5 things you should know about pre-auction offers

Pre-AuctionIn most instances, sellers will reserve the right to sell a property prior to the auction date. Here’s 5 things you should consider when you’re thinking of submitting a pre-auction offer.

1. Your offer needs to be cash and unconditional
As with any bid at auction, a pre-auction offer needs to be fully unconditional. The lead-in period to auction is there to allow for all interested parties to carry out their due diligence investigations so as to be in a position to bid unconditionally on the day. You may submit a conditional offer to show your intent, but this is unlikely to be accepted prior to the auction.

2. You’re unlikely to shut down the auction altogether
If the seller is inclined to accept your pre-auction offer, the most likely course of action is to bring forward the auction to within 2 working days of notice being given to you that the offer is acceptable. This is to allow other prospective purchasers an opportunity to throw their hat into the ring, especially if they have spent time and money in the course of their pre-auction enquiries. The price stated in your pre-auction offer effectively becomes the opening bid. In some cases no further bidding occurs and the hammer goes down. In others, the opening bid can be met with fierce competition and a selling price considerably higher than the initial offer.

3. You can beat other prospective bidders to the punch
An advantage to submitting a pre-auction offer is that you’re beating other prospective bidders to the punch. If you’re in a position where you have all your ducks in a row and can purchase the property on a cash unconditional basis, you’re likely to cut out those who haven’t been so efficient in their enquiries. Many buyers see the pre-auction offer as an effective way to avoid an out-of-control bidding war.

4. You’re going to have to make it worthwhile for the sellers
Continuing on from #3, by submitting a pre-auction offer, you’re asking the sellers to cut short the property’s exposure to the marketplace. Thus you’re going to have to make it worthwhile for the sellers to shorten the timeframe in which potential purchasers may hop on board the auction train. For example, a seller is unlikely to take a hit price-wise when their property has only been on the market for a week. Our advice is to go in strong with a little fighting money in the kitty should it be needed.

5. Just because your pre-auction offer hasn’t been accepted doesn’t necessarily mean the property won’t sell at the price you offered
We’ve seen instances where sellers have been presented pre-auction offers at levels at which they’d sell if there was nothing better on auction day. The only reason they weren’t accepted is because the sellers chose to carry on with the marketing campaign as planned in the hope of amassing as many potential bidders as possible. In other words, they’ve opted for the 2 birds in the bush as opposed to the one in the hand. Ultimately it is the seller’s decision and they’ll weigh up the pros and cons accordingly.

As with all property transactions, auctions can be circumstance-specific and there are many variables at play. Some sellers will take the money and run, others will be more willing to see what comes together on the day. Nevertheless, pre-auction offers can be an effective tool in getting a head start on your competition. Any questions, be sure to ask your local real estate professional – we’re only too happy to assist!

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About Peter Griffioen

Peter Griffioen - or simply Griff to those who know him - has an established reputation as a high-producing Harcourts Canterbury salesperson. With a focused approach to customer service you can rest assured that you are in good hands, whether it be a relaxed chat about the state of the market or an in-depth discussion regarding your next property transaction. The key advantage of engaging Team Griff’s services is their local knowledge and experience. Currently in this post-seismic era, it is vital to have true professionals working on your behalf, ensuring that you are guided through the process professionally and with a caring approach. The advent of the ‘as is, where is’ market means specialised expertise are required and Team Griff has taken it on themselves to both understand and explain the pros and cons of this now accepted sale/purchase option. For over 26 years the Griff brand has become synonymous with achieving results. Griff now prides himself with his five member team and takes much satisfaction from empowering them to both achieve and reach their own goals. A team with a proven track record placed with the highest ranking Harcourts Million Dollar Club members, exceeding the $275m level. Such accomplishments highlight the team’s exceptional marketing and negotiating skills. Team Griff are recognised as industry leaders for their online presence and regular blog posts of current and relevant real estate information. E-marketing and readily available property specific detailed info means Team Griff’s clients have the edge when it comes to selling their homes, not forgetting purchasers who benefit first hand. A simple Google search says it all – the Griff brand ranking with the most frequent. Griff’s life focus extends beyond business, with quality time and fun being high priorities, while mountain biking, boating and fishing provide that vital time out. His Christian faith is his anchor for daily living, and his community is important to him. For a team approach to optimize the result for your next property transaction, be sure to talk to this award winning team - synonymous with hard work and results! Griff and his trusted team welcome your enquiry today.

6 thoughts on “5 things you should know about pre-auction offers

  1. Elizabeth

    Hi there, why is it the real estate agents won’t disclose pre auction offer amounts to other interested parties? Surely if they are working for the vendor it would be an advantage to share the pre auction offer. An auction is clear and transparent as to who is bidding, why can’t this process be the same?

  2. Peter Griffioen Post author

    Hi Elizabeth, thanks for your comment. I certainly understand where you’re coming from. While there is no black and white rule about disclosing the amount of a pre-auction offer, the convention among salespersons is that this amount is not announced until the time of the early auction. The overarching ethos of our professional obligations is that we owe a fiduciary duty to our client to act in their best interests, but also owe a duty to treat prospective purchasers fairly. Some may consider it unfair to the submitter of the pre-auction offer that the level of their offer is then being used to drum up further interest.

    For us personally, we’re not in the business of wasting people’s time, and will often say to other interested parties, “If you see value above X, then you should definitely be there”. I know some consultants won’t give anything away as to price (which is also frustrating when we’re working with buyers), but a good question to ask them is “My limit is X for this property, am I wasting my time at that level?”.

  3. Ruby

    We have put in a cash offer on a house that has been accepted by the vendor, so why does it still have to go to auction even though the sale says auction this date …… unless sold prior
    Surely if they have accepted our offer then that is that. No auction

  4. Peter Griffioen Post author

    Hi there, the reason the auction is still held is to be fair to all interested parties who may have invested time and money in completing their due diligence. The only alternative to holding an early auction would be for multiple offers to be presented – when everyone is in the dark as to their competition. The “unless sold prior” refers to the property being sold at auction on an earlier date. Trust this assists 🙂

  5. Gemma

    If your pre-auction offer is declined, but you still intend to attend the auction, do you have to withdraw your offer or is it automatically assumed it is withdrawn because it was declined?

  6. Peter Griffioen Post author

    Hey Gemma. Yes, if your offer is declined there is no need to withdraw it. While you have disclosed to the agent and the vendor the level to which you’d be prepared to pay, you are not bound to bid to this level at the auction, nor will bidding commence from the level of your offer. Hope this helps!

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