Auctions can be the best way to secure a property fast, but they also come with their fair share of stress and uncertainty.
Smart property buyers know that their chances of success are far greater if they try making an offer before auction day as opposed to letting the emotion of auction day get to you, emotionally and financially!
Buying a property in this manner could be the best way of landing a great property at a price you can afford.
When the Real Estate Agent tells you that the property must go to auction, that might be true in a couple of cases, but usually it’s because they’ve not had that killer offer yet.
Let’s run through the top 7 tips of how to buy a property prior to auction.
1. Do Your Research
You won’t know how much to offer or the best way to negotiate without having done your due diligence on the property and the area where the property is located.
This means checking out comparable properties in the area so you can get a clear picture of what the property is worth. These comparable properties should have been sold no longer than 3 months prior to give you some level of accuracy.
Treat each property you look at based on its own merits. Be objective so you can be unemotional about the transaction and make sure you consider like with like.
Does the property have a view? Is it located on the water? Is it backing on to a golf course? Is it on a main road? Is it north facing? Does it get plenty of natural light? All of things need to be considered.
The location, position and aspect of the property can add or detract from its value. Make sure you pull together a well thought out list of things to look for in the property and what you think the property is worth, and why, before you speak to the agent about the property.
2. Know the local market and the competition
A pre-auction offer is much more likely to be successful if we are in a buyers’ market, so it’s very important that you know what is going on in the market that you intend to buy in.
Click here to check listings and market trends in Sydney suburbs.
If the market is saturated with similar properties, or the seller hasn’t achieved the interest they’d hoped, you stand a better chance of securing the property prior to auction day.
So, your competition, that’s a bit harder to work out.
Unlike at an auction, where your fellow bidders are right in front of you, when you negotiate privately it’s nearly impossible to know how many other interested parties there are or how much they have left in reserve.
You’re flying blind without any of the tell tales that you can get face to face at auction, but you can make yourself stand out from the crowd by doing a few things that the vendor will favour. Things like:
- Offering a larger deposit and let the vendor have access to the funds.
This could make it easier for the seller to finalise the purchase on their next property and tip the scales in your favour. - Waive the cooling off period and supply them with a Section 66W.
When buying or selling property in NSW, after the exchange of contracts, there is generally a five-day cooling off period before the contract becomes binding. However, the cooling off period can be waived if the purchaser’s solicitor issues a section 66W (s66W certificate), making the contract immediately binding. The cooling off period and waiving of the cooling off period is regulated by the Conveyancing Act 1919 (NSW) (the Act). - Don’t make too many changes to the contract if you don’t NEED them.
i.e., if you can afford to make a 10% deposit, then don’t change it to 5% for the sake of it. If you can do a 6-week settlement and that works for the vendor, don’t make it 8 just to give you more time to pack! Pack faster! - Make it easy for the seller.
Ask the agent if the seller requires anything to make the move to smoother. It could be a shorter or longer settlement. It might be to leave certain things behind in the house that they are finding hard to dispose of. It could even be to feed the local cat!
You can also get an understanding of the types of buyers you’re up against when coming across them at other auctions for similar properties in the area or open homes, maybe even at the open home for the property you are intending to buy.
Are they investors or owner-occupiers? Are they cashed up downsizing baby boomers who are likely to have a lump of cash to spend, maybe even buy the property in cash! And in buying property, cash is king! Or are they cash-strapped first-time home buyers who will need finance to get the deal across the line and might need a hand from the bank of mum & dad?
All these things can help you with your game plan so you can pip them at the post.
Click here for further insights into the real estate market in New South Wales.
3. Don’t hold anything back
Now, your instinct might be to hold your cards close to your chest so you can negotiate hard and give them a bit at a time. But that’s not how it works when you are trying to buy in, for all intents and purposes, is a blind auction!
This is the perfect opportunity to be open and transparent and give them all you have in one fell swoop!
You have nothing to lose and everything to gain.
This is because one of the benefits to buying prior to the auction is that you’re in the best position to negotiate more flexible terms of sale, which could be a huge bonus for both you and the seller.
As I mentioned in the previous point these can be a larger deposit, waiving the cooling-off period, a longer or shorter settlement time, or including rent-backs in the negotiation could be the cherry on top of your offer, and may just help you win the vendors over.
4. Get your pre-approval and be ready to move, FAST!
If the vendor is motivated to sell quickly and your offer looks good to them, then having your finance pre-approval ready can be your best asset.
An immediate, painless sale that has them on their way to their next home in record time could be the clincher that sees them cancelling the auction and accepting your offer. It might also be worthwhile letting the real estate agent know your intentions.
Most auctions only have a handful of serious bidders, so let the agent know that if your offer is unsuccessful, you won’t be in attendance on auction day. It might even be worth putting a time limit on your offer i.e., the offer is only good until 5pm on the day that you
With one less buyer in the crowd, the viability of the auction may have taken a direct hit, which could be to your advantage. Worried that a lack of interest or competition will impact the result, the vendor might reconsider your offer.
5. Strike Early and Strike Hard!
After a dozen busy and successful open homes, with a number of interested parties making enquiries and taking contracts with them to be evaluated, the vendors are much less likely to take their home off the market. They will instead think they can get a higher price by going to auction than selling pre-auction. And most of the time, they’d be correct.
Don’t let the vendors wait until they’ve built up high expectations of what they can get for their property. Instead, strike early and hope that they are believers in the old saying “a bird in the hand is worth two in the bush”.
Selling early on saves them the stress of keeping the house tidy for inspections, dealing with the anticipation and anxiety that comes with selling a house, and it means they can move on sooner, so it could be a win all-round.
6. Keep it cool like Fonzie
Keep your emotions in check. Don’t let your emotions take over your ability to make logical decisions and to cloud your judgment, or you could end up paying far too much for the property and then we enter the realms of buyer’s remorse, which is not something you want to have for a house that you plan to own for the next 10 years or so….
Keep it cool, keep a level head, use your research that we spoke about in point 1 and negotiation tactics to finalise the deal. After all, that’s one of the main reasons you’re trying to avoid the auction in the first place.
7. Now is The Time!
Even with all its ups and downs, the Sydney property market over the last 30 years has averaged a 5% growth rate, and we all know that history repeats itself.
It’s never too early or too late to buy property.
Whether it is for your first home, a bigger home for the expanding family, a downsized property because the kids have finally moved out or an investment property to set you up for the future or for that early retirement you’ve been dreaming of.
Buying a property can be a time consuming & stressful process. You need to spend time researching the local market, the properties, the agents, and more… and then be able to match your negotiation skills against real estate agents who know every trick in the book, and use them day in, day out.
For owner occupier home buyers, at Parker Hadley we offer a full buyers agent service which is and end to end, start to finish, fully tailored package to ensure you get the best property your money can buy at the same time as getting your life back and letting us do all the work for you.
We also help investors realise their dreams of building for the future, for their family, for early retirement or to build an entire property portfolio.
Get in touch today by booking in a time to have a chat with us.
