With the spring auction season in full swing, the number of auction listings increase and so too does the number of properties that are passed in.
Just because a property has been passed in does not mean that this is the market price, it is simply a price point for further negotiation. The key is to work within the price range you have predetermined and not waiver from it.
Here are REBAA’s top five tips for negotiating at auction:
- Stay outside the property
Unless it’s teeming with rain, do not follow the agent inside. This is akin to being put in isolation. Even though you have exclusive rights to negotiate with the vendor, it is critical you stand in a position outside where you can assess whether there is any competition or just family friends who are pretending to be buyers. The implied prospect of competition is a powerful negotiation tool that agents use frequently.
2. Determine the reserve price
More often than not, the reserve is not the price at which the vendor will ultimately sign the contract but rather the vendor’s asking price which is usually higher to allow for negotiations. A good question to ask is “What is the lowest price the vendor will sell for?”
3. Decide on your strategy
This should be based on your own research as to what you estimate the property is worth under low competition and at the upper end when there is intense competition.
4. Deliberate and minimise the outcome
The extent of any negotiations will depend very much at which end of the price range the property is passed in for. Don’t be frightened to say things like, “This is already at the upper end of what I think the property is worth” even if this is not the case. If there are no other buyers in sight and everybody has left, then minimise the amount you are willing to counter-offer.
5. Keep a poker face
It is a fact that 90 per cent of communication is conveyed through eye contact and your body language which puts buyers at a distinct disadvantage compared with the vendor who has an agent acting on his or her behalf. Keeping a poker face can save you thousands.