Putting in Pre-Auction Offer (VIC)

sclass on 02/10/2023 - 22:06

Hi all,

I'm based in metro VIC, looking at a townhouse listed for auction in 2 weeks' time but just received notice from the REA that an offer of 735k has been put in (top advertised range 710k) and that any counteroffer needs to go in by tomorrow afternoon. I am keen to put in an offer as this is still within my budget.

How much higher an offer is reasonable for the vendor to consider? 10k? Do these tend to go back and forth between bidders?

And should I send the REA a text with my offer being subject to finance and building/pest inspection? Or should I leave building/pest inspection out so I'm more competitive? (It's a 5-year-old townhouse.)

I had preapproval which just expired and I reapplied earlier today - I've had no changes in my financial situation so I'm presuming this should not be a problem.

Any advice would be appreciated as a first timer - thanks in advance!

Home & Garden

Comments

  • jjjaar on 02/10/2023 - 22:17
    +3

    Are they doing it as a boardroom auction, or just taking other offers? If they’re just taking offers, ask the REA how they run it, as everyone is different. Is it back and forth, or is it best and final offer? If back and forth, only go in a couple k higher, as though it’s an auction. Best and final, well, you could still go in a bit higher and hope that the first offer went in at their highest already.

    Do you know if the other offer has any conditions? If there are none, adding conditions would likely mean you would need to add a nice sum of $ to make it worth the vendors while. $5k-10k may be enough, but for others, it may need to be $20k-30k more. Given that it’s going to auction, the vendor may not be willing to entertain conditions. FWIW a 5 year old townhouse is exactly the kind of thing thats going to start having issues in the next 2-5 years, when all of the warranties expire.

    When was your pre approval previously granted? How many interest rate rises ago? If at least one, you may not have the same loan amount as previously. Would a reduced loan amount impact your budget?

    • sclass on 02/10/2023 - 22:23

      Thank you, that's great advice. It sounds like the REA is just taking other offers but I will clarify this, as well as whether the existing offer has conditions attached to it.

      My last preapproval was in mid July, so I think it should be fine.

    • Pcosmic on 02/10/2023 - 22:33
      +6

      Why would the agent tell any of these? They would always say it's best and final offer & no conditions. They're fishing for offers prior to auction. It's a classic REA strategy

      • sclass on 02/10/2023 - 23:11

        True that - although last time this REA advised of a pre-auction offer for a different property, it was sold the next day. Might just go with a ~8-10k offer then.

      • jjjaar on 03/10/2023 - 05:19

        I’ve had agents tell me. All I did was ask.

        On most occasions I learned there were conditions.

        On one it wasn’t just BAFO, it was one by one. I didn’t put any offers in but I got notified every 2 or so hours for about a day when another offer had been put in. In that case there were two bidders going back and forth, both finance clause but only one had building/pest.

        And for the times it was a boardroom auction (two online via zoom, one IRL in their boardroom), they definitely had to tell people because… well… they needed people to show up? (That one played out to typical auction conditions though, so no conditions like finance or building/pest were allowed).

        That said, yes many REAs are sneaky and lie. I’ve known someone who put in the first offer, REA came back and said they had a counter offer of $5k higher. They said “sorry our number was firm” and got a call the next day saying theirs had been accepted because there was no other offer.

        I’m not suggesting to believe everything the REAs say, but asking can’t hurt. If they say no conditions, sure, there might be… but why would they be lying if say they’re are conditions?

  • localhost on 02/10/2023 - 22:39
    +4

    REA is doing hidden auction :)
    Whatever offer you put - write it: letter or email. To have a proof.

  • JIMB0 on 03/10/2023 - 01:56
    +2

    Always get a building inspection unless you're only paying land value. Going unconditional on finance can help but ask your mortgage broker

    • freefall101 on 03/10/2023 - 09:03

      This, building inspection doesn't cause any hassle (it's quick to get done and it's hard to find an inspector that does a decent job anyway) and if they say no, that's a big red flag.

      Whereas there seems to be a huge deal about signing subject to finance, REAs barely talked to anyone who was subject to finance and leapt at me when I said I wasn't. Granted, that was my ignorance of what that meant, I thought I was fine because I had preapproval and the REAs kept telling me that was all I needed (it's not). Fortunately it went through fine.

      • sclass on 03/10/2023 - 10:17
        +1

        We're pretty confident with our finances as we're not borrowing a big amount. I think we'll just make it subject to building/pest inspection then.

  • popcornready on 03/10/2023 - 07:29
    +2

    I would be careful with your pre-approval figure. If interest rates change today it may throw out your final approval.

    Maybe wait till 3pm today when we hear from the RBA before putting in the offer

  • TimmyTims on 03/10/2023 - 11:08

    I wouldn't touch anything without a building and pest inspection. Also make sure the clause is written in a way so you can cancel if not satisfied with the results. My contract original said something like, "subject to major defects". But anytime there was a potential major defect in the report, it also said further inspection by an expert was needed.

    • pharkurnell on 03/10/2023 - 11:34

      I wouldn't touch anything without a building and pest inspection

      agree 100%

  • wannagrababargain on 03/10/2023 - 12:01

    Usually when the REA sends that text with the time limit, they have received a signed offer that the vendor has accepted and are giving all other buyers an opportunity to put in offers. Ideally you would have your building inspection and finance sorted before it gets to this point.

    • sclass on 03/10/2023 - 12:12

      The first inspection was last Thursday, and with the long weekend since then, there hasn't been time to get a building inspection!

      • wannagrababargain on 03/10/2023 - 13:31
        +1

        Wow, the other buy either has their act together or has a bunch of conditions or are just YOLOing it.

        As suggested by others you could ring the agent and ask a bunch of questions. Usually there are two stages of 'offers', there's verbal discussions/back and forth or informal offers to try to discover an offer and terms that the vendor would be happy with. When you submit a formal offer you present a signed contract (with all agreed amendments). Obviously to go to all that trouble you want to first have that informal verbal agreement that your offer will be accepted.

        There's no problem trying to get more transparency, you need to ask the agent where the process is at, and what the situation is with the vendor and other sellers with regard to conditions. Have they received a signed contract and the vendor has accepted the price and will sign the contract at 5pm if no other offers are received? Or is it still in an informal negotiating stage and they're running a blind mini-auction? (The 'winner' of said mini auction then getting the right to submit their formal offer). The nature of that SMS suggests to me that they received a signed contract but on the other hand the pre-auction price premium doesn't seem that high so I don't want to assume anything as all the agents and companies work differently.

        Remember nothing is set in stone until two signatures are on the contract that both parties agree to.

        Finally, reconfirm in your own mind that this is the type of house and area you want to live in and that it's not just 'social proof' of receiving that message that is psychologically pushing you into action. When you first saw this house were you already blown away so much that you immediately thought of sending an offer pre-auction or were you just happy to wait until auction day?

        If you still are serious you should:

        1. Request a copy of the contract and section 32.
        2. Read over the contract yourself
        3. Get your Conveyencer/lawyer can do a contract review - this can usually be done pretty much at a moments notice.
        4. Get your Conveyencer/lawyer to request any changes to the contract (including your conditions if these are not 'tick boxes' in the contract).
        5. Book a building inspection, for tomorrow if possible (not 'within a week'). You'll need the agent to let the inspector in.
        • sclass on 03/10/2023 - 14:08

          Thanks very much for that. I've just called the REA and they are taking it to a boardroom auction tonight. Unconditional of course, but I haven't done a building inspection yet. Might YOLO it myself…

  • Almost Banned on 03/10/2023 - 12:34
    +2

    Ah, a pre-auction offer already 25k over top of price guide…
    If I gave my client a cost estimate that was immediately substantially wrong, I could face professional discipline.

    • sclass on 03/10/2023 - 12:36

      Yep… everything similar in the area has been selling for 30-40k over.

  • iforgotmysocks on 03/10/2023 - 12:59
    +2

    You can also try peeing on the house to mark it as your territory.

    • sclass on 03/10/2023 - 13:45

      Do I do that before or after the building inspection?

  • Heaps for Cheaps on 03/10/2023 - 17:12
    +1

    The best offer would be to ask a mate to go a a street behind the house and start yelling things like 'I'll kill ya, ya dog!' and other boganish things so the other bidders second-guess their decision, then you'll knock out at least some of the competition.

  • vince088 on 03/10/2023 - 18:44

    i thought REAs are not allowed to tell the exact bidding amount? just if you bid they can say its too low and someone's already bidded higher?

  • sclass on 03/10/2023 - 18:49
    +2

    Thanks all - we got the house in a boardroom auction!

    • Heaps for Cheaps on 03/10/2023 - 19:09
      +1

      Congrats! When is the house-warming? When can we do the tour?

      • sclass on 03/10/2023 - 19:23
        +1

        I'll contact everyone on their new Boost SIM card and we can do Pizza Hut 100% cashback pot luck!

    • TimmyTims on 04/10/2023 - 10:03

      Congrats, that's huge news
      I haven't head of many boardroom auctions, can you give some details please.
      Was it similar to a normal auction, no cooling off, no conditions etc?

      • sclass on 07/10/2023 - 15:44
        +1

        Thanks! Yep, pretty much same as a normal auction (unconditional etc), except it's only people who have specifically voiced their interest separately to the agent.

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