Pre-Auction Offer Advice

[Stellar]

Hi there,

we are FHB so relatively new to the housing business...

we are interested in a property and have viewed it a number of times. It is due to go to auction in roughly 2 weeks time. Asked the REA at the last inspection if they are taking offers prior to the auction, which he said most certainly.

So....we are keen to put in an offer (we have finance ready to go, are ready to do a quick settlement etc and have the 20% deposit ready).

We are willing to put in a high offer, but the price has changed (is advertised everywhere as $550k+, but on THEIR website is $580k+). we were thinking just under 600k for an offer but now not sure whether to change this to reflect the apparent new base price?

TIA (and apologise for the ramble: this whole business is rather daunting )

Stellar

 

[The Y-man]

Start low and work up....

The Y-man

 

[Stellar]

Start low and work up....

The Y-man

really? awesome. i guess with the auction still a bit away we have that room to move if need be...

just wondering: so why do so many 'tips' tell us to offer high at pre-auction? is this just an industry trick to get us to pay more?? (yes, naive do-gooder here LOL! )

 

[Gools]

Offer what you are willing to pay based on what your DD tells you it is worth. Their figure could have been calculated using a dart board. Are you really just going to offer then $20k more than the price guide? That's crazy talk!!

Gools

 

[jazzlobber]

never do this, keep your figures to yourself, the agent will only use it against you everytime, go to the auction and let other do the bidding, wait until almost sold until you come in, hopefully it is still in your range.

if enough people keep stum it will get passed in and you can buy afterwards with your terms and conditions in the contract.

 

[elarbee]

I'm buying a property in Melbourne right now as well. Unfortunately this place just loves auctions

As a buyer I try to buy pre-auction for a few reasons. First, I don't buy at auctions because I don't trust the process. Second, I think it's hard to buy good value at them in Melbourne right now (just my .02) Finally, I think many successful bidders pay too much at auction because they are, or are competing with, someone who's all excited/emotional/ego driven to win it.

Unfortunately these reasons are all to my advantage so my point is that your pre-auction offer needs to be strong, confident and compelling to the vendor to persuade them to sell pre-auction.

I'd accept the reality the REA is probably misleading you. I've seen 6 auctions last two weeks that all sold around 20% above the REA's guide price. REA tells you $550-$580k but it'll sell above $650k. I think they do this to get lots more people at the auction, cynical much?!

If it was me I'd work out the price you're willing to pay, it's one number, not a range. Using my head I determine market value price (a topic unto itself you should search these boards on) and then adjust that number using my heart, I really love it, the street's amazing, wow that kitchen = pay more. The bathroom needs reno, the courtyard is small, I want new lighting = pay less. Voila the price I'm willing to pay emerges. Make sure it's a price you can afford and stick to it.

I'd make the agent one strong non-negotiable offer (my best foot forward to secure the property), tell them the terms, deposit %, settlement days, special conditions etc. Tell them my offer is valid for 2 days and I'm ready to do a deal. Tell them I won't be bidding at auction. Why would they take my money now when they could take it then or even use it to up the bidding at the auction? No way, this offer is on the table right now and right now only.

Usually the REA's desire to simply close the deal can be used to your advantage.

HTH

 

[The Y-man]

In the past year, I sold 6 IP's.

All of these were by auction.

One of them sold pre-auction. One sold immediately after auction. The rest were passed in on our (vendor) bid, and sat around for months.

If I had got prior offers on the others, I am likely to have sold (especially after having several auctions where NOBODY fronted up).

The advanatage to the vendor: if the sale is done within 3 days prior to auction, the sale is unconditional - this is a big carrot.

Cheers,

The Y-man

 

[Stellar]

oh wow! you guys are awesome!

great stuff to read and a huge help to get me comfortable with the process.

Elarbee: It's so true that melbourne loves an auction! i am hoping to avoid an auction in this case as the area is a low IP area and has mostly PPOR people. therefore i *think* the auction has potential to just steam ahead (if that makes sense). we have come to a figure we think is strong for the property based on the usual location, fittings etc etc. so fingers-crossed!

Y-man: oh cheers man! i guess we will try to hold off then until just before auction to make the offer. i am nervous though that they may sell it from under us...or will they notify other interested parties to try and better any deal?

Jiz: yeah this happened to friends of mine that their limit was known by the REA and he used it to prop up another couple, so they lost out in the end by $1k! so we have so far kept mum on our figures.

Gools: ha ha! i think a dart board may be in action here! LOL! especially considering the minimum price has mysteriously just jumped up $30K!

hmm, well, i guess it's back to the drawing boards. i will try to not jump hastily into making an offer and maybe hold out until next week. i just hope that they will let us know of any other prior bids.
he did mention that by making a prior offer we would just be bringing the 'auction forward' which i surmise is his way of saying that it would be open slather LOL!

cheers guys! Stellar!

 

[The Y-man]

Y-man: oh cheers man! i guess we will try to hold off then until just before auction to make the offer. i am nervous though that they may sell it from under us...or will they notify other interested parties to try and better any deal?

In our pre-auction case, the offer was made a week before, but the agent told us not to respond to it until it fell within the 3 day limit.

Cheers,

The Y-man

 

[jazzlobber]

In the past year, I sold 6 IP's.

All of these were by auction.

One of them sold pre-auction. One sold immediately after auction. The rest were passed in on our (vendor) bid, and sat around for months.

If I had got prior offers on the others, I am likely to have sold (especially after having several auctions where NOBODY fronted up).

The advanatage to the vendor: if the sale is done within 3 days prior to auction, the sale is unconditional - this is a big carrot.

Cheers,

The Y-man

Y-man you probably should have sold them in 2007, for most of the 2008 the high IR killed the market, the stock on the market (melbourne) was well down, i think lower than 50% of 2007, so it wasn't the best time to sell?

If your cashing in your chips what is your strategy now,

pay off 50% loans, live off CF?
LOE?

 

[Stellar]

In our pre-auction case, the offer was made a week before, but the agent told us not to respond to it until it fell within the 3 day limit.

ahhhh. now me sees clearly LOL! cool, it actually will probably suit us fine anyway if they play it that way. we are ready to move, have all the finances in place etc, so i dont see a quick settlement as too hairy. but i guess will have to see what our solicitor reckons of our (no doubt) reckless plan

 

[Gremlin]

I've only ever twice made an offer prior to auction.

On such occasions, I have made an UNCONDITIONAL offer (a conditional offer prior is of little value to the vendor as if the conditions fall over it can have completely derailed the entire auction process). I have it explode within 48 hours of submission - put the pressure back on the vendor to make a decision. I'd also make it clear that I would not be attending the auction (and stuck by it). I'd make it at a price I'd be prepared to pay but not necessarily my absolute best price - if there is negotiation, I want it done quickly as possible so the vendor can't horsetrade my offer with others. I would also make sure the offer exploded at least a week prior to the auction date since other potential purchasers may not yet be in a position re their own DD to counter offer.

Of course, I'd judge the level of interest in the property. It may be that the upped price range is indicative of interest or it may be the REA playing games. You need to work out which for yourself. If there is a lot of interest in the property it's less likely an offer prior is going to work.

FWIW, of the two prior to auction offers I made, one was accepted. The other was rejected but then the property was passed in at auction (I wasn't there as I said I wouldn't be). The agent rang me almost immediately and wanted my offer back on the table. I picked it up for $20k less than I'd first offered.

 

[ben73]

FWIW, of the two prior to auction offers I made, one was accepted. The other was rejected but then the property was passed in at auction (I wasn't there as I said I wouldn't be). The agent rang me almost immediately and wanted my offer back on the table. I picked it up for $20k less than I'd first offered.

Nice work

 

[Stellar]

Nice work

that's what i thought!

maybe i should get gremlin to do my wheeling and dealing!!!

 

[Stellar]

well it's all gone to mud. we organised to go in today to make the offer....only to be told by the agent that the vendors are no longer taking priors. ANNOYED. and he was also reluctant to give us the contract of sale info. but 'promises' to send it this afternoon. doubt it!

anyway, so all that for nothing it seems, i guess i will have to brave it in the world of auctions. arrghhhh!

 

[The Y-man]

Y-man you probably should have sold them in 2007, for most of the 2008 the high IR killed the market, the stock on the market (melbourne) was well down, i think lower than 50% of 2007, so it wasn't the best time to sell?

If your cashing in your chips what is your strategy now,

pay off 50% loans, live off CF?
LOE?

It was definitely a struggle - '07 in hindsight would have been a great time (and ironically '09 too - as all bar one were in the FHB range) - but that's life.

It wasn't a choice made lightly - our business tanked, and we needed to rapdily extinguish some big loans to ease cashflow. This wasn't a strategic move from an investment point of view, so much as an evasive maneuvre - hence I know there are some happy buyers out there who got some great properties, at great prices

As for the future, I am looking at the end of the property market I feel will bear the brunt of job losses - the higher end ones which are way out of the FHB range, and may have been bought buy high paid execs who may be out of a job....

Cheers,

The Y-man

 

[Gremlin]

that's what i thought!

maybe i should get gremlin to do my wheeling and dealing!!!

FWIW, I only have the testicular fortitude to be hard nosed when I'm buying an investment - it all comes down to the numbers. All the emotion is left at the door.

When I'm buying a place for me, I'm the opposite. I stress, I get emotional, I do all the things that I know I shouldn't be doing. To save me from myself (and protect the sanity of me and Mrs G) I've used a buyers agent for my last few 'peronsal' purchases.

Irrational... But at least I recognise it's irrational!

 

[Stellar]

FWIW, I only have the testicular fortitude to be hard nosed when I'm buying an investment - it all comes down to the numbers. All the emotion is left at the door.

When I'm buying a place for me, I'm the opposite. I stress, I get emotional, I do all the things that I know I shouldn't be doing. To save me from myself (and protect the sanity of me and Mrs G) I've used a buyers agent for my last few 'peronsal' purchases.

Irrational... But at least I recognise it's irrational!

i totally get it. other places that we have seen and gone 'yeah, no worries let's do it' without issue, but with this particular place we are a heap on the floor. trust me i have been tempted to get someone else to do our dirty work LOL!

have you been happy with a buyers agent?

 

[elarbee]

ANNOYED.

Hang in there, you'll learn from each of these disappointing/annoying encounters. It won't take long before you get a handle on the way the game is played. Never let em see you sweat and never let em see you drool. Good luck.

 

[Stellar]

Hang in there, you'll learn from each of these disappointing/annoying encounters. It won't take long before you get a handle on the way the game is played. Never let em see you sweat and never let em see you drool. Good luck.

so true....

enter: 'cool as a cucumber'!

(well here's hoping!)

positive news today was watching the auction of a very similar house with the same start price pass in $20K less than the original minimum price!! WTG ppl! more of this kinda bidding please LOL!