How to make a winning pre-auction offer

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12 October 2015| Christina Zhou| Domain

http://www.domain.com.au/news/how-to-make-a-winning-preauction-offer-20151012-gk1of1/

Sneaking in an offer to beat your competition before hammer time isn’t just about having the deepest pockets – preparation and tactics are also important.

If you intend to make a pre-auction offer, those in the know share some advice:

Be the early bird

David Wood, director at Hocking Stuart Albert Park, says buyers should “go hard and early” and always do their homework on comparable sales.

He says sellers will be more reluctant to take their property off the market if an auction date is just around the corner.

“When [they’ve] had big numbers through [their] open for inspections, vendors would be encouraged by that,” he says.

“They get close to a date where they can say ‘we can see the finish line in sight now’, we’ll let it run through to auction.”

Mr Wood says a vendor may be more likely to consider the offer if it is made during the early stages of the campaign because they will still have four weeks of inspections left and need to keep the house ready.

That buyer may also not be in the same position to purchase in a month’s time, he adds.

Don’t make a low-ball offer

Buyers who believe they’re always going to pay less before the auction date should think again.

Some owners who need an urgent sale might consider a pre-auction offer if it is in their range, Mr Wood says. But generally, buyers are more likely to pay market price or a touch higher.

Gary Peer director Philip Kingston says there is no point making an offer if it isn’t aggressive, especially in a strong market.

“Go with … a price you would contemplate paying under the pressure of an auction because you’ll only get the vendor’s attention with an offer that they think is at the top end of their expectations,” he says.

Offer a larger deposit

If the offer is made on a long settlement, sometimes a larger deposit can be appealing to a vendor, Mr Kingston says.

A deposit (usually 10 per cent) would be put into a trust account, but after 30 days it is usually released to the vendor.

“Often, a vendor sells on a longer settlement so they’ve got time to go and buy something, and they use that deposit being released to them,” he says.

“So sometimes a sweetener can be a larger deposit than 10 per cent, depending on the vendor’s circumstances.”

Don’t include a string of conditions to your offer

Valuer and buyers’ advocate Greville Pabst, of WBP Property Group, says purchasers should consider what conditions of sale would make their offer more appealing.

Other than a larger deposit, he says, it could be an unconditional offer, or a shorter or longer settlement period, depending on the seller’s requirements.

“If your purchase is for investment purposes you could also rent the property back to the current owner in need to sweeten the deal,” he says.

Offer the vendor/agent a time ultimatum on the offer

Some buyers use this tactic to make sure their offer doesn’t get leveraged against them with other purchasers.

Mr Wood says the timeframe needs to be fair, like 48 hours, so the agent can sit down with both parties.

Mr Kingston believes deadlines can work against the buyer because vendors often don’t take the pressure well.

Consider going to the auction

Even though auctions can be daunting, Mr Pabst says it is more transparent because buyers can see how much interest there is and avoid overpaying.

Putting in a pre-auction offer also means showing your hand to the agent should the auction proceed anyway, he adds.

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