Offering before auction in today’s cooling property market.

Just my two cents, although I'm no expert and hence may stand corrected in the presence of more well-informed advise, however this would be my personal opinion:

A property is only worth as much as someone is willing to pay for it. Therefore, it would be crucial for you to consider how good the property is in terms of location, whether there are any issues ongoing in the body corporate, any forseeable large expenses that you'll need to fork out for the building etc and then decide how much you think its worth.

Putting in an offer on a property is not about offering within the quoted range. It's about offering how much you think the property should sell for (even minus say 10% if you're hoping to buy under market value), and giving your best offer the first time around. Do NOT offer $480K straight up just because that's your max. The property may NOT be worth $480K in the real world. Do check out the other deals out there to see if better ones exist.

If you offer the maximum of their quoted range and it is not accepted, it matters not whether they are underquoting. It is of no value to you to know this. What purpose would that knowledge serve? Furthermore, when it comes to properties on auction, it is sometimes routine to see properties sell for higher than the maximum figure in the quoted range, but it is not always the case. As my Dad frequently warned me, it is unsafe to simply assume a property should sell for between 0-20% more than the higher end of the quoted range, even if historically this has happened in more popular areas.

Key thing is always to do your own study and analysis and weigh up the pros and cons of this property versus others in approximately the same price range (ie. +/- $50K or so). Of course the other factor depends on how badly you want the property. This emotional reason does not justify overspending on an investment property, however sometimes you simply have no choice. A real life example if when my parents bought the house we currently live in. Our lease was coming to an end in the house which we were renting. The landlord sold the house with vacant possession and badly wanted us out. So my parents decided to quickly buy the nicest house in the best area they could afford, and to do anything in their power to win at auction, WHILE STILL SPENDING WITHIN THEIR MEANS. The result is that they overpaid slightly in a face-off against a similarly persistent bidder, however it got a roof over our heads and saved us a lot of stress, of moving to another rental property and potentially dealing with the same issue again.

Sounds like ribbish <moderator: delete language> to me. If you're making an offer prior to auction, then you should be able to put clauses such as 'subject to finance' or 'subject to building and pest inspection revealing no major faults'. Even if you're going to auction, there is some room for negotiation (some days or weeks before the auction begins), except the introduction of a cooling-off period (as mentioned before). Personally I've been to an auction where I was allowed a 90 day settlement (if I was successful at auction) instead of the usual 30/60, which was what the vendor originally stipulated.

This varies on a case-by-case basis however. If you're dealing with a particularly cold and non-motivated vendor, then he/ she may have already stipulated to the agent that all offers before auction must be unconditional, otherwise they are not acceptable. And again, some vendors would even completely refuse offers before auction, even without knowing what the figure is.

This is madness, in my opinion. If the property is hotly contested at auction between two bidders, the highest bidder may get your apartment at say, $535K when he/ she was originally prepared to offer up to $550K. In this instance the vendor has 'lost' the potential to make another $15K. Having said that, some vendors refuse such offers on the advice of their agent and hence are guided into doing something that is not necessarily right for them.

Couldn't advise on this unfortunately. Very basic knowledge tells me that your budget would of course depend on the loan amount which the bank would conditionally approve. However, if the bank approves a loan amount of say $480K and you go overboard and splurge all of that on a property that should only be worth $300K, then the bank valuation may be reason for the bank to refuse to loan you that money, even though it was conditionally approved based on your income and ability to service the loan etc.

This is where your research comes in handy again…knowing how much you should be paying for the property is crucial and you'll need to compare this current property with similar past sales in the last few months. I've developed a bad hoarder's habit of keeping the property sales results from each week's newspaper in a folder and have done so for over a year. However if you go on a website like realestate.com.au there should be limited past sale prices available under the 'Sold Prices' section, or if you just type in your suburb of interest in Google, do a search and manually sift out the websites that have free suburb information.

Hi Simon, have you made the offer yet? If so, how did it go?

All 3 clauses should be ok to include. An offer that is not subject to finance would technically be a stronger offer. Also, you could do a building and pest inspection first, and then if that is sound, then make an offer that is essentially unconditional (if you're confident about getting finance). It would be advisable to tell the building and pest inspectors NOT to discuss the findings of the inspection with the vendor or his agent.

Consider asking the agent if the vendor would prefer a shorter or longer settlement and then offer accordingly.