Going once. Going twice. What do you mean it’s already gone?
In today’s property market, particularly in the auction capitals of Sydney and Melbourne, it is highly likely that when a property is listed for sale by auction it will sell on the day. And the proof is undeniably in the pudding.
According to a recent CoreLogic article year to date auction clearance rates have been near enough to 80% in both Sydney and Melbourne. So why does it happen then that a property for all intents and purposes that is listed for sale by auction sells prior?
Keep reading to find out the main reasons why a property sells before auction and how to make sure you’re in with a fighting chance if it does.
Preparing for auction day
As an experienced Sydney buyers agent I have seen this issue first hand. I mostly hear it from disillusioned clients who have engaged our services because they keep missing out on securing their dream property by patiently waiting for auction day to come around. But it never does.
Here’s how the scenario typically plays out. A property is advertised for sale by auction. You inspect the property and make enquiries of the agent who says the vendors are committed to selling at auction. But then a few days or maybe a week or so later, before the scheduled auction, you find out the property has been sold.
I recently had a client engage my services to bid for them at auction as they were unable to attend on the day. To prepare I went along a week before the auction and inspected the property located in Alexandria. Alexandria is a suburb becoming increasingly popular with young Sydney professionals in a fashionable pocket where Sydney’s inner west and inner east meet.
I asked the selling agent if the property was definitely going to auction and he assured me that it was. After the inspection I looked at other similar properties listed for sale in the nearby area and considered them against the price guide being quoted. I also reviewed everything remotely similar that had sold in Alexandria in the 6 months prior.
Pretty soon I had a clear idea on what I thought was a possible sale price range for the property.
Pre-auction strategy
Later that day I prepared a negotiation strategy for my client and sent them a report detailing as such. I recommended putting in a pre-auction offer $100,000 above the price guide quoted by the agent. This was both below the maximum range I thought the property would sell for and what my client was prepared to pay.
I told my client there were 3 good reasons for doing this. Firstly, it would let the selling agent know that they were serious about the property. Secondly, if the vendor countered the offer it would indeed confirm they were open to selling prior. Thirdly, if they rejected the offer outright it would reaffirm the property was definitely going to auction. A win win situation all round if you ask me.
The unpleasant surprise
So on the Monday before I had a chance to put in a pre-auction offer for my client, the selling agent called and advised the property was selling that day.
It turns out an offer was received that morning that the vendors were happy to accept, but as a courtesy the agent was seeking interest from any other interested parties.
To cut a long story short, I put in an offer that day for my client which was within the range they were prepared to bid at auction and it secured the property.
While every situation is different, in my experience as a Sydney buyers agent here are the 6 main reasons why a property sells before auction:
- Vendor gets cold feet – Just like prospective buyers become overwhelmed by the occasion of an auction so too can vendors. They may get stage fright or overcome with fear, nerves and anxiety that no one will show up on the day, that no one will bid or they don’t get the price they want. So when someone comes along with a firm offer before auction they will jump at it.
- Vendor committed elsewhere – This usually happens when a vendor has purchased elsewhere before they have sold. Many vendors will opt for certainty over doubt. Especially when they are already committed elsewhere and accepting an offer before auction means they can align settlement dates.
- Limited interest from buyers – Throughout the marketing campaign leading up to auction day interested parties may be too slow to act or might keep their cards close to their chest. With no firm offers or price interest received the agent will work with someone they know is keen, interested and ready to do a deal rather than risk a disappointing auction result.
- Unpredictable sales results – In a market down turn when prices are erratic or falling many vendors will take what they can rather than risk the chance of a lower price or disappointing result at auction.
- Macro factors – Major public announcements or pending ones such as interest rate decisions, changes to state or federal Government policy can all play a part in positively and negatively affecting consumer sentiment. Rather than wait for something that could have a negative effect on house prices a vendor may choose to accept an offer now rather than wait.
- An offer to good to refuse – When this happens many vendors will grab hold of this opportunity with both hands, legs and anything else they can. As would you if it was your property.
How to avoid missing out before auction
- Ask the agent if the vendor’s will accept offers and consider selling before auction. If they will, do your homework and work out what the property could sell for. Then put in a reasonable offer. As a rough guide it should be above the agents price guide but below your final limit.
- Show the agent you are genuinely interested. There are some cards you do not want to keep close to your chest and this is one of them. Inspect the property more than once. Get a copy of the contract sent to your solicitor. Get your due diligence inspections done. All of this signals you are keen.
- Tell the agent you want to be contacted if the vendors consider selling before auction. If they do sell before auction this will give you the opportunity to put in an offer.
For more information and industry insights on buying a property contact us for a no obligation consultation.
If you liked this article perhaps you might also like How To Slow Down The Bidding At Auction.
Shelley Horton is the founder of Sydney based exclusive buyers agency Albion Avenue. With a 20 year career honing her skills in every aspect of the property industry Shelley knows what makes a property worth buying and how to get the best deal.
