Presenting Pre-Auction Offers
Thursday 07 Nov 2019
I was asked this week why does a vendor accept a pre-auction offer given clearance rates are at such prominent levels, supply is low and demand is high. Given my mantra is that “auction is the best option to deliver the best result”, why not wait until auction day? It is a good and very valid question. Here is my answer…
Let’s get things straight. An auction campaign drives a sense of urgency. It signals vendors intent to sell. It sets a defined timeframe and a deadline for decision making. It creates anticipation, builds tension and encourages competition.
Auction day represents the climax of that anticipation. Interested parties must show their hand or miss out. They must be prepared and ready to compete and put forward their best offer at the moment in the hope it will be the best offered on the day. That’s how it works and it is increasingly working in the current market with the October clearance rate sitting at 73% with 70% of those sales coming in above reserve.
So why would you settle for a pre-auction offer? The fact is all the benefits of an auction campaign do come into play when securing a pre-auction sale: Building anticipation, tension and competition are crucial. But more than anything a pre-auction sale it is founded firmly on the trust vendors have established in their selling agent.
Obviously, purchasers are keen to make an offer before the auction to remove the inevitable element of uncertainty and stress that comes with an auction. That same motivation exists for vendors. They want to get a deal done especially if they can be reassured a pre-auction offer is strong.
Morton Sydney agent Ettiene West explains his vendors are prepared to take his advice to accept a pre-auction offer because they are confident he has identified and communicated extensively with every potential purchaser to understand their motivations and financial capabilities.
“We have long-established relationships with many of our clients. We talk to them constantly throughout a campaign to ensure every possible potential purchaser is aware of the property and the level of interest it is generating. We also speak to our vendors nearly every day. Consistent, honest communication is crucial.”
As exciting as it sounds the chance of someone unexpectedly dropping in on auction day, registering and purchasing a property is incredibly rare. In most circumstances, every registered bidder has been carefully nurtured by the selling agent over the course of the marketing campaign, if not long before that.
If an offer is received Ettiene presents his recommendation to the vendor based on intense evaluation of the information he has gathered. “We literally role play every possible scenario that could take place on auction day until we are confident we know how it could best play out. We explain those scenarios to the vendor who is then empowered to make a decision on whether to take up the offer or proceed to auction.”
Of course, there are properties where an agent will recommend not taking a pre-auction offer. Those are properties where interest and ability appear relatively even so the intense environment of auction day will be best to shake out the party willing to go hardest.
So if you’re not sure, talk to your agent. At Morton, our aim is to ensure our clients have the right information so they can make the right decisions. That might, or might not be to make or take a pre-auction offer.