There is a saying I love: “never a mistake is made in hindsight”. This is so true because after the event we know all the answers. This is the power of hindsight. All the things we wanted to know before making a decision are now out in the open.
When it comes to buying property, nothing is truer.
Before we sign a contract of sale, a number of decisions are made and they are all based on limited information and a lot of speculation. Decisions need to be made on the following:
- Whether to try to buy it or not.
- Whether it is likely to be one of those properties that really goes up in value compared with others in the area.
- Whether to try to make a pre-auction offer or to wait and bid at auction.
- What your upper limit will be and how much you should bid or offer in the meantime.
And while you are mulling over the best thing to do, the agent, if he/she is doing their job well, will be doing their best to drum up as much interest as they can. Consider this: the selling agent knows more than everybody. He/she knows:
- The vendor’s real motivation to sell and how realistic their price expectations are.
- What amount was put on the agency agreement.
- How many other serious buyers there are.
- And for an auction property, whether there is likely to be a lot of competition or not.
- Bottom line – how easy it is going to be to sell this property.
As buyers agents, we spend a lot of time filling in the gaps and building a picture so that we can best assess what it is that the agent knows. After doing so, we come up with a strategy for buying each property. This strategy might involve any of these tactics and more:
- A pre-auction offer.
- An “off the record” chat with the agent.
- Making low offers to “condition” the vendor.
- Making a slam dunk offer designed to catch every other buyer unawares.
- Deciding to go to auction.
Unfortunately there is no parallel universe and we rarely ever find out what would have happened if we took a different plan of attack. Every now and then, however, we do have an opportunity to review a property sale with the benefit of hindsight. When we searching for clients we aim to inspect new listings as early as possible in their sales campaigns. This is so that once a decision is made to “go for it” we can get all the due diligence done and come up with the best strategy for negotiation. If we are ready a two weeks out from an auction date we can determine whether it’s best to make a bold offer or whether to wait and go to auction.
But if you only decide in the final week of a campaign your options are limited.
Recently we had a client who came to us with a property they had found and they had been deliberating over for a couple of weeks before deciding to get professional help. It was in the final week of the auction campaign and there was little to be gained by making an offer at this late stage in the game. Two reasons for this:
- Every other interested buyer is probably also ready to buy and if an offer is accepted by the vendors they would be in a position to compete. An “auction” on the end of a telephone is nowhere near as transparent for buyers as a real auction is.
- If the agent is keen to sell prior to auction at this late stage of the game, then it shows us that they don’t have as many interested buyers as they hoped for. Under these circumstances, making an offer would probably resulting in overpaying.
The bottom line here is that the chance to make a pre auction offer was the week before they engaged us. We could give them guidance on whether it was a good property (it was) and how much a reasonable price to pay was. Spoiler alert – they didn’t get the property at auction but I really think they would have if only they had made their decision earlier.
What we know now:
- Property quoted $1.15M+
- Agent verbalized to me a possible expectation of $1.3M
- Agent also said that vendor had high expectations so any offers needed to be really strong
- We did our pricing research and could see that a reasonable sale price in this market could be $1.425-1.475
- As it turns out, reserve was $1.43M
- So an offer of $1.45M would have looked really good in week 2 of campaign
- Instead it sells at auction 1.545M
This illustrates how sometimes an offer that feels really high before the auction can feel very small afterwards. However, not all auctions are the same and we go back to the drawing board with every new property we consider.
First published:- 17th Sept, 2015
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.