Australia’s clearance rate at auctions is showing an increasingly healthy trendline with data companies such as Cotality and Domain regularly reporting a success rate of more than 70% – a benchmark for a healthy market.
But what happens to the other 30% of properties that don’t sell?
Do they get bought?
Yes, except for a very few exceptions.
When a property fails to sell at auction – what real estate agents call “passed in” because it fails to meet the owner’s reserve price – an agent will focus on the highest bidder and try to negotiate an acceptable price.
Occasionally, a second party emerges to make a counter offer – and all of a sudden you find yourself in a bidding war.
Bidding wars are not unusual, especially when markets are hot or starting to heat up – and we’re starting to see this in the major capital cities and regional centres again.
If you find yourself in this situation, here are five important tips:
Stay cool – Don’t let your heart rule your head. You need to focus on making a deal that you can afford. If you’re in a competitive situation, it’s easy to want to win. Your research should inform your decision on the value of the property, and how much you’re prepared to pay.
Stick to your budget – You probably didn’t meet the price expectation of the seller at auction, so ensure you don’t go beyond your affordable position now. Remember, you’ll need funds to cover closing costs and moving expenses. That can be up to 5% of the purchase price.
Competitive offer – Resist the temptation to low-ball or go significantly under the market value, as this will not win you the deal. When there is less competition, you may be able to offer a lower bid. However, most sellers do not need to hurry right now. They’ll wave away a low bid. So, stay realistic.
Be clear – If the negotiation occurs over a number of days – and there’s nothing wrong with that – respond promptly to the sales agent to demonstrate your professionalism and interest. However, don’t overshare, especially when it comes to your personal financial information and maximum budget.
Be resolute – Set your absolute walk-away price based on thorough research, and commit to it. The best buyers will mentally prepare themselves to walk away. There will always be other properties. Overpaying often leads to buyer’s remorse. Remember, you’re buying an asset for its value, not to win a bidding war.