Sunday, 14 July 2013

Another great article by Switzer's John McGrath Tips for Auctions

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John McGrath
Property Expert
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Tips for buying before auction

Tuesday, June 04, 2013
Auction clearance rates have improved substantially in many markets this year. Take Sydney, for example. The clearance rate is up by about 20% on last year and hit a peak of 78% in late May. That’s a very strong rate of sale and reflects an increasing urgency among buyers to secure their next property before the market really takes off.

When there’s this type of urgency in the marketplace, it’s not uncommon to see buyers making offers on properties in the first week of the campaign. Today, I think this is especially the case because many buyers have been sitting on the sidelines for years so they’re more than ready to get a deal done now that the bottom of the market has passed.

Anecdotally, we’re noticing a lot of pre-auction sales occurring in today’s market, so I thought I’d share my tips on how to better your chances of securing a property prior to auction, especially when you have competition from other buyers.

In a rising market, it’s to your advantage to secure the property without the competition of others. But if there’s a lot of interest in the property and market conditions are strong, the vendor will probably be more inclined to go through to auction. So if you want to buy prior, you need to play your cards right to entice the vendor to sell early.

Here are my top tips for buying prior to auction:
  1. Tell the agent you’re interested and ask if the vendor is willing to sell privately. If the agent gets a flood of offers after the first open and you haven’t made yourself known to them as a serious buyer, you might not get the chance to make an offer
  2. Let the agent know you have pre-approved finance. This is a very important signal that you’re a serious buyer
  3. Offer a price that is close to your walk-away figure. Vendors will only entertain the idea of selling prior if a premium price is put forward. As with all negotiations, the vendors will assume your first offer isn’t your best so leave some wiggle room
  4. Waive your right to a cooling off period to show you’re a serious buyer
  5. Do more than a verbal offer. The best way of showing you’re serious is by signing the contract and attaching a cheque for the deposit. Alternatively, put your offer in writing and mention you have your finance approved
  6. Offering odd amounts is a great tactic especially after making a couple of lower offers. For example, rather than offering $460,000 or $465,000, offer $463,500.  An odd amount suggests there’s some logic to your offer and it also implies that you’re at your financial limit
  7. Be prepared for a situation where you and another buyer are at the same price, so it will come down to a race to exchange. If neither of you are willing to offer more, it will be a matter of who can get themselves organised and in a position to sign the contract first
If you’ve been thinking of buying, now is definitely the time. With interest rates at an historical low, competition is only going to get stronger.