Post-auction argy-bargy is a fine art
Published on 29/06/2014
When the bids don't match the reserve, everybody needs to keep their cool in the negotiations, writes Paul Best.
The bid on the two-bedroom semi-detached Victorian in Fitzwilliam Street, Kew, stood at $1.01 million, still shy of the owners' reserve and agent's price range of $1.1 million-$1.2 million. The Jellis Craig auctioneer spelt it out: if there were no further bids, the property would pass in to the highest bidder, who'd have the exclusive right to negotiate with the vendors.
While a property only passes in about every fourth auction, particularly in today's bullish market, when it does, what follows is often an intense - and tense - period of horse-trading during which seller and buyer square off, figuratively speaking, to see whether they can settle on a price.
Usually, with the adrenalin still surging, the selling agents escort the bidder into the best room in the house while they reconfirm the reserve with the vendor. "We keep parties separate while we go backwards and forwards," says Jellis Craig's Richard Winneke.
It's what RT Edgar's Warwick Anderson calls "a bit of argy-bargy". For Barry Plant Yarraville's Hayden Kay, it's crucial to cash in on the momentum and energy generated by the auction.
All agents agree this is generally a time for cool heads - especially as emotions are running high (and away) and offers and counter-offers can fly thick and fast in quick-time. "There's no advantage being adversarial," says Nelson Alexander director Arch Staver, who's seen vendors raise the price simply because they've taken the failure to sell personally. "You're just debating price. It's important to be amicable."
Commonly, agents suggest vendors bend a fraction on price, while trying to jack the bid price up. "I'm a firm believer every owner should have a small degree of flexibility [on the reserve], if you have a buyer," says Biggin Scott's Guy St Leger.
Winneke concurs: "Those that sell quickest after auction are those priced realistically." Haggling over price largely comes down to doing homework on the market, researching comparable sales, and knowing what's fair.
In the case of Fitzwilliam Street, negotiations continued for half an hour, after which the bidder upped his offer to $1.11m, then stalled while the vendors thought over the offer, still $65,000 short of their reserve.
Agents, though, are highly skilled at assessing each individual situation, understanding motivations and massaging the buyer through exerting subtle - and sometimes, if a buyer agent is involved, not-so-subtle - pressure. Good agents also know buyers' capacity and what else they're looking at.
Buyer advocate Melissa Opie says agents will appear very nurturing, particularly if it's an inexperienced or first-home buyer. They may say that if they don't buy now they'll miss this exclusive opportunity and it may take several more months to find a similar property. Opie, who also acts as a vendor advocate, sees herself in this role as a "silent assassin" not beyond playing "good cop, bad cop" in concert with an agent to extract the best price.
By the same token, vendors need to be mindful of the time and money invested in the campaign and losing the bird in the hand, unless buyers are way off the mark. "We often find they'll go cold the next day, human nature being what it is," cautions Anderson.
While Domain Group's Andrew Wilson argues buyers enjoy more leverage, he says a high-risk strategy for sellers may be to withdraw the property either to force the buyer's hand to meet the reserve or to start over later. "It's leverage for the vendor," he says.
The price may be at the front and centre of negotiations, but there are other factors. Vendors can offer (or buyers can ask for) a smaller deposit, say 5 per cent rather than 10 per cent, to encourage a sale. Negotiations also can involve flexible terms of settlement - a longer settlement if buyers still need to sell or shorter if they've already sold.
Very occasionally buyers try to include chattels or furnishings. St Leger says he recalls a buyer who'd meet the reserve if he could have furniture, artwork and a pizza maker. "There was $15,000 worth of stuff," he says. "It didn't work but he still bought the place."
Bargaining chips like these often are debated during the campaign, especially in the days immediately leading up to the auction, which can have some bearing on how the after-auction negotiations pan out.
Typically, if the negotiations break down, agents immediately approach any other bidders or chase down interested parties who either failed to bid or didn't show. The property will be readvertised with the asking price and will open for inspection on the Monday.
With Fitzwilliam Street, another buyer emerged the next day with a slightly higher offer, which prompted the original buyer to offer marginally more again. "We sold the property on the Sunday for $1.12 [million]," says Winneke. Below reserve but $110,000 up on the original final bid.
How to negotiate after auction
Keep your cool and communicate openly
Remove distractions, such as family, friends and pets
Be prepared to bend on the reserve
Be flexible on the terms and deposit
Be prepared so you know what's a fair price
Assess the level of buyer interest and possible new interest
Take on board the agent's advice