Number of vendors accepting pre-auction offers has risen dramatically

Number of vendors accepting pre-auction offers has risen dramatically
Number of vendors accepting pre-auction offers has risen dramatically

Of the 720 results from a recent weekend's scheduled auctions, around 220 had sold prior to auction, CoreLogic calculated. 

That was higher than the 160 passed in and not that far off the 284 houses and units sold under the hammer. There were over 50 withdrawn from auction, reasons unknown.

The number of vendors accepting pre-auction offers has risen dramatically in recent weeks.

The decision can typically be put down to one of two reasons.

The first scenario is that the sellers got an offer too good to be true, and this is still happening a bit.

But the more likely scenario in many markets across Sydney is that the anxious buyers have taken their estate agent's advice to accept the best, and possibly only offer, that had emerged during the first few weeks of the auction marketing campaign.

More often than not these offers come from frustrated, but increasingly savvy, long-standers in the market who have done their due diligence, and perhaps know the market better than any rookie, or overly optimistic, listing agent.

In a rising market, it’s often to the buyers' advantage to secure the property without the competition of others, though most often the vendor will go through to auction.

But in a softening market it is possible playing your cards right might entice the vendor to sell early to your likely advantage. 

Auction clearance rates have deteriorated in most suburbs during winter.

Those peaks of 80 percent plus this time last year are long gone, with the recent results sitting in the high 60s.

Some agents are telling their vendors to hold their nerve, to wait until after auction when hopefully more buyers have passed the tougher loan requirements that are certainly a brake on the market.

Negotiating on any property sale or purchase is about balancing the actual and perceived risks and rewards.

Agent John McGrath's says the tip for buying prior to auction starts by simply telling the agent you’re interested and ask if the vendor will sell privately.

Letting the agent know you have pre-approved finance is important. Advise also that you are happy to waive the cooling off period.

Then offer a price that is still some distance from your maxed out, walk-away figure. Vendors will assume your first offer isn’t your best so leave wiggle room. Even cheekily sign a contract and a cheque at your nominated offer as that will certainly prompt the vendors to think harder than just an oral offer.

There is always the prospect your pre-auction offer may be rejected, and then be used by the agent as a price floor on auction day. On the other hand in a flat market it may emerge there is no another buyer.

There is always the risk of paying more than you needed to whether its is buying pre-auction, under the hammer or post-auction.

But beware focusing purely on the reward of securing a lower price might raise the risk that another buyer trumps you - and you miss out on the house you love.

This article first appeared in the Daily Telegraph.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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