Should I Sell My Property On A Pre-Auction Offer?
Property question
Q: I have been talking to a few agents about selling my house later this year. Two of the three have suggested going to auction. I’ve heard of people selling on a pre-auction offer – how does that work and is it a good thing to bring the auction forward?
Thanks, Lily W.
A: No problem Lily, let’s discuss whether you should sell your property on a pre-auction offer.
Pre-Auction Offer
When a property is being marketed for auction, provided the agent has advertised it as “unless sold prior” (USP) the agent can present a pre-auction offer to the vendor. Once an offer is presented the vendor has three options:
- Accept the offer, sign it and it’s a done deal
- Say ‘No thank you, we will wait for the auction date’ or
- Say “Yes that’s enough for me to sell’ and bring the auction forward.
In this case (#3) the reserve is set at the offer figure and the auction starts with that as the opening bid, and if no higher bids are received then the property is sold at the offered price.
Of course, other buyers can still bid and the property will then sell to the highest bidder. In our opinion, 99% of the time pre-auction offers only benefit the buyer.
What are those benefits to the buyer with a pre-auction offer?
Firstly, bringing the auction forward means that fewer potential buyers will view the property (one or two weeks fewer open homes) so the buyer is cutting down on competition. Secondly, most pre-auction offers are not at the maximum the buyer is willing to pay. (In last year’s market we often had pre-auction offers exceeded when the auction was brought forward – today that is less likely to happen.)
What are the benefits to the seller?
The upside for the seller is that the property gets sold earlier, and they know that it’s sold.
In our experience, most vendors ultimately care more about getting a good price, although in the current market, they may prefer to go with the early offer.
Some real estate companies have a policy to automatically bring the auction forward if an acceptable offer is received prior, but we think that it should be the vendor’s choice to decide how they want to handle the offer – it’s their property after all!
We are always willing to give advice of course, but that is all it is – advice.
Remember that the selling/listing agent works for the vendor, not the buyers, so always bear that in mind when talking to the agent who is selling the property.
Lisa and Steve Stone
Elite Agents for Ray White