As a newbie to the whole auction process, I was wondering if you could offer a rough estimate as to how much to bid based on the following criteria.
– nicely presented property
– building inspection showed no serious defects
– 4 bedroom, 2 bathrooms
– located within 12kms of CBD
– close to transport
– rental potential of approx $280 – 300/week
– land size 500sqm
– our intention – ppor for first year or so and then rent it out.
– auction is in 1.5 weeks and no offers have been placed.The auction has been advertised at $340+. After speaking with the agent, he’s advised the owner wants between 340 – 370, but who believes an agent?
I’m a little confused about the following:
– Is there a rule of thumb as to how much should be offered as a pre-auction offer? ie. do we offer below $340 to test the waters or stick between their range to be taken seriously?
– What is the likelihood of the owner counter offering?
– The property is worth what they’re asking (due to comparative sales).
– I’m not sure how much an auction costs to run, however do you think most owners prefer for the property not to go to auction? I guess it’s a tough one to answer as each to their own but just wanted to know if there was a general consensus about auctions amongst owners.
– If the property goes to auction and the auctioneer asks who wants to put a starting bid, do the public generally offer a ridiculous amount? ie 100k cheaper? I’ve been to a few auctions and they all differ, have any of you started off an auction and if so, what price did you suggest? Or do you keep quiet until all the bidders have exhausted themselves and then join in for the serious bidding?
I know at the end of the day it’s determined about how much we want the property, it’s a nice place and we’re both happy with it, however we want to get it at the cheapest price possible.
Thanks
Simba
[fez]My thoughts is that if the auction is 1.5 weeks away, your offer would need to be “clean”, ie a cash offer. At the very least, any conditions would need to be satisfied prior to auction day, in which case a good agent would still market the property in case you decide not to go ahead.
If you put clauses on the contract that mean that the contract isn’t “unconditional” prior to the auction, the vendors are taking a huge risk of letting go of anyone else who may have bid.
I would suggest that being this close to the auction, your offer would have to be fairly attractive to be accepted.
If it was me, and assuming you are satisfied that your building, pest and finance are “go” I’d put in a clean contract at whatever you think the house is worth and if it is not accepted, go to the auction, let it run its course and if you are still within your budget jump in at the end.
Wylie
Thanks.
Doesn’t the real estate agent mark up the auction start price by 10% or do they mark it down by 10% to attract buys?
They want $340 – $370 for the property, would you consider an attractive offer to be $355? Meet them half way?
I don’t want to shoot myself in the foot by offering more when they only expected “x” amount of dollars. I guess it’s all a gamble in the end.
What to offer is a really hard question. If you have done your homework and think the house is worth $355K then perhaps offer $340K or $345K. If I was the vendor, I would not accept a low offer, but I would wait to see what the auction brings because of the advertising I had spent getting to auction.
Having said that, someone close used to sell real estate and said many times a vendor got greedy, knocked back a good offer prior to auction, then failed to get even up to that figure.
The questionable thing is where does the figure of $340K to $370K come from? How much faith do you have in the real estate agent’s word. You need to have done your homework so you know the values in the area. The quoted figures may be unattainable in this market.
If the house goes to auction and is passed in, it may go for less than they expected. If they decline your offer and the house sells for higher in the quoted range, then you move onto the next house.
If the contract is clean, ie. no conditions, they have time to negotiate with you and still not lose momentum for their upcoming auction.
Only you can decide on a price, and if it isn’t accepted, go to the auction and you might get it for that price, or maybe more, or less, but go in with your eyes open and a good idea of what it is worth.
Good luck, Wylie.
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