Making a pre-auction offer

[fudoc5]

We are looking at a lifestyle property 30min form Tauranga CBD, we really liked it and can see our family growing up there. The property is listed as auction, I asked the Agent about the Vendors current situation, and he says the Vendor’s motivation is high as they have put an offer on another property, so they are keen to see it go. CV $620k (2016), Agent says Vendors are looking $750k upwards. Similar properties have sold 25% above 2016 CV.

Having only been listed this week, there is quite a bit of interest already on the property. We have done our DD and are considering putting in a pre-auction offer of $800k to cut down on the competition early and avoid going to auction or having the auction brought forward, I’m not sure if $800k would be enough to tempt the Vendors to sell and avoid the auction all together.

Knowing that the Vendors are keen to sell to settle their other house, so maybe a pre-auction offer in this case could benefit them.

Keen to hear everyone’s thoughts, would a 30% above CV offer be enough to tempt the Vendor?

[DaveW]

you can only try your luck, the vendor might not like public auctions, or they might get less at Auction when you see you are the only bidder. You will certainly put the vendor on the spot.
If you are putting the offer through the listing agent it will be in his/her interest to close it and reap all the commission. The vendor will need to decide if the 800k is enough to bring the auction forward or to continue with their marketing.
Don't show too much interest, make it seem like you are making your best offer and that you have other properties to choose from that are more affordable. This is the risk the vendor has to take if they pass on your offer then they may not see you again because you might buy something else.
Give it a go.

[John the builder]

I thought they were bound to bring the auction forward?

even if so you might head off those who have completed DD or finance arrangements

[DaveW]

I thought they were bound to bring the auction forward?

Only if the vendor considers the pre auction offer is at an acceptable level then the auction will be brought forward. Otherwise they can say nothing and continue to the advertised auction date.

[John the builder]

as opposed to just accepting an offer and cancelling the auction?

[DaveW]

as opposed to just accepting an offer and cancelling the auction?

That's correct. They can "accept" the offer but the auction is brought forward to usually 48 hours and all other buyers who have an interest in the auction are then advised that the auction has been brought forward. The auction then begins at $800k.

[fudoc5]

Thanks, in this situation wouldn't it be in the Vendors best interest to sell the property fast so they could settle on the other property. Do interested parties normally get notified and given the chance to put in an offer if a pre-auction offer is made?

[DaveW]

Thanks, in this situation wouldn't it be in the Vendors best interest to sell the property fast so they could settle on the other property. Do interested parties normally get notified and given the chance to put in an offer if a pre-auction offer is made?

It's up to the vendor but yes absolutely all registered buyers are notified. So the sooner you get your offer in the better so there are less registered buyers.

[Aston]

That's correct. They can "accept" the offer but the auction is brought forward to usually 48 hours and all other buyers who have an interest in the auction are then advised that the auction has been brought forward. The auction then begins at $800k.

Or they can accept the offer and cancel the auction.

If auction is cancelled, any other interested party will be advised to put forward their best offer.

[DaveW]

Or they can accept the offer and cancel the auction.

If auction is cancelled, any other interested party will be advised to put forward their best offer.

No. That's a Tender.

[Aston]

Yes but can't an auction still be cancelled, if vendor chooses to accept a prior unconditional offer.

[DaveW]

Yes but can't an auction still be cancelled, if buyer chooses to accept a prior unconditional offer.

The vendor accepts the pre auction offer conditional on their being no better bid at the new auction date, which is brought forward to 2-3 days from conditional acceptance of the pre auction offer.

[Aston]

You could submit an offer conditional upon the auction being cancelled.

[DaveW]

You could submit an offer conditional upon the auction being cancelled.

Absolutely not. The buyer cannot add any conditions to a pre auction offer.

[Aston]

Why not???

Auctions can be cancelled.

Maybe you are wrong about that.