Buyers considering making a pre-auction offer must first understand the agent’s rules of engagement.
Too often, buyers mistakenly assume that by making a pre-auction offer, theirs will be the only offer presented to the vendor.
The truth is, if any prior offers in the vendor’s acceptable selling range are received prior to auction, the agent is likely to inform every other buyer who has expressed interest in the property.
Exactly how the agent goes about facilitating the sale process is something which every buyer considering making a pre-auction offer should determine before they make any offers. Some agencies have a published process, others determine the process based on the number of competing buyers. Some let the vendors decide and others have their own individual preferences for handling competition.
Processes include but aren’t limited to:
- Boardroom auction the following day – this is where interested buyers meet at the agency and bid against each other in a boardroom where the auction is ‘simulated’ and usually hosted by an auctioneer. While it feels like an auction, auction rules may not apply. Cooling off periods may still be available depending on the timing of the sale and the state legislation applicable. Conditional offers are generally not acceptable but the agents can define whether this is the case.
- Round-robin style – usually undertaken by phone. The agent commits to going around to each buyer fully disclosing each incremental offer until the last man stands.
- Best and highest – a secret ballot style negotiation where buyers are given one deadline to submit their ‘best and highest’ offer. In these situations, a buyer can sometimes get lucky and but at their best and highest price when they would most likely have been outbid at auction but in most cases it is a method where remorse or disappointment strikes. Buyers don’t like flying blind or ‘guessing’ prices.
Establishing the rules is essential because that can determine whether or not it’s a good idea to buy prior to auction.
Not all competing processes suit all buyers and making the decision which is right for you is vital.
Buyers need to remember that selling agents are not acting for them but in the best interests of the vendor to get them the highest price.
Having a REBAA accredited buyer’s agent can help level the level playing field.
