Making a pre-auction offer can be a great way to get ahead of the competition. It’s one way to stand out from other bidders and secure a property without the stress of attending an auction. To make a pre-auction offer, you must understand the rules of engagement for the real estate agent. These rules of engagement are determined by the selling agent who represents the seller of the house.
When you make a pre-auction offer don’t assume that you’re the only one making it. There could be various other bidders trying to do the exact same thing. If any of the offers on the house are within the selling range, the agent will most likely inform all the other bidders. This can spark a pre-auction bidding war.
The process of putting in an offer can depend on how the seller and the selling agent want to go about it. Some real estate agencies have their own set process. Other agencies determine the process by the amount of competing buyers. Sometimes the seller will decide on the best way to handle offers.
Here are the different bidding processes that might be used for pre auction:
1. Boardroom auction
A boardroom auction involves getting all the interested buyers to meet at the real estate agency for bidding. The interested buyers bid against each other in an auction hosted by the auctioneer. Unlike a normal house auction this is done in private and away from public viewing. Some of the usual auction rules may not apply. There may not be a cooling off period or conditional offers.
2. Round-robin style auction
This type of auction is usually done via phone. The selling agent calls up each of the interested buyers. They disclose each incremental offer until there’s only one bidder remaining.
3. Best and highest
Via a ballot style negotiation, buyers are given a deadline to submit their highest offer. This puts most bidders at a disadvantage. They have no idea how high the other bids are. They could be putting in a bid that’s already 20k over what the next highest bid is. There’s no way of knowing.
Establishing the bidding rules
No matter which bidding method is used, make sure you find out all the details. Figure out what the deadlines are and what information you do have access to. Every little bit of information you have can help determine how much you should or shouldn’t be bidding on the house.
Not every bidding method is suitable for bidders. If you feel uncomfortable making a bid, then don’t. No matter what bidding process you’re in, you want to be confident that you’re making the best decision for your interests, not the sellers, the other bidders, or the real estate agent’s.
Play to your strengths and make sure that you feel confident about whatever bid you do put down. Don’t raise a bid just because you feel that’s what you have to do to win. You need to put in a bid that strikes a perfect balance between what your means are and what you think the average house prices are at.