant answers.

A little about myself… I am 23, a qualified CPA, working full time and still living at home with no dependents. Bought my first investment property off the plan when I was 19 (Southbank apartment, Vic) from savings working part time whilst at uni. I can now see why that wasn’t the best investment move, but hey it’s been a big learning curve since. I am taking the opportunity to save as much as possible whilst living at home. I have no personal debt and close to $230k in savings sitting in an offset account. I am currently in the market for a property I can rent out with future subdivision and development potential 10km North West/West of Melbourne.

I had been to 5 auctions on Saturday and surprisingly all had very low attendances with only one or two bidders. Auctions located in Maidstone, West Footscray, Braybrook, and Sunshine. All properties ended up being passed in with most auctions ending up $30k+ below reserve. Whilst I have heard the exact opposite happen in Melbourne’s Eastern suburbs over the weekend, is the West starting to become a declining market? for some reason, although agents keep telling me things will pick up next month, I can’t see that happening with all this supply and so little demand.

Now back to the reason I started this thread… re one of the auctions I attended over the weekend. I’m good mates with the auctioneer/sales agents and parents have been for a while. The agent tries to help me out when possible. The property was passed in $60k below the reserve with me being the last bidder. As I was preparing to go in and negotiate at the vendor’s reserve, I was quietly approached by the agent and asked to leave the scene immediately and call him on Monday. Now, I did get ppl giving me the eye and the auctioneer trying to call me when getting in the car. But in the end I did what I was told and left…

Is this a negotiation tactic? That if the price difference is large, its suggested buyers refuse to negotiate further on the spot? Is it assumed that the agent will try to educate the vendor that prices have dropped? Has anyone used this before and does it work? or is the agent playing games?

Anyhow, thank you for your time in reading this. This place is a wealth of knowledge and I appreciate it very much

 

[Perp]

I have no personal debt and close to $230k in savings sitting in an offset account.

Holy! Well done.

I’m good mates with the auctioneer/sales agents and parents have been for a while. The agent tries to help me out when possible. The property was passed in $60k below the reserve with me being the last bidder. As I was preparing to go in and negotiate at the vendor’s reserve, I was quietly approached by the agent and asked to leave the scene immediately and call him on Monday.

If they're friends, why didn't you call them and ask what that was about?

In any case, if they really are mates, my first suspicion is that there's something really wrong with the property that perhaps you're not aware of, such as a structural fault or something, and they're trying to save you from buying a lemon. They may not be able to tell you, because of their fiduciary duty to the vendor, but they may want you to buy under non-auction conditions, so you have time to do due diligence and find out whatever the problem is, because if you buy immediately after auction, you usually buy "under auction conditions", ie an unconditional purchase. I'd suggest if you make any offer today, you want to put in enough "subject to"s to protect yourself, and then look very hard at the property during the conditional period.

Good luck, that's very interesting indeed. I've not heard of this as a negotiating tactic, but I tend to avoid auctions. It sounds a little bizarre to me.

 

[wobbycarly]

Now back to the reason I started this thread… re one of the auctions I attended over the weekend. I’m good mates with the auctioneer/sales agents and parents have been for a while. The agent tries to help me out when possible. The property was passed in $60k below the reserve with me being the last bidder. As I was preparing to go in and negotiate at the vendor’s reserve, I was quietly approached by the agent and asked to leave the scene immediately and call him on Monday. Now, I did get ppl giving me the eye and the auctioneer trying to call me when getting in the car. But in the end I did what I was told and left…

Do you think he's asking this for your benefit as your mate or for his/vendor's benefit? Make sure you call him today and let us know what went on! You've my curiosity roused.

 

[Wunderbar]

Lol the agent trying to save you from buying a lemon.....That's my laugh for the day!

 

[buster]

May be the agent thinks it will be better to let the vendor stew over not being able to sell his house. Give him more time to worry about wether he will be able to sell his house. By monday he will be more willing to negotiate as he has more time to realize his price expectations wont be met.

 

[andrew_de_a]

Pm Evan, he will know what the agent was trying to do.

 

[Ed Barton]

sch - how did it go?

walking away is a common negotiating tactic but one not often used in rea due to the emotion.

i would not pay more than market (and market is what you bid at the auction, and arguablely the real bid before you)

 

[schebib]

Thanks for all your input.

I can see how this tactic works and certainly isn't easy walking away...

OK after leaving a voice message and sending multiple emails I got a response. The agent says the delay was from the vendor not confirming a new reserve price. The agent his saying the reason I asked you to walk away is:
- Didn't want you to buy under auction conditions
- The reserve set by the vendor was fair but he didn't want me paying market rates as there was not much interest on auction day.

- I went to auction prepared to pay the $500k mark. Which i see a fair price considering the size of land and a clean 4 bedroom 2 bathroom
- I won the last bid at a touch over $440k when the property was passed in.
- The agent tells me that vendors reserve was $510k on auction day. I now realise this is a fair reserve in a sellers market but this would not be achieved in a buyers market.
- The agent told me "It was time to break him after auction" So I am assuming this meant the vendor was educated by the agent after I walked away and made to rethink. The vendor reassessed the asking price over the weekend and has lowered his asked price to 480k.
- I know the vendor is currently going through a divorce settlement and the property is currently empty.
- The agent tells me the under bidder (one and only other person that bid) is willing to pay 450k as he will be using it for a multi unit development site (simular to what I intend in doing except in a couple years time)
- The agent has told me to hold off another couple days

To me he sounds like his on my side and offering great help. This raises the question though, isn't the agent meant to be achieving the maximum possible price for the vendor? Isn't that how he gets paid? and What's in it for him in trying to get me the best deal? can it simply be friendship...

Based on the above I think considering the lack of interest in the property and their personal situation of the vendor I will not be paying more than what I bid at auction. So Ed, I'm going to have to agree with you on that, market value it is for the time being.

Anyhow I will definitely wait a couple more days and call him again for further advancements. I will also make sure I include as many "subject to" clauses if a deal is made as you suggest Perp. Will let use know of the outcome

Cheers
Sam

 

[Wunderbar]

Well technically yes, the agent is acting in the vendor's best interests. But think about it - if the vendor is just unrealistic and refuses to sell, that means $0 commission for the agent. So whether the price is $450k or $500k, the agent doesn't care because at least he gets the sale (and his commission)! At the end of the day, they'd rather a quick sale and get paid quickly rather than holding out for a larger offer that may (or may not) come, and can cost them a guaranteed commission

 

[Melbournian]

spot on wunderbar.

 

[wobbycarly]

And some wonder why REA's have such a bad reputation...

 

[Bradsdad]

Hmmmmm and the property is in Melbourne? Please remind me not to use this agent when selling.