Is there anything more frustrating than preparing for an auction only to discover that your dream home was bought the day before by some other lucky purchaser? All that wasted time, research, and effort! Many people are unaware that it is sometimes possible to purchase prior to auction even when properties are in high demand and high prices are a feature of the market.
Why homeowners sell prior to Auction…
So why do homeowners sell before auction? There are several reasons, and it is important to realise that the stars need to align for both the buyer and seller for a transaction to occur prior to auction.
A buyer should never assume that just because a seller has committed to an auction campaign that they will see the campaign through to the end. Personal circumstances and market conditions are changeable and alluring offers can and do shut campaigns down. For example:
- a seller may want to sell before auction because they have found a property that they want to make an offer on and selling before buying allows them financial certainty around putting their best offer forward
- a seller may want to sell before auction because they’ve already purchased their new home and have committed to a settlement date
- a seller may sell before auction if that they find the auction and open home process stressful, this can particularly be the case for some older vendors
- market situations may change suddenly such as the recent unexpected floods in Brisbane
So you want to make a pre-auction offer, what now?
It’s important to find out if the agent and seller are open to pre-auction offers. If they are receptive this can be advantageous for a buyer in a strong market as it may reduce competition for a property.
Here are some tips for successfully securing a property before auction:
Tips for successfully securing a property prior to auction
- Ensure you have your finance pre-approved. To attract the seller’s attention your pre-auction offer needs to be clean with no conditions – the same as it would be on auction day. Wavering the cooling off period should also be considered if the market is strong. In doing so, however, the buyer needs to understand what they are agreeing to, and all the risks involved in relinquishing their cooling off rights.
- Research the market extensively so that you can make a compelling offer. This is where you may want to consider engaging a Buyer’s Agent who can advise you on market value through researched market analysis within the area. A Buyer’s Agent is in a prime position to negotiate an offer that may persuade the seller not to go to auction as well as an offer where the buyer doesn’t overpay. A Buyer’s Agent is also expert at communicating with agents and may be able to gain valuable insight on the vendor’s expectations.
- Be prepared to increase your offer if the seller’s expectations have not quite been met. You may have to offer slightly more than you would have wanted but it may still end up being below what you might bid at auction under extremely competitive and emotionally charged conditions.
Beware the risks of pre-auction offers
The major risk you run in making an offer before auction is that the agent uses your offer as a starting point in a bidding war. You may then become involved in a hidden auction rather than a public one where everything is out in the open and transparent. If a seller rejects your offer the agent may end up using your offer to set the reserve price.
If you are uncertain about what is the best strategy to pursue going into auction a Buyer’s Agent can guide you through this process.