How to negotiate a pre-auction offer
Unlocking the door to your dream home doesn't always have to be a bidding war on a neighbourhood stage.
While auctions may be the norm in Victoria, there could be opportunities to negotiate an offer prior. Here are our insider tips to help secure your property before the auction frenzy begins.
What you need:
Know the value
Be friends with the agent
Investigate vendor motivation
Finance basics (and yet not everyone does it)
The compelling offer
The negotiation dance
What’s the value?
Uncover the market value with a thorough approach to research. Below are tools to use and information to research:
propertyvalue.com.au.
Computer generated via Corelogic. Take it with a grain of sale, although it offers an ok base to start from.
realestate.com.au
Run analyses of sold properties using the sold tab and your criteria. Try research like for like properties and go back 3 months in your search. This offers a high-level overview of the going rate. Go a step further. Create a spreadsheet with size (sqm) and price per sqm. Determine what you want to pay considering all variables; location, orientations, site condition etc.
microburbs.com.au
Get into suburb data. A good tool for identifying demographics, amenities, and appeal. It’s fun to use and offer useful information
Attend property inspections and auctions of similar properties to track the rhythm of the market, offering you unmatched insight and credibility when crafting your pre-auction proposal. Now that you have an idea of market value, determine what it’s worth to you, and what you’re willing to pay. This is different for everyone. What it means to you is different to what it might represent for someone else. Have your final figure in mind and know that you’ll tap into that figure confidently and only if necessary. Walking away will be your strength when you’ve done the research.
The agent (information gatekeeper)
Have a great relationship with the real estate agent. You do this by being a serious buyer, dropping any attitude you may have and not wasting anyone’s time. Having said that, always understand, that agents represent their client, the seller, not you. The information they offer will be in the best interest of their client. Ask them how many building reports have been conducted (they may or may not tell you) and if you seriously want to explore a pre-auction offer, ask them what the seller’s appetite is for a pre-auction offer and what the figure looks like. They may inflate the figure - again they’re representing their client. They may say that it’s going straight to auction, and that’s clear, at least you know. If the opportunity is there to make an offer, consider the points below. An agent relationship managed well, can offer some really great insights.
What’s the motivation?
A compelling offer addresses what the sellers are motivated by. You have the opportunity to find out what they’re motivated by, by asking good, sharp questions. Questions like, how quickly would they like settlement to be? Using the right words in your negotiation helps unearth information. If the agent indicates sooner is better, then you know a short settlement is the way to play it. Exploring information is a dance. You want to ask without asking and engage in conversation. Things like, ‘What a beautiful family home they’ve built’. When I used this one last, the agent agreed and also shared that one of the parents had a work offer overseas and they needed to move asap. Gold. Find the motivation using conversation and sharp questions to dig out the information you need - information others may not be privy to. This will help you tailor a beautiful compelling offer.
Finances - always be ready
In the pursuit of property in a highly active market, having your financial apples in a row is your advantage. Navigate the negotiation opportunity by securing pre-approval from your bank or mortgage broker. In a world where not all bids are equal, a buyer with sorted finances may just hold the golden ticket.
A compelling offer
You’ve done your research. You know what the market value is. You feel very confident with what you’re prepared to pay. You’ve asked some excellent questions and dug around to get some great intel on the vendors. You know they’re happy to have a conversation pre-auction. Now this next step is important.
Ask the agent what the process is when making an offer.
Agents must present all offers to their clients. What you want to know is, once you put an offer forward, what’s the process? Is the agent going to shop it around? Will it go to blind auction? Board room auction? If you’re the first one to make an offer are you also the only one that has the opportunity to counter offer? Ask, ask, ask!
Agents manage this process differently so you need to understand what’s involved to determine your next step. If you’ve done all this, I can guarantee you’ve accessed more information than most others, you are now at an advantage, even if there are advocates in the mix :)
Make you’re offer compelling based on your research and your capacity.
The negotiation dance
Negotiations are a bit of a dance, and it's not just about the price. Let the rhythm of give-and-take guide you through discussions on settlement length, deposit amounts, property inclusions and of course, price.
Apply pressure only when your terms align with the vendors. Your strength will be in your ability to know when to walk away and when to swipe forward. Both of those approaches are informed by research and driven with confidence.
Good luck!
PS - We understand negotiations can be tricky, they are a big part of our work, and quite honestly, what we love pursuing on behalf of our clients.
If negotiations and navigating auctions are not your superpower, and you’ve already missed out on properties, get in touch with us. We’ll get the best result for you. We might be able to save you money along the way - or at the very least, make sure you don’t overspend.