When to make an offer before Auction?

[exstatic]

I have found a property I am interested in, however it has only been on the market for about 2 weeks and plans to go to auction in another 4 weeks.

I attended the first OFI tonight and we were the only ones there and the REA said the interest hasn't been great just yet, but it is still early days.

The property seems to be priced below market value and does need a lick of paint, a few touch ups and some new carpets and it looks like it has only had renters in it and has not really been cleaned up prior to the inspection.. so from the outset it looks a little messy, i.e; gardens need to be done, bathrooms need cleaning, etc.

I am fairly interested in the property and hope to have all the finances ready to make an offer next week, I just need to work out the best game to play in terms of negotiating or making an offer.

Do I..

A) Make an offer early on.. say 3 weeks before the Auction when the interest is still quite low below asking price, with say a short settlement in hope that they want to move it quick?

Only problem I see with this is the REA notes early interest in the property which gives a positive reaction to the vendor to hold out until auction in hope of a better price.

or

B) Wait until a week or so before Auction make the same offer hoping that the interest has still been low in the property and the vendor can see this may be the only offer they get.. ?

I would prefer not to go to Auction as I am not in the country!

Anyone been in this situation before? Any advice would be great?

 

[Rolf Latham]

Hiya Brendan

if you have done the pest and build etc etc , then 2 days before auction might be a good stopper

ta
rolf

 

[wylie]

Don't forget that any closer than two weeks would really need to be cash unconditional. Put yourself in the vendor's shoes. If you are a vendor two weeks out from an auction, the only contract you should consider signing would be cash unconditional. Any conditions mean the whole advertising juggernaught stops dead, and then the buyer can pull out on a whim.

To the vendor, that means all momentum is gone, other possible buyers wonder what is wrong with your house, and you have just flushed all that advertising money down the gurgler.

 

[willair]

.

The property seems to be priced below market value and does need a lick of paint, a few touch ups and some new carpets and it looks like it has only had renters in it and has not really been cleaned up prior to the inspection.. so from the outset it looks a little messy, i.e; gardens need to be done, bathrooms need cleaning, etc.

A) Make an offer early on.. say 3 weeks before the Auction when the interest is still quite low below asking price, with say a short settlement in hope that they want to move it quick?

Only problem I see with this is the REA notes early interest in the property which gives a positive reaction to the vendor to hold out until auction in hope of a better price.

I would not worry what the R-E thinks,and i don't know of any formula that can truly predict street by street what is going to happen to real estate prices,if you were the only person to turn up at the O-H then that alone would tell the vendors what the market is like..
IMHO,leave the offer till the last week,and have a rough idea of reno costs,cleanup costs,and make one offer that stands for 48 hours then walk away,if the listing is open to other R-E then play all competing R-E against each other but tell them all you only intend to make one offer..
..imho........willair..

 

[WinstonWolfe]

keep in mind once you have made the offer, the vendor has it sitting there on the table for consideration for as long as your sunset clause allows.....

I don't know how much slower the Melbourne market is currently, but can't imagine it has the legs of last year. and with THe Age pumping headlines like this, I can't see the market improving until an RBA interest rate cut.

Benefits of an early offer are the vendor might be saved some advertising costs and the REA some time. Cons are the REA has the offer there on the table to stimulate interest and higher offers from other buyers...as in 'the property is not a dog cos the market has already expressed strong interest.'

 

[buzzlightyear]

Wait until auction

Its hard to make an accurate call because we don't know the property details ie style, land size, location etc. However IMHO, given the market today overall, I would wait until the auction.

Why?
* If you are ready re finances, you can explore other opportunities in parallel
* My preference is not to signal interest or even a price range to the REA unless I have to. You will find in some cases (this may not be one of them), the agents themselves are unsure about what price they can achieve given the uncertainty in the market. And without a doubt by signalling a range or a specific price, they will collate this with everyone else and get an indication of interest.

*Market is cool (although I find in some areas & some property styles they are still holding value), and it is my belief, that unless there is a genuine unique value proposition about this property, then an auction in this environment will suit you better.

What you don't know is the predicament of the owner. Maybe a few innocent questions about why is the vendor selling an opportunity to add some value? This information is the only reason to make an offer early. If you go down this path, I would make it no later than one week before the auction.

 

[evand]

At a point a couple of days out from the auction the agent knows how much interest there is in the property and knows if there will be any serious bidders - or none. (contracts out, pest & building inspections, serious enquiries, etc)

Weeks before the auction the agent is still gauging interest so your offer will most likely be rejected.

If he sees quite a bit of interest and expects some decent bidding then your offer will probably be rejected as he thinks the property will sell at auction and he'll get the comm. (As Paul Keating said always back self interest)

If there is no or little interest and you make your offer 2 days pre auction you just might get it over the line if he knows there isn't much interest and will do his best to get the vendor to accept it if its a sensible offer. (its the old bird in the hand thing)

Its a chance you take but thats the game isn't it. If they knock it back you can still go to the auction and bid if you are keen on the place.

So make your offer 2-3 days before auction, make it unconditional (maybe even with a couple of sweeteners) except for a sunset clause and see how you go.

 

[The Y-man]

So make your offer 2-3 days before auction, make it unconditional (maybe even with a couple of sweeteners) except for a sunset clause and see how you go.

Actually, in Victoria, an offer made 3 days prior to an Auction IS unconditional, as the conditions of the Auction Contract will be binding on the offer (i.e. it is as if you had bought at Auction).

Cheers,

The Y-man

 

[RedPanda]

Given the market conditions today and given that you think that level of interest on the property is quite low and also given that the property is not in a very good condition, I would wait till the auction, ensure that I am the highest bidder (till my fair price), hope it is passed-in and then negotiate. Alternatively if you are not dying for this property, wait till it is passed-in and then negotiate on your terms. I always prefer this because I then get all those cooling-offs and pest and building and finance clauses.

 

[BUNDY]

There are risks involved in submitting an offer prior to auction, or waiting for auction day.

If you wait until the auction day - the vendor may in fact sign a contract prior to auction and you will miss out altogether.

If you put in an offer, it may or may not be accepted and you give both parties and indication of your position.

Personally I would be asking the agent if the property is definitely going to auction OR is the vendor keen to sell prior to auction. Also inquire as to teir reasons for selling.

Many vendors don't really want their house to proceed to auction (unless their is strong interest) and would be happy to negotiate contracts prior to this. It all depends on the vendors motivations for selling and your motivations for buying.

Let us know what you decide to do?

Bundy

 

[knightm]

If it is an investment remember that the deal of the century comes around about once a week and there is another option.

Wait, don't offer before auction, and don't go to auction or bid.

Hopefully no one else goes, it passes in and then the owner is deflated.

THEN you make an offer.

Of course the risk is that the property might sell before or at auction and you have to be prepared to lose it.

But this course is likely to achieve the lowest purchase price imho

 

[exstatic]

Well in the future it will be an investment property, but for the first 5 years or so it will be a PPOR, so there is a small factor of emotion in the purchase decision.

Because I am in the UK it makes it hard to bid at an auction, so ideally I have been trying to put offers in prior so that is my intention on this, I am just trying to gauge when the best time to put an offer in is.

I have contacted the REA to find out how motivated the vendor is to try and judge when a offer will be best to put in, I just don't want to put it in to late so that it just goes to auction anyway, and not to early to stimulate perceived interest in the property.

Given the way the media are representing the property market this week in oz, I am leaning more towards an offer a week or so prior to auction.

 

[WinstonWolfe]

Brendan, keep in mind someone else might want to put an offer in prior to the auction too.....