You’re at auction, waiting in anticipation as the crowd gathers expectantly. The auctioneer takes their place and begins the preamble about the property and revs up the buyers. They open the bidding – and after all that work preparing for the big day there’s only a few bids before interest peters out. The property never reaches the vendor’s reserve price and passes in.
When that happens the highest bidder has first right to negotiate a deal with the vendor. What most people don’t know is that if a deal can’t be struck the property is back open to anyone to propose an offer.
I was at an auction in Melbourne that I had intended to bid at on behalf of a Perth based client. Unfortunately the client wasn’t able to purchase unconditionally (a requirement for auction purchases) and was therefore not in a position to bid.
Still, I went along to see how the property performed. I would at least get a chance to see what sort of interest the property would attract and give me an opportunity to gauge the market.
Image: McDonald Real Estate
As it turned out the property passed in.
At this stage I had a chance, albeit a slim one, to secure the property for the client – even though I wasn’t bidding.
I approached the agent and advised that I didn’t participate in the auction but had a buyer who may be interested in putting forward an offer if the highest bidder and the vendor couldn’t reach an agreement. The agent acknowledged the proposal and went off to negotiate.
I immediately called the client and told them what had happened. Excited at the unexpected opportunity, the client gave permission to submit the offer on his behalf. It all hung on the negotiations between the vendor and the highest bidder.
Almost everyone in attendance had since left by the time the agent finally came out of negotiations. There was good news: an agreement couldn’t be reached between the vendor and highest bidder. The vendor was willing to negotiate and we ultimately secured a deal.
Even though the property had passed in, the transaction had effectively reverted to a private sale.
Key to buying any property is recognizing an opportunity and making the most of it. In this instance, the selling agent had an alternative buyer ready to go in the event the highest bidder couldn’t reach an agreement with the vendor.
Image: abc news
Auctions can be incredibly competitive, even for experienced advocates. Buyer’s should do whatever they can to put themselves in a position to put an offer on a property, and that counts just as much when a property passes in. There will be some occasions when negotiations after a pass in fall over, and if buyers have positioned themselves well they may be able to swoop in and close the deal.