While auctions are certainly the flavour of the day in a strong marketplace, the emotion that they tend to bring out of buyers means that I would prefer to stay away from them unless I’m prepared to pay top dollar. That’s not to say I don’t participate in the deal, in fact nearly three quarters of the properties I purchase are done so prior to auction. That means the vendor was looking to sell via auction but then decided to sell early. So how do you knock out the other buyers and secure your dream property?
Ask the question
Sounds simple, but asking the agent whether the vendor is willing to sell prior to auction is one of the most effective ways of finding out the intentions of either the agent or the vendor. The outcome will either swing one of two ways – the vendor would like to go through to auction, or the vendor would be open to an offer beforehand.
If they are open to early offers I always like to ask when would be a good time to put a written offer forward. This tells the agent that you’re willing to work with them and understand that there are other considerations that the sales agent may be dealing with, with their own client. The agent may say that they need to have the property open for 2 weekends before the vendor would consider an offer. Anything less and you know that you have a motivated vendor on your hands who is looking to sell quickly.
Have your finances in place
Too many people walk into the marketplace after having spoken briefly to their mortgage broker or lender thinking that they can arrange their finances once they’ve found the right property. This often comes after they’ve been told be their lender that approval can often happen overnight. What they fail to realize is that the approval often relies on having all the paperwork together and I can tell you from experience, even the most organized people take weeks to get everything in order.
If you’re serious about purchasing then don’t waste your time on a Saturday before having yourself ‘pre-approved’ by your lender. Once that happens you’re free to bid on anything that takes your fancy.
Written offers, not verbal
While we can often get caught up in the excitement of making an offer and are keen to throw around numbers verbally with the agent, if you want to get serious then you’ll put pen to paper and provide a signed contract with a deposit cheque. Anything less is a waste of time and unless you’re a regular buyer with a reputation for putting your money where your mouth is, you’re much better off showing them you mean business straight away. A written offer will always command attention, even if it’s not at the level the vendor is hoping for.
Offer a fair price
In addition to the last point, you can waste your time by misjudging your offer. This is not to be confused with the unrealistic expectations of a vendor who is shooting for the stars in terms of price, but it’s a novice move to think that a low-ball offer will grab you the dream property. If it really is a dream, then there’s a good chance that others want it too and throwing in an offer that’s too low will only just serve the agent who can now prod other interested parties into getting their offer in.
As a good guide here, if the agent is quoting above $500,000, then they’re usually expecting another 10% – $550,000. A novice will always get tripped up on this and offer $490,000. Wise up, organize a professional valuation if necessary, and put forward a price that is reflective of market expectations with a view to ending up at or near the $550,000 that you had originally calculated.
Give them what they want
Sometimes the best way to get what you want is to give others what they want. This is not to say that you need to lie down while they take you to the cleaners, but does the vendor have needs that you could appeal to, to get the deal across the line. This is where some expert negotiation tactics can shine, but often it’s simply about knowing what can be negotiated and what can’t.
Would it suit the vendor to stay a little longer in the property while they sorted out their own property purchase? If so, a longer settlement might be possible for example. Nudging the agent to see whether there is something else other than price that would make this deal attractive for the vendor may be just what they need to get it across the line for you.
So the next time you see your dream property come up for auction, don’t despair. There are plenty of options available to you to help knock out the competition. Be prepared, be decisive and be ready to work with the agent and the vendor to bring a deal together that will leave all parties walking away feeling as though they’ve had a win.