With multiple bidders vying for popular properties at auction, it can be more difficult than ever for buyers to get a foot in the door and make a successful purchase. Recent data suggests that homebuyers are getting fed up with competing for properties at auction, and are getting in early with high pre-auction offers to get ahead of the competition.
Buying a property at auction can be a nerve-wracking experience, especially for first time buyers, or those who haven’t had much experience buying at auctions. If you have seen a property that you love, it can be tempting to make an offer early and avoid the whole auction process, but it’s important to be aware of the advantages and disadvantages to making an offer before auction.
Advantages:
- You don’t have to wait until the date of the auction before putting in your offer
- If you find the idea of competing with other bidders at an auction stressful, you can avoid that by putting in an offer early.
- Instead of competing with a whole room full of bidders, you may only have to compete with one or two other buyers.
- Depending on the market conditions and what happens on the day of the auction, you may be able to get a lower price, especially if the seller is keen to sell quickly.
Disadvantages:
- If other parties have also made an offer, you may find yourself in a highly competitive and equally stressful situation.
- Unlike at auction, you won’t be able to see your competition or have any idea what their maximum price is.
- You could end up paying more to settle before auction than if you waited and went to auction.
- If you want to buy a property before auction, the terms of the contract may be more favourable to the seller.
If you are thinking about making a pre-auction offer on a property you have seen, there are a few things you might want to consider. Whatever you decide to do, it’s important that you stay as neutral as possible and try to avoid getting too emotionally attached to the outcome.
Review all documentation and reports
Before you make your offer, don’t forget to review all the necessary documentation and inspection reports. Time may be short but locking yourself into purchasing a property with major problems could have long-term financial consequences. Take time to arrange strata inspection reports, pest inspections and pre-purchase building inspections where applicable.
Educate yourself on the market
You may need to make a high offer to secure a property before auction but it’s important that you don’t pay more than the property is worth. Knowing the market and the value of the property beforehand can help you avoid a big mistake and ensure that you don’t get carried away.
Offer a high price
Once you have worked out what your upper range is, make an offer that is close to that. The seller may have multiple offers, and bidding too low in the hope of getting a bargain may put you straight out of the running. Bid high, but leave yourself a little room to increase if you need to. This shows the seller that you are serious and will help you beat the competition.
It’s important to think carefully before you decide to make a pre-auction offer on a property. By reviewing all the documentation, deciding on a price and putting in a high offer which is still within your range, you may be able to beat the competition and avoid having to go to auction.
By Darel McBride
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