Putting the First Offer

Hello all,

First IP Purchase- palms sweating and butterflies in Tummy. Who said this was easy ;-)

The house is going to auction soon. The agent is ready for offers/ "preauction bidding".

I have tried hard but the agent wouldnt give me a "number". Because there is meant to be an auction the agent is quoting a very very low number and saying anything over that.

What sort of bid is good to start with? What should be my strategy?

How low a bid is a good one to begin with?

X -10% -20% where X is the price of the house in my head or in other words my final offer.

The property is in Reservoir - decent sized block + prime location. Similar sales (within the street or next few streets) have been in the 510- 530K range, The agent is saying they are looking at anything over 300 (thought he was joking at first).

Should I put my first offer at 400, 470 or 490.

Thanks again
 
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Hi Melbournee,

I think it will depend on a lot of factors, if it's an investment property, I am thinking you would be looking at what you think it's worth in comparison to how much yield it will attract and future capital growth.

If this is the case, then yes perhaps 10%-20% below your 'final offer' is feasible. However, it can be very dependant on which areas you are looking at. I know with houses around Coburg, Pascoe Vale South where I have been looking, you would only be successful with a pre-auction offer higher than the reserve price, since the market is so hot right now, and there is much more demand than supply. There was a house up for private sale a few weeks ago in my street, it wasnt even going to auction, advertised for $620,000, it sold for $688,000 :eek: So in cases like this where it's extremley competitive low ball offers wont be much good...

In saying that, if is just an investment I think you can afford to be a bit wiser about it...and I'm guessing you would know the market in your area to also be able to assess just how competitive it is.

Putting in an unconditional offer (if you are 100% with your finance and the condition of the house) is usually more appealing, especially for a pre auction bid, and will show that you are serious too.

Best of luck!

Mez
 
Sorry, I just saw the details about the house and asking price etc. Considering the agent is quoting 300+, I think it would be reasonable to put in a starting offer from 400-420...
 
First IP Purchase- palms sweating and butterflies in Tummy. Who said this was easy ;-)
It gets easier the more you do it - like anything

The house is going to auction soon. The agent is ready for "preauction bidding" now.
Agents are always ready for this :)

I have tried hard but the agent wouldnt give me a "number". Because there is meant to be an auction the agent is quoting a very very low number and saying anything over that.
Agent represents the vendor. You are coming across to him as a novice by doing what you've done. He's seen your types before ;)

What sort of bid is good to start with?
Wrong question to be asking. First you need to determine this: If I can come up with a price that is suitable to the vendor, would the vendor be prepared to sign a contract now, or are they still committed to going to auction anyway?

What should be my strategy?
See above. Otherwsie all you are doing is helping the agent & vendor to establish a reserve price for the auction.

How low a bid is a good one to begin with?
Wrong Q. again. It is a matter of what you are prepared to pay and what the vendor will accept. It is not where you start but where you finish that is important.

X -10% -20% where X is the price of the house in my head or in other words my final offer.
No-one (except you) cares about the 'price in your head'. Suggest you do some research and come up with a figure that you are happy with. Also see if pre-auction offers will be entertained seriously - otherwise don't play that game.
 
Thanks to both Mez and Propertunity for some great ideas/feedback/guidance :)

>>So in cases like this where it's extremley competitive low ball offers wont be much good...
Thats the big worry!

>>The agent is ready for "preauction bidding" now. They always are.
yeah, the Section32 "wasnt ready" for a while. So I thought he just doesnt want preauction bids. Agents love Auctions in Melbourne- not sure if its to do with the free publicity they get. And Vendor spends for all of it as well.

>>You are coming across to him as a novice by doing what you've done
You are spot on with this. Thats what I was thinking later on as well. How could I approach this sort of deal better - i mean for next time?

>>Otherwsie all you are doing is helping the agent & vendor to establish a reserve price for the auction.
The agent said the vendor is ready to go now. But apart from his word there is nothing else to go on at this stage, is there? How can dig deeper to make sure they want to sell?

>>you do some research and come up with a figure that you are happy with.
I have done quite a bit of research and got a fairly good idea around the area as well. But have this feeling that whatever number I present might be called "not enough"- the agent might want to persuade me for more. Also if I give my best number there is no room for me to negotiate further.

Also I do know what the house sold for last time - not too long ago (year or so). Can I apply the growth fgure of the area to this number to "justify my offer". I can also point to all the work needed in the house etc. Just thinking about what to say when the time comes- the more I think I more I feel lost :eek:
 
It's a really tough game to play, and Propertunity makes a really good point about whether or not they be serious about considering offers before auction, or just trying to bump the price up before the real bidding starts...

I would do some research also on the selling agent / company. Whilst I was looking, I would often ask if the vendors would consider selling before auction and every single time (and there were lots of houses!) the answer was no - except for the most recent one which we miraculously did end up getting before auction!!!

There were some agents in the area that I knew would occasionally sell before auction, and I could also see what the quoting price was for these houses and what the sale price was - giving me a good indication of a ballpark figure of what's an appropriate offer in pre-auction environment.

I would do my best to separate my heart from my head too - especially considering this is an investment for you. Can you just ask the agent what will buy it? Tell him / her you have other properties to look at and want to put a reasonable offer in but don't have time to go back and forth if the vendors aren't serious about selling beforehand.

With the house we bought, the agent gave us an indication of what price they were hoping for at the auction, so we matched that and gave an unconidtional offer...and the house was not officially advertised yet so they were happy to escape all the associated advertising and auction fees...
 
Managed to "find" the seller on a morning walk LOL and asked whether he was genuinely interested in preauction sale. Turns out Propertunity was right and the agent was just playing with us. Its definitely going to Auction so no point waiting on section 32 (which I can safely tell now is never coming!). Funny thing is that I went to another open for the house the day before and the agent was like "I am so angry they are still not sending us the section 32". yeah, right!
 
No harm in making your best offer before the auction.
Do it in writing, attach a cheque for the deposit, and ensure it gets to the vendor. You may also want to suggest you're not in town on the day the auction is scheduled.

If your best offer is accepted, you have a property. If not, you can still attend the auction. If your offer is close to the vendor's expectations, but perhaps a tiny bit less than they'd like, it may be just enough to plant the seed of doubt and see him or her accept.

Good luck whichever way you go!
 
Christian, you need to be careful with that. If there are other interested parties, putting forward your best offer will just give the agent the ability to tell the other potential bidders what you are up to. As Melbournee has done, they have worked out it will certainly be going to auction so in that case there is lots of harm to be done by putting in your best offer now. I would be ringing the agent straight away and telling them you are no longer interested in the property. Put the agent on the back foot and thinking their might be limited interest in the property. The agent can then go about conditioning the vendor to believe a lowish price may be all they can achieve at the auction.
 
Yes, good point Gools. I only offered the advice, as it's exactly what I did to secure a property, and it worked. Made the offer on Friday, the Saturday auction was called off, and I was the new owner. Of course I may have also paid more than I could have secured the property for at auction! But it was the amount I was happy to pay.
 
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