This article appeared in The Weekly Review.

Hello, my name is Mal James, I am a buyer agent and, this week, we are at Boheme in Coppin St, Richmond, continuing last week’s pre-auction offer discussions.

Mal: So, still love 106 Chystobel?

Helen: Absolutely.

Lyndon: We have looked at the risks v rewards we outlined last week and we still want to make a pre-auction offer.

Helen: Two long blacks and a latte….

Mal: Let’s look at specifics then.

Lyndon: Great! When should we offer?

Mal: Not before we have completed more due diligence.

Helen: You mean get a building inspection?

Mal: Yes, but it’s more than that. What about a contract? Making an offer before we have that is counter-productive to your best interests.

Lyndon: Why?

Mal: In Victoria, you cannot sign a legally binding sale of land contract without it being in writing.

Lyndon: So…?

Helen: So, dummy, if we make an offer now without the contract, then the seller cannot agree, even if they wanted to, and all we are doing is giving other potential buyers the luxury of time to get themselves organised at our level.

Lyndon: Hey, Mal, what about a two-hour deadline offer? Let’s stick it to the agent.

Mal: That is an option. But even if the offer is ridiculously high, I’m not sure a two-hour deadline maximises your chances of success, for three reasons:

1. Most, but not all, selling agencies now have in place written methods of handling pre-auction offers, including notification of other buyers and, usually, but not in all cases, a minimum 12 or 24-hour period between offer and acceptance. This is not a legal requirement but many selling agencies adhere to it.
2. A good working relationship with the selling agent has its advantages and this type of unannounced two-hour offer can make him or her look bad. So, even if the selling agent begrudgingly recommends acceptance of our two-hour offer, the seller may now have diminished trust in the agent because he gave no warning. When trust is diminished, inaction is heightened. This means no deal for you.
3. This ties in with the third reason. Selling is just as emotional as buying and this sort of pressure can often force a vendor to reject the greatest of offers because the time-frame is simply too tight for their neurones to connect the dots and therefore they don’t act and therefore your offer is not accepted.

Helen: We find the agent less than helpful.

Mal: Why don’t I ring the agent and arrange a coffee? I think it would be good to know if the sellers would consider an offer beforehand. If it’s a messy divorce or a deceased estate, a decision before auction may be impossible and all our talk now is moot. If the sellers are just thinking about selling but want an auction irrespective, then all our pre-auction offer will do is raise the stakes on what we may have to pay come auction day. A good offer that wasn’t accepted is rarely a positive for the offer-maker in this circumstance. Alternatively, a good pre-auction offer may be well received if the seller has already bought elsewhere. Why not ask the agent before we offer?

Helen: And what else should we ask?

Mal: If you have other buyers, what will happen next? Will you come back to me, just sell if it’s a higher offer, have a boardroom auction, or a blind tender?

Helen: Will they tell others what our offer is?

Mal: In a nutshell, yes. First, they obviously need to advise the seller and, if it’s acceptable, then most companies notify all other sales staff that an acceptable offer has been made and, pending no better offer, it will be sold to the buyer who has made the offer within a short period of time. After that, a competent and ethical selling agent would ring around all other buyers who have expressed interest and tell them of the situation.

Lyndon: Surely there will be leaks and others will know our offer.

Mal: They certainly will know roughly what they have to beat and this is fair. After all, you are making the offer to buy and the selling agents who are working for the seller, not you, are trying to maximise the seller’s position, not yours, by finding somebody else to pay more.

Helen: I’m not so sure now that a pre-auction offer is the right way to go. There seem to be a lot of pitfalls and we haven’t even got to price.

Mal: The second week of an auction campaign can be just as good a time – sometimes an even better time – to offer pre-auction than this, the first week. I’ll have a coffee with the agent, Michael, and listen to his take on things and report back.