How to decide when to make an offer before auction

Property buyers tend not to like auctions because they fear being outbid or they are daunted by the thought of having to perform in public. Often people prefer to try to make an offer before auction. But is this always the best strategy for a buyer?

Here’s a sign to look for: if the sales agent is encouraging you to make an offer before auction, then it’s probably NOT in your best interests to do so. Conversely, if the selling agent is discouraging offers, it MIGHT be wise to consider making a pre-auction offer.

When the market is hot, agents are less likely to encourage you to make an offer before auction. This is because they know they’ll get competition and it will sell on the day – it doesn’t matter to them who buys the property. They also know that a pre-auction offer could start a messy bidding war, at the end of which, they’ll have a number of disgruntled buyers on their hands. The agent doesn’t want to look bad, he/she would much prefer to go to auction and have you blame the other buyers if you miss out, not him/her.

When the market slows down, we see sales agents encouraging buyers to make an offer before auction. This is because they are worried about the outcome of the auction. They are not confident that any or all of the interested buyers will turn up and bid. They think that one buyer is probably stronger than all the others and so they want to flush this buyer out. And so, we start to hear some pretty interesting pieces of dialogue.

When the property market slows down, we see sales agents encouraging buyers to make an offer before auction. Is this in the buyer’s best interests? Click To Tweet
“I have a buyer coming in today with an offer that the vendor will probably accept. But they are also putting an offer on another property and they’ll buy whichever one gets accepted first. I really think this property will sell today, so I encourage you to put your best foot forward so you don’t miss out.”  We heard this story recently on the day before the property was scheduled to go to auction.

Our clients were still in two minds about this property and didn’t feel the need to make an offer before auction, so we decided to call the agent’s bluff. Sure enough, it didn’t sell and the auction was cancelled. The agent gave himself a “get out of jail free card” by saying the buyer had made offers on two properties. In this way, he felt he wouldn’t have egg on his face in the event that the property didn’t actually sell as he has predicted. We bought it a few days later at a price less than he was pushing for prior to auction.

“A buyer has made an offer over the guide price that is acceptable to the vendor except that there is a condition attached that is not appealing to them. However, they will sell the property to them today unless another buyer comes in with a more attractive offer. I am meeting them at 12pm, so I need your best offer in by then and they will sell.” We heard this similar story only a week after the last one, once again the day before the scheduled auction.

In this instance our clients shaped up to put in their best offer, which was also over the guide price. The agent’s response was that we were “miles away”. So we let it go. It didn’t sell after all and the agent then indicating a price almost $300K higher than his original price. This agent didn’t provide a face-saving pre-emptive explanation for a non-sale. Instead he clearly demonstrated to us that the vendor has high price expectations and he had no buyers interested anywhere near that level.

Both of these agents worked to elicit buyers to make an offer before auction because they knew it wasn’t going to be competitive. It takes a lot of nerve to call an agent’s bluff (especially if you really want the property) but it’s important to realise that agents will encourage offers if their campaign isn’t going that well. If they have lots of buyers, they’d always prefer to go to auction.

Have you found the home of your dreams and want to make an offer before auction? We can help you decide on the best approach. Contact us now.

Download our free eBook – How to Master Auctions and Buy Like a Pro!

Further reading:

How do you make a pre auction offer?

Making an offer: the sure fire way to avoid being gazumped

What does auction price guide mean?

Published 13 February, 2018.

Updated: 12 September, 2019 & 4 September 2020.

DISCLAIMER: Good Deeds buyers tips are intended to be of a general nature. Please contact us for advice that is specific to your individual circumstances. You may also need to get advice from other professionals such as an accountant, mortgage broker, financial planner or solicitor.

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