David and Marie decided to go for a house in the suburb of Lilyfield, in Sydney’s inner-west, which is a very auction-oriented area. The property required them to stretch their budget and they they also decided on a pre-auction offer because they didnt want to risk missing out.
There a few things to consider when you’re trying to buy a house prior to auction.
1) UNDERSTAND THE QUOTED PRICE
It’s important to know how the quoted price came about – and basically it’s the lowest price that the agent can get away advertising the proeprty for.
For example, if it’s $1.5 million plus, chances are you’re not going to get it anywhere near that. You’re probably lookin at something like $1.6 million.
There’s a fairly common saying among agents - “Quote it low, watch it go, Quote it high, watch it die”
2) GO IN HARD
The bottom line is, agents are quoting a price in order to create interest. If it gets to auction, they’re trying to build competition to push the price up. So, if you want to buy a property prior to auction then there’s no point going in at quoted level – that’s the worst case scenario for the vendor. So you’ve got to entice that owner to sell before auctin, so youve got to go in hard.
3) BE PREPARED
In order to go in hard, you need to have your ducks lined up in a row. There’s no point making an offer that’s subject to any conditions because there is no incentive for the vendor to say yes.
Get your valuation done, get your finance done and make sure everything is in place so you can put in a strong offer. Be prepared to make the property go unconditional straight away to give the vendor something to think about.
4) DO YOUR RESEARCH
We’re not encouraging you to pay more than a property is actually worth, and we really believe you should do your reserach before deciding on that top level of your offer. Undestand what recent sales have been in the area and where they sit in relatin to the property you’re so keen on.
5) BE WILLING TO PAY A PREMIUM
If you’re not willing to pay a premium for it, then let it go to auction and fight for it. But if youre willing to pay a premium an don’t want to miss out las David & Marie decided, thats why you have to go in hard before auction.
6) PUT IT IN WRITING
In order to increase your chances of success, it’s preferred to put your offer in writing with a deposit cheque attached. Also seek your solicitors advice to waive your cooling off rights so youre really buying under cooling conditions.
7) BE TACTICAL
It’s important to be tacitcal as well when youre looking at price offers, eg. When the vendor rejected the 1.6 million offer that agent then had to increase his quoting price from $1.5 to over $1.6 – which also has the potential to start eliminating other buyers interested in the propertty which can be a real plus for you.
8)NOT JUST ABOUT PRICE
It’s absolutely fundamental that all this pre-auction strategy is not just about price. In the case of Marie and David they had very few choices of properties in their preferred suburbs that really suited their family. So once Veronica found them the ideal property this was all about securing it – it wasn’t all coming down to price.
David and Marie knew they possibly might have got the house for a slightly lower price if it went to auction but they werent prepared tro run the risk. They really wanted this house and so they went and got it.