Vendor won’t accept pre auction offers

Discussion in 'The Buying & Selling Process' started by jinx77, 16th Oct, 2019.

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  1. jinx77

    jinx77 Well-Known Member

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    I’m a first home buyer who wants to avoid auctions because I don’t want to fork out money for pest and building inspections for a property I could be outbid on at auction. I’m buying in Melbourne where the market is hot and there’s a lot of competition.

    Some places I’ve looked at are deceased estates or government owned, so the REAs have advised that the vendors won’t consider pre-auction offers.

    I have a BA to bid for me at auction, but I can’t afford to waste money on checks for properties that I have no guarantee of securing at auction. Especially now when auction clearance rates are rapidly improving.

    Is there any way to get around this? How likely is it that the vendor will agree to pay for these checks?
     
  2. kierank

    kierank Well-Known Member

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    If you were the vendor, what would be your feeling/position on such a potential buyer?

    Have you offered a purchase price way above the price range, say 20% to 50% more than you think it is worth? :D
     
  3. The Y-man

    The Y-man Moderator Staff Member

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    Two things here.
    • Buying into a hot sector of the market - unless there is an absolutely compelling reason to, don't. However, knowing you are looking for a place to live in, this is probably not 100% avoidable - so the choices are "meet the market" or "wait".
    • Gov/Deceased estates can be the most difficult ones to buy competitively (unlike what you read on books) - they generally are heavily sought after (by said people who read the books) and therefore get bid very high. Also, the sellers can't be bothered with pre-sales negotiations.
    The Y-man
     
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  4. Scott No Mates

    Scott No Mates Well-Known Member

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    Govt sales are a process, that process is public auction. If it fails at auction, then you can negotiate within their guidelines.

    Dec estates - the beneficiaries want the maximum/exector is bound to do the best job, hence the reluctance to negotiate pre-auction. If there is a sole beneficiary or the parties aren't fighting over the will, then there may be a possibility that they accept a pre-auction offer.
     
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  5. Air_Bender

    Air_Bender Well-Known Member

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    In my opinion a building and pest inspection is a must for all property purchases, except for new builds. It could potentially save you from making a huge mistake where the cost to fix the defects can far outweigh the $300 - $400 it would cost you for a professional inspection.

    All the best.
     
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  6. Trainee

    Trainee Well-Known Member

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    If you can afford 1-2k for a couple of inspections, what happens if a toilet breaks after you buy it?

    cant afford, or dont want to pay?

    the only good way to save on this is only get inspections done for places you are confident of getting, and for that you need to know the price. Attend every auction. Every open.
     
  7. kierank

    kierank Well-Known Member

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    @jinx77, the first rule of purchasing is:

    “ALWAYS believe you are in the strongest negotiating position”
    This takes knowledge, confidence and most of all continuous practice (and lots of it).

    I practice every day so it becomes like a reflex.

    Even when I go to MacDonalds to get my free Seniors’ coffee. I negotiate by requesting an upgrade from a standard size to the large cup, for no cost.

    Most times I am successful; when I am not, I just walk out.

    I am always in control.
     
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  8. Depreciator

    Depreciator Moderator

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    It's frustrating, Jinx. I went to an open for inspection recently where the vendor had commissioned a B&P report and it was available for everyone to look at. Of course, people can sometimes be suspicious of them. It would not hurt to ask agents if a report is available. Or ask them if they know of any companies that have done B&P reports on a property you are interested in. That company might provide a copy for a reduced fee. I recall one company did this some years ago.
     
  9. Trainee

    Trainee Well-Known Member

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    As a vendor its a good idea to do your own inspection. Any issues can be highlighted, and get buyers who like the property but not enough to do there own b&p.
     
  10. jinx77

    jinx77 Well-Known Member

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    No first home buyer on a tight budget wants to waste money on building inspections for places that they have no guarantee of winning at auction. Each inspection costs at least $600 - while I can afford to pay this multiple times, I don’t WANT to pay it multiple times on what turns out to be unsuccessful bids. I only want to pay it if I know I have a strong chance of getting the place. It’s hard to know this in the current market in Melbourne where things are rapidly changing.
     
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  11. Trainee

    Trainee Well-Known Member

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    There are no guarantees. Increase your chances by paying more, buying in a bad market for sellers, or knowing the market well.

    maybe go to every open house and auction for 2 months. Track every sale.
     
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  12. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    I just did a taxpayers tax. Bought at auction. And acquired a $22K termite treatment problem that isnt deductible because of this same report cost issue. Almost all property will have some issue. Maybe trivial or maybe major.

    Ditto illegal alterations.
     
  13. wylie

    wylie Moderator Staff Member

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    Would that $22k termite treatment be able to be added to the cost base? At least that is a slight silver lining I guess.
     
  14. Morgs

    Morgs Well-Known Member Business Member

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    I had a client recently pull out of a purchase due to B&P inspection identifying significant issues underneath the house with flooding and rising damp which were not evident from physical internal inspection and would've cost circa $50k to fully address.

    It is unfortunately cost of entry unless you're happy to wear the risk or looking to significantly renovate the purchase. 12 months ago you may have got away with the vendor covering the cost but not in the current market where you're competing with others who (from what I'm seeing) are throwing unconditional signed purchase contracts at agents without even doing their own DD.
     
  15. kaibo

    kaibo Well-Known Member

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    You will be always in control of the people that continue to deal with you.

    Just have the deepest pockets and bid strong and hope no one is happy to pay more than you. Also only get inspection done if you know the market well as if the sale price is over 10% more than your budget clearly you don't know the current market and need to adjust your target

    I don't get the BA bidding thing if that's all they are doing for you. Money will be better spent getting a building inspection done
     
  16. kierank

    kierank Well-Known Member

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    Totally disagree.

    I have no idea of the number of times I have walked away. Some times I have been called back; some I have accepted the call-back, others, I haven't.

    In the biggest deal I have done in my life, I got up, walked to the door and was walking out. I was called back. I hesitated, paused for a minute or two with my back to the room and then re-entered the negotiations (in an even stronger position).

    You are ALWAYS in control (you just have to believe it).

    In my eyes, if one narrows it down to one thing to negotiate on (say, price), one has weaken their position. I always aim to have multiple items that I am prepare to negotiate/horse-trade on.

    Totally agree.
     
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  17. Propertunity

    Propertunity Well-Known Member

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    Look I know I'm can be seen as biased being a BA myself, BUT I have probably been to and bid at many, many hundreds of auctions and I do get exactly why intending purchasers would want to use a BA to bid at an auction. The people I win against at auction display similar characteristics:
    1. They start low and "drag up" all the hopeful bidders they find themselves competing with at the pointy end of the auction. I'd blow most of these away with my opening bid.
    2. When they reach their limit or are about to, you can easily tell because they start making phone calls and/or talking to their family members to get more money....so my next bid needs to be confident and as though I have more of a limit that they do.
    3. They get intimidated by bold, confident bidders - I've seriously wanted to go up to some bidders and smack 'em over the head and say "I'm out of money dummy, all it will take is another $500 bid from you and I'm out and you'll win". (of course I can't do that and I'm winning for my client) but they let me bluff them out of bidding further. But they'll never know by looking at me, that I'm about to run out of money, just like them.....................and so on.
    Bidders find they get very nervous and also have to deal with selling agents sent by the auctioneer to get them to bid more. As a clearly obvious BA at some auctions, I've even been approached by agents trying to get me to increase my bidding increments if I'm down to $500 bids (ie another $5,000 might just do it, says the agent). They get brushed aside by me with a hand gesture and/or some words to the effect that I don't need any help, thanks anyway - tsk! But I see many bidders egged on by agents in this manner.
    BA's on the other hand can stay cool calm and collected - as it is not their money they are spending and they won't be living at the property - so there is a lot of benefit in being emotionally detached.

    One final rant - BAs also know the auctioneers (private buyers can too if they attend enough auctions). So when an actioneer calls, "once, twice, third and final" you need to know if he is really selling OR he does this all the time and he/she's about to defer to the vendor for instructions, before he/she really gets serious - all auctioneers are different.
    Some will chat to me as a BA before the auction begins and even ask if I will open the bidding if no-one else does as he has another auction to attend and can't afford lengthy silences. That's usually my strategy anyway (but not always). Then we can chat during the auction as well (if need be).
    Did I mention that I love auctions? :)
     
    Last edited: 18th Oct, 2019
  18. Sackie

    Sackie Well-known cafe bum of the East Premium Member

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    Lol.. haven't heard something that funny in a long time.
     
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  19. hammer

    hammer Well-Known Member

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    We tried this exact same strategy when we were buying our first place and it didn't work either.

    We discovered that by making a pre-auction offer all we were doing was setting the reserve price.....
     
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  20. dabbler

    dabbler Well-Known Member

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    Oh yeah, buyers and or their solicitors can ask for some real laughable stuff at times....
     

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