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If you have found a house that matches your requirement perfectly, it is easy to get emotional about it and end up paying more than you possibly should. Whether you are a home-buyer or an investor, it is easy to get carried away by your emotions during negotiations, but it is critical not to. On the contrary, your negotiations must be impartial and based on firm research, which means, you should be ready to walk away rather than paying more for a property.

 
Tips to succeed in a pre-auction negotiation
 

Especially if you are an emotional person, bidding at an auction can be daunting. However, if you have done your research regarding the value of the property, making a pre-auction offer could give you a head start on the competition.

Here are a few advantages of making a pre-auction offer:

  • You know how much you are willing to pay and stick to that budget
  • You get the benefit of a cooling-off period in case you change your mind regarding the purchase
  • You get to purchase your new home sooner

Many a time, in an over-supplied market or in cases where the vendor’s agent has not been able to generate much interest, the seller might decide to accept pre-auction offers. An assertive buyer may also initiate pre-auction negotiations. In any case, the vendor’s agent will inform all other prospective buyers who expressed an interest in the property of the pre-auction negotiations.


Rules of Pre-Auction Negotiations

Unlike a property auction that is quite transparent, unfortunately, the only rules that govern a pre-auction are those set by the vendor’s agent. However, there are a few things you can do to maximise your chances of trumping the pre-auction negotiations.

Show your interest – If you are interested in buying a property, the first step is to let the vendor’s agent know that you’d be attending the auction several days in advance. Once you have clearly communicated your interest in the property, the agent will contact you if the vendor decides to sell the property early.

Ask for pre-auction terms in writing – The vendor’s agency generally decides pre-auction terms. Therefore, it is best to ask the agent for all the rules of engagement in writing. You might find the terms to be mainly in favour of the vendor, such as an unconditional deposit, an early settlement date, etc. You might be required to present your bid in writing before a specific time. However, if you find the terms unfair, feel free to walk away, as there are always more properties in the market to buy under more satisfactory terms.

Now, coming to the negotiation part:

Be prepared with the groundwork – When bidding for a property prior to the auction, you might not know what your competitors are offering for the property, but you must know the top price you are willing to pay for it. When it comes to property negotiations, knowledge is the most powerful weapon in your armoury. Thus, it is essential to know the market value of the property before quoting a price for it.

Besides, you should not fear to put forward your best quote if you really want to buy the property and think it is worth the price. There’s no point losing out a good home to a competitor only because you were looking for a steal.

Be patient and a tad bit secretive – It is best to keep your cards close to your chest and not reveal the maximum price you are ready to pay for a property to the agent. The reason is that you might give away too much information that can bring down your negotiation power. Agents want to sell a property for the maximum possible price and may share the information with another buyer who might outbid you.

Another potential trap is engaging in a Dutch Auction where two or more possible buyers end up bidding blindly before the auction. As you are not aware of what the others are quoting, the agent can quote a higher price and ask you if you are willing to increase your offer. Such continuous bidding can raise the price of a property significantly. Thus, you must keep a cool head and be prepared to walk away if the price crosses the limit you have set for yourself.

Be ready to walk away – While no one enjoys losing, it is better to step out of a negotiation rather than over-committing to a property and regretting it for years to come. Once you know the real value of a property, set a limit on how much you are ready to pay for it and be mentally prepared to back out if the seller does not accept this price.

Talking about finances, it is recommended to get a home loan pre-approval before you decide to bid at an auction or take part in pre-auction negotiations. In fact, letting the vendor’s agent know that you have pre-approval in place will only strengthen your position as a serious buyer.

Getting a home loan pre-approval is quite straightforward. Your HashChing mortgage broker will not only introduce you the best home loans for your situation but also help you get pre-approved for your home loan. Speak to a mortgage broker to know more.

HashChing is Australia’s first online mortgage marketplace that allows users to compare broker-negotiated mortgage rates from over 60 lenders across Australia. Users can also post their home loan queries online to have them resolved by experts in a transparent manner, free of cost.

 

By Vidhu Bajaj,
HashChing Content Writer

 

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HashChing is helping Australians by providing access to the pre-negotiated home loan deals. Obligation free consultation with one of our partner brokers might save you time, hassle and money.

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