Tips for making pre-auction offers in turning property market

Tips for making pre-auction offers in turning property market
Tips for making pre-auction offers in turning property market

Sydney's spring auction selling season has had an early start with high volumes with auction clearance rate less than the same time last year.  

CoreLogic RP Data had noted the number of auctions across Sydney has on occasion been running higher than in Melbourne, traditionally Australia’s busiest capital city auction market.

Auctioneer have noted there has been a drop in the number of bidders per auction to at least half the winter average of six registered bidders.

There is just one conclusion which is that the increased supply has seen some of the steam is coming out of the auction market.

I am a great believer in auction results doing a remarkable job in reflecting emerging residential market trends - so when auction clearance rates are on the rise, prices are generally going up too. And the reverse of course. 

Auction volume and price momentum can be fickle. Take back in the last real boomtime of 2002 when there were record monthly clearance rates in the very high 70%s. There were 2700 auction offerings in November 2002. Just two years later came the quietest November in the past two decades with just the 1400 offerings - and a clearance rate in the lows 40%s.

No doubting we are still in a seller's market for a little while longer, but I'd suggest it worth buyers being adventurous this spring.

Try to seize on the seller's and agent anxiety with a smart pre-auction offer as the volumes ramp up.

Here's a few tips on getting what you want while keeping a cool head. 

1) Think seriously about a pre-auction offer. Just because a home is advertised with an auction date does not mean you have to wait until the auction to bid for it. Don’t try to be too clever by submitting a bid lower than you know the vendor will accept, but make an offer that you believe is genuinely competitive. You are, after all, trying to avoid competing against the likely auction throng.

2) Keep talking to the listing agent in the countdown to auction day. Ask for an indication of the vendor's possibly changing situation and intentions. The agent can’t and won't disclose everything, but you may be able to get some helpful insights.  

2) Make sure you have done all the due diligence on the contract of sale, sought out legal advice, obtained a building and pest inspection and all other checks. With such preparedness you could get the deal done the same day.

3) Query the agent on what settlement terms the vendor may want. If they’ve already purchased their next property, they may want a quicker settlement than the standard 45 days. 

4) Pre-auction offers are unconditional, so it’s important to approach the opportunity from a position of strength. Put the offer in writing; even attach a cheque for the deposit to show the vendor that your offer is serious and that the vendor may be better off not waiting until the auction day.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of our authors. Jonathan has been writing about property since the early 1980s and is editor-at-large of Property Observer.

Tags: 
Auctions Residential Market

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