What does it mean if an agent is quoting $1.3M for an auction property?

If I offer $1.3M will they sell it to me prior to auction?

We have heard this question in numerous forms over the years – so many people get confused by Sydney’s auction price quoting system.

The fact they are quoting around $1.3M really means that they really want more than $1.3M. If the property goes to auction and the best offer they get is $1.3M, they might then sell for that price – but they might not. But for a buyer to buy it prior to auction, they need to make an offer that will entice the vendor to sell before the auction – as all vendors hope to get competition that will give them a price over their reserve. (I am not even going to venture into the area that deals with what price the agent put on their vendor’s agency agreement).

Without having done any pricing research on this property, I would think they’d be thinking at least $1.35M to sell prior to auction. But if there are other interested buyers, this figure can climb. For example, recently we had a client interested in a property that was being quoted as $940K+. I spoke with the agent about an offer and was advised that other buyers had indicated around $1.06M (a big jump, I know, and there were comparable sales to justify this). My clients were very keen on this house and decided to offer just over $1.1M. This would have bought it, had there not been at least three other buyers prepared to pay similar money. In the end, we secured it for $1.125M – and believe it or not, there were two other buyers then prepared to pay more!!

I hope this makes sense? It doesn’t make sense to me half the time…

For more information on buying property in Sydney go to www.gooddeeds.com.au.

How to decide how much to pay for a property.

As real estate agents, we have a requirement under the Property Stock & Station Agents Act to undertake a thorough analysis when determining what purchase price we recommend a client pays.

There are a lengthy list of factors we take into consideration in order to comply with the Act. Some of which are:
• A detailed analysis of recent sales
• Assessment of the factors that may affect the price people are willing to pay for this property in the current market.
• Is it a property that will attract buyer interest if you need to sell it in a flat market?
• Is there an obvious way that you can add value?

However, there are also factors that are individual to every buyer. For instance:
• How long have you been looking for? Is this the only property that you have found in 12 months that suits your requirements?
• What is your timeframe – own it for 5 years then upgrade, or is this your 20 year home?
• Are you an investor or an owner occupier?

Sometimes you need to pay a premium for a property that is going to suit your needs better than anything else that is likely to come onto the market in the near future.

Sometimes, however, it is folly to pay a premium for a property that is highly likely to drop in value when the market levels off. Knowledge is power and the more you know about the suburb you are buying in, the better decision you will make.

For more information on buying property in Sydney go to www.gooddeeds.com.au

Gazumping is legal.

In a competitive market many buyers find themselves either trying to gazump or being gazumped. And with many people, the moral code is that gazumping is fine if you are the one doing the gazumping but unethical if you are the losing party!

If a property you are keen on has already had an offer accepted but contracts have not yet exchanged, then you are free to submit an offer. But it has to be a serious offer designed to entice the vendors to reneg on their previous agreement – don’t just add a couple of thousand dollars to the price.

One of three things are then likely to happen:
1. The vendor decides to honour the original agreement (even at a lower price)
2. The vendor gives the other buyer first right of refusal at the higher price you have offered
3. They accept your offer

If they accept your offer you’d better exchange contracts quickly to avoid being gazumped…

For more information on buying property in Sydney go to www.gooddeeds.com.au

Why would an agent say “no offers” during an auction marketing campaign?

Here is a little known fact about auction price quoting. Apart from rare situations where the vendor has instructed the selling agent not to entertain pre-auction offers, there is a very compelling reason for agents to discourage offers. If an offer is rejected, they have to increase their quoted price expectation!! And they do not want to do this for fear of not being able to build interest and create a competitive auction.

To give you an example, an agent is quoting a property at “over $900,000”. You make an offer of $950,000, which the vendor rejects. The agent now needs to increase their quoting to reflect the fact that the vendor will not accept anything up to and including $950,000. Perhaps that will turn other buyers off, so don’t be deterred if you want to make an offer prior to auction.

For more information on property buying in Sydney go to www.gooddeeds.com.au

What to do with competitive offers.

At the moment it seems like every property under $1,500,000 has numerous buyers fighting over it. So what are your options if somebody else is making offers on the property of your dreams? Here are some to consider:

Option 1 – match the other offer and race to exchange contracts unconditionally
Required steps:
1. Let the selling agent know that you are about to make an offer and want a copy of the contract
2. Have the contract reviewed by a solicitor/conveyancer
3. Order a strata search or building/pest inspection as appropriate (or take the risk of not getting one, though we would never recommend this)
4. Book the bank valuation if you need one (unfortunately this can put you at a disadvantage)
5. Organize to sign the contract and get the 66W certificate signed by your conveyance or solicitor (this waives the 5 day cooling off period)
6. Get the signed contract, 66W and deposit cheque to the vendor’s agent or solicitor and make sure they exchange contracts immediately
The risks are that another buyer might beat you in the race to exchange (especially if they have had a head start) or that you will still need to increase the offer in order to be the successful buyer.

Option 2 – offer the asking price (or even a bit more)
You will then still need to race to exchange as another buyer could still match or better the offer. Depending on whether the selling agent discloses offers or not, this could be a good strategy as the vendor may treat you more favourably – though there are no guarantees.

Option 3 – try to exchange with a cooling off period
Required steps:
1. Let the selling agent know that you are about to make an offer and want a copy of the contract
2. Organize to sign the contract
3. Take the contract and your deposit cheque to the vendor’s agent for exchange
You will then have 5 business days within which to:
4. Have the contract reviewed by a solicitor/conveyancer
5. Order a strata search or building/pest inspection
6. Book the bank valuation
7. Change your mind
However, with other serious buyers it would be unlikely that the agents/vendors would agree to a conditional exchange of contracts. And if you do change your mind, there is a penalty of 0.25% of the agreed purchase price.

For more information go to www.gooddeeds.com.au