One of the most common questions I get asked as a buyer advocate is whether it's wise to put in a pre-auction offer. It's easy to see why this idea is appealing—securing a property before auction allows you to avoid the competition and stress of bidding on auction day, and you might even secure better contract terms. But deciding whether to make an early offer is more complex than a simple 'yes' or 'no.'
Here are some key factors to consider before making a pre-auction offer and tips for increasing your chances of success.
1. Does the property meet your needs?
Before you even think about making a pre-auction offer, ensure that the property ticks all your boxes. It should fulfill your list of "must-haves" and ideally cover many of your "like-to-haves." Making an early bid on a property you're only mildly interested in can waste time and effort, and it might alienate the selling agent, which could impact future opportunities. Only move forward if it's the right home for you.
2. Know the market value
It's crucial to have an accurate understanding of the property's market value before making an offer. This can be done by comparing it with recent sales of similar properties in the area. Being well-informed about market value allows you to craft a convincing offer that the seller will take seriously. If the expected price is out of your budget, it's probably not worth making a pre-auction offer, as it's unlikely to be accepted.
3. Understand the seller's motivations
One of the most important factors in deciding whether to make a pre-auction offer is understanding why the seller is selling. Do they need a quick, unconditional sale? Have they already purchased another property? Or are they willing to wait for the auction, simply using your offer to gauge market interest? Gaining insight into their motivations can be tricky and requires asking the right questions and reading between the lines. This is where an experienced buyer's agent can be invaluable, as they often have long-standing relationships with selling agents and can gather key information that benefits you.
4. Gauge the competitive landscape
Once you've determined that the property is a good fit, you'll want to assess the level of interest from other buyers. A skilled buyer's agent can help interpret market conditions and seller agent feedback to gauge how much genuine interest there is in the property. If you find that interest is low—especially as the marketing campaign enters its third week—this might be a good time to consider making an early offer.
How to Make a Pre-Auction Offer
If you've done your research and decided to move forward with a pre-auction offer, here are some guidelines for approaching the process:
Be realistic with your offer: It's highly unlikely that you'll be able to "steal" a property with a low-ball offer before auction. The seller and agent have already invested time and effort into the campaign and have a good sense of the property's value. Ensure your offer is strong enough to persuade both the vendor and their agent, as the agent is the seller's key advisor.
Communicate a response deadline: Give the seller a reasonable amount of time to consider your offer, but don't allow them to keep you waiting endlessly. Strike a balance between being flexible and firm to maintain the momentum of negotiations. Creating a sense of urgency, or what I like to call "FOMOOY" (Fear Of Missing Out On You), can work in your favor.
Remain unemotional: This can be difficult if you've fallen in love with the property, but emotional involvement can cloud judgment. A buyer's agent can provide an objective assessment and help you maintain a strategic approach during negotiations.
Leverage buyer's agent expertise: Buyer's agents are experienced in negotiating with selling agents, often having built relationships over many years. They can help present your offer in a professional and persuasive manner, ensuring your proposal is well-received. A skilled buyer's agent also knows when to push forward in negotiations and when to hold back, an art that takes time and experience to master.
In summary, while making a pre-auction offer can be a powerful strategy, it requires careful consideration and expert negotiation to succeed. A buyer's agent can provide you with the insights and advice needed to maximize your chances of securing the property you want.