Making offer prior to auction

Discussion in 'The Buying & Selling Process' started by oasis, 12th Dec, 2015.

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  1. oasis

    oasis Member

    30th Oct, 2015
    I'm seeing quite a few properties that I have inspected being sold prior to their auction dates.

    Have you made an offer on a property prior to an auction date? What was the outcome? What was your motivation for doing so? And if you were the vendor, what motivated you to accept an offer prior to an auction?

    Interested in the thought process from a buyer's and vendor's perspective. How does one determine it might be appropriate to make an offer prior to auction as opposed to waiting for auction day?
  2. vtt

    vtt Well-Known Member

    18th Jun, 2015
    Inner West, Sydney
    There are way more experienced buyers than myself on this forum but yes I have done this, twice, and with different outcomes each time.

    Situation 1 - Early 2014, 3 bed terrace very run down house in Darlington, Sydney. Market was rising. Price guide on the property was $850-$950K. Valuation came in at $935K. Offered $935K prior to auction, rejected. Agent said vendors wanted it to go to auction.
    Went to auction, sold for $1.2M. An astronomical and ridiculous price at the time.
    The reason for a pre auction offer was to get the property off the market, we liked the area and these types of property don't come up much (scarcity). The property was purchased by a young Asian buyer who paid in cash. This property is now worth about $1.38M

    Situation 2 - Early-mid 2014, 2 bed terrace in Glebe, Sydney. Market still rising and signs that it was going to go a bit crazy. Valued at $950-980K. Also run down but not as bad as Darlington. This property is filled with original features and is a really "pretty" house with a traditional layout. Viewed it on the Saturday, due diligence and pest and building inspection on the Monday, offered on the Monday afternoon. Offer accepted and property off the market on Wednesday. We used a buyer's agent and their advice was that if this property went to auction it would likely go above $1M. We paid $983K. We needed to get this property off the market to get it within our budget. It had lots of potential, good area, parking space but still perfectly liveable as it was. The vendor felt it was a fair price, we were genuine buyers ready to go and we were happy with his settlement terms (3 months). We have owned this property now for 18 months, it has had about $30K worth of renovations and is now valued around $1.2M. On reflection we would have liked to have bought it for $950K but at the time that just wasn't going to happen.

    Two different outcomes but one reason, get it off the market and away from the frenzy of the auction. At the time auctions were a great unknown - prices were going nuts! Of course it got a lot worse before things started to get better.

    Bentley, Tranquilo and wylie like this.