Buying a property prior to auction in the changed market
Although the Sydney market has softened, most properties are still being marketed with an auction campaign. Sales agents are convinced that this is still the best method of forcing buyers to commit to buying a property, as it sets a sense of urgency and a limited time frame for the sale.
With this changed market many properties are now attracting on average only 1 or 2 serious buyers (whereas during the height of the market boom most properties had 5 or more). When the reality sets in after a week or 2 of running the auction campaign, vendors are often advised to consider selling prior to auction due to the insufficient competition required to conduct a successful auction.
As buyers agents we are often put in a position of having to advise our clients on how best to respond. We need to develop a negotiation strategy, including determining an initial offer amount, and how to close the sale with the most favourable price & terms for our clients.
Some of the factors we take into account in this complex process are :
- What are the most recent comparable sales in the area and how do they compare to this property
- What is the maximum amount the property is worth in the current market
- Has our due diligence and investigations uncovered any notable negative issues with the property
- Have other buyers requested sale contracts, and importantly have any building & pest inspections or strata inspections (for unit purchases) been completed
- Were many others present at the property inspections, and were the potential buyers there seriously engaging with the sales agent
- Who are the vendors and what is required for their decision making, and what are their logistics for signing a sale contract
- Have the vendors purchased another property and therefore need to sell
- Will a shorter or other settlement period be attractive to the vendor, and possibly result in accepting a lower sales price
- How experienced is the sales agent & are they busy with their other listings
Recent Negotiation Case Study | Earlwood
This week our owner occupier clients settled on an attractive Californian Bungalow in the Inner West suburb of Earlwood.
In November last year I negotiated this purchase prior to auction at $1.76 Million. The following week a very similar house in the same street went to auction and sold for $2.41 Million, $650,000 or 37% above the price I had negotiated successfully just a week earlier.
The property purchased was a deceased estate with 4 beneficiaries and part of a complicated estate. This type of sale is normally very difficult to complete prior to auction due to the number of interested parties. Following offers and counter offers an agreement was reached, and contracts were formally exchanged.
My clients are delighted with the outcome and have this week taken possession of their new home.
House purchased by my clients
Single level house
3 bedrooms, 2 bathrooms & parking
696 square metre level block
More attractive frontage with a formal verandah
Similar house sold at auction the following week
Early Californian bungalow
Single level house in the same street
3 bedrooms, 2 bathrooms, parking
836 square metre level block
Similar internal floor space but the layout not ideal