Despite what the buyers agent might tell you, virtually all vendors are prepared to accept a pre-auction offer.
When property markets are hot like they are now and with a shortage of high-quality stock on the market, sales agents are normally trying to push all sales through the auction process.
However, this is often more to do with the sales agent than the vendor. When a property sells quickly prior to auction, the sales agent misses out on a lot of exposure through the marketing process. They also miss out on the big crowds and publicity they might be getting on auction day.
If you’re looking to buy a property that is slated to go to auction and ask the agent if the vendor is prepared to accept a pre-auction offer, 80% of the time or more they say no. However, if the offer is a good one, you can bet they will not only listen but quickly accept.
In practical terms, if a house is guided at $2 million and you offer $3 million, I would think you will likely be able to bypass the auction process altogether.
Bid Strong an Early
If you go to a home open for a property early on in the marketing campaign that is pushing towards auction, you need to make an offer early on.
It’s also important that you put your best offer in upfront. In fact, you need to bid as much as you were willing to pay at auction.
For the most part, you can normally throw out the price guidance given to you by the sales agent when assessing a property’s actual value. The agent’s goal is to attract as many bidders as possible, in the hopes of playing them off one another and driving up the price.
One of the most important things you need to do is to use comparable sales data to get a true understanding of what a property is actually worth. You can then be confident in making a strong offer early on. As you have a very clear idea of what the property is really worth.
If you’re prepared to pay $2.9 million for a property that is guiding at $2 million, while that might seem like a big jump, it might actually be the correct price. Your job is to understand what that correct price is and it doesn’t matter what the agent’s guidance is saying.
Making a strong offer like this also puts the vendor in a position where they are now going to be forced to make a decision.
They must decide whether or not they will likely be able to achieve that price on auction day. Especially if you make it very clear that you won’t be bidding on auction day itself.
The other thing a $2.9 million offer would do in this example is up the price guide from the previous $2 million to $2.9 million, because legally it has to be increased.
What this also does is force the bidding to start at $2.9 million on auction day, which automatically removes a lot of the weak hands and many of the bidders the sales agent was hoping to attract in the first place.
If you go out and bid strongly and bid early, this will likely force the agent to take that offer to the vendor and then go and round up all the other buyers at the same time and force them to make a quick decision. Ultimately, you can expect that property will then sell prior to auction.
While the auction process can be a great way for vendors to sell, if you have a good strategy in place pre-auction, there’s a good chance you can still get that property off the market quickly as a buyer.