When should you make an offer before auction in Sydney? My team and I make offers before auction all the time, and in this episode I walk you through how we decide: when to go early, what to ask the agent before you put a number on the table, and how to offer so cleanly that the vendor picks you over someone else.
In part one, I explained why offering early just to dodge an auction can cost you. This is the other side of it. Be ready from week one. On a four-week campaign, the third week is usually the moment, and pre-market campaigns flip that. Ask the agent how they'll run it. Set your auction limit before you offer, because a rejected offer moves the guide. And make the offer unconditional, with your section 66W ready to go. I also share the 9pm deal where a higher offer lost because the other buyer couldn't get their 66W that night.
If you've found a property and you're staring down the choice, offer now or hold for auction, don't make that call blind. Our Evaluate and Negotiate service does all the research on the property first, so you can decide whether to make an offer prior or go to auction. Email hello@buyyourside.com.au to find out more.
Chapters
0:00 Making an offer before auction
1:37 Be ready from week one
3:58 Why I don't jump in the first two weeks
5:32 What happens in week three
8:35 Ask the agent how they'll use your offer
9:40 If the agent runs sealed bids
11:24 Planning for a rejected offer
12:25 Doing your pricing research
14:45 Keeping something in the tank for auction day
15:35 Auction day is unconditional
16:50 Adding a section 66W certificate
18:13 A story about why 66W matters
20:13 Do your research first, then decide
Listener FAQs
When is the best time to make an offer before auction? On a four-week auction campaign, I usually go in the third week. The deal-doer agents like the Tuesday after the second Saturday, because by then the agent has market feedback and the vendor feels they've had value from the campaign.
What should I ask the agent before I make an offer before auction? Ask how they'll handle it. Do I get the last right of refusal? Is it one bid, best and final, or sealed bids? Will you disclose my offer to other buyers? Agents all act within the law, but what one thinks is fair can be very different to the next.
What happens if my pre-auction offer is rejected? A rejected offer moves the guide and shows your hand. So before you offer, set your auction limit and know how much room is left between your offer and that limit, so you can still show up confidently on auction day.
Does an offer before auction have to be unconditional in NSW? In most cases, yes. A vendor taking a property off the market won't usually give you five days to think about it, so you add a section 66W certificate from your solicitor or conveyancer, which removes the cooling-off period. That means doing your building and pest, strata and contract review before you offer. Talk to your own solicitor or conveyancer about your situation.
Is an off-market property different? Many off-market campaigns are really pre-market and often only run for two weeks, to see if the vendor gets the premium they're looking for. If you want to be in the running, you'll usually need to act within that window, and your offer will most likely still need to be unconditional.
I'm an independent buyers agent based in Sydney, buy-side only, I never act for vendors.
Part one: Offer Before Auction or Wait? Why Playing It Safe Costs Sydney Buyers
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Speakers in Today's Episode
Michelle May, Michelle May Buyers Agents
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In the last episode, I told you the market doesn't care about your opinion and why offering early just to dodge an auction can cost you. But here's the thing, we make offers before auction all the time. So today I wanted to talk about the other side of it. When is it the right time to make an offer early? What do you ask before you put a number on the table, and how do you offer so cleanly that the vendor picks you over someone else? Because get this part wrong and you can win by five bucks or overpay by 200 grand and you'll never know which.
If you're new here, my name is Michelle May. I am the principal of Michelle May Buyers Agents here in Sydney and this is the Buy Your Side podcast, the podcast to help you make smarter property buying decisions. So today I want to walk you through how to make an offer successfully prior to auction. I want to talk you through it bit by bit. Be ready early and don't sit on your hands. When to go early.
I want you to ask the right questions, because there's a hidden rule book with every agent that you work with. Pitch the number and your plan if it gets knocked back, and then the unconditional offer done just right. So let's go back to the very, very beginning of this. I need you to be ready early and not sit on your hands, and being ready and early are not the same things necessarily, okay? So even if you are planning on going to the auction and it is an auction campaign, I need you to be on the property and ready from week one.
The reason for this is that you need to have options, okay? Even if you decide to wait to go to auction, there may be someone else who comes in and makes an offer. And if you're not ready to go and you haven't done your due diligence, then you're taking a mighty risk by going in basically without knowing all the facts in front of you.
So someone who hasn't heard this podcast might swoop in before week two. And if the vendor may well take that offer, you might miss out on a property that you could have bought, but you simply weren't ready. I think it's something that happens quite often, where agents tell me that buyers complain to the agent after the fact, going, well, I would have bought that and I would have paid that, but I haven't had my contract review done or I haven't had my building and pest done, or whatever the case may be.
So if you find a property early, it's not like dating, where you wait a couple of days to call someone back because you don't want to appear too keen. If you find the right property, which is pretty damn hard in this current climate where there's not a lot of good stock around, just go forward at a decent pace, because that will allow you to get some good options in front of you. So you want to, of course, make sure that your pre-approval is sorted, your finance is sorted.
You talk to your broker and say, this is the property I'm interested in, are there any red flags? If it is a strata property, it may well be that the lender doesn't lend on that particular building, that particular postcode, because they're overexposed. Well, if that's the case, either you choose a different lender or you walk away from that one, but it's better to know these kinds of things early in the piece. You do your due diligence, so I'm talking strata review, building and pest, contract review, looking at all those things that are important, and do them early so you can act the moment you need to.
So whether it's a reaction to someone else or you have chosen to take that next step, right? If you are going early, when is the right moment? Now, part one of this two-parter, episode 88, I think it was, covered why we don't jump on things in the first two weeks.
There are a number of reasons, but when we are going to go, if it is a four-week auction campaign, we usually go in that third week. The deal doer agents love that Tuesday after the second Saturday, because that's when the agent has acquired enough information from the market and the vendor feels like they're getting a bit of value for money, with the feedback coming back from the agent, right?
So with a four-week auction campaign, usually after that second Saturday, that's when things start to move. But again, if you haven't listened to part one of this two-part, listen to part one, where I go into things in a bit more detail. Now, what I want you to look out for is, has the language from the agents changed? How many people are still coming through, and how does that compare with the first time you went through? Ideally you went through that very first open, where there's usually a lot more people coming through, because it might be neighbours or people just testing the market or whatever the case may be. So does that dwindle off, or has it remained steady?
Have you seen the same people coming through, et cetera, et cetera? You need to look out for those things, as much as the agent is feeding that back to the vendor, of course. And then if you've spoken to the agent and he said, well, look, it's a divorce or deceased estate, plans to run to auction, this whole plan is off. You just wait for auction day.
When I say that third week after two Saturdays, there is an exception to that, and that's when it's this off-market thing that a lot of agents are doing. There are a lot of agencies now that have an off-market portal, an off-market list, which of course everybody with an email address is on, if they've ever inquired on a property. But that campaign, which is usually called off-market, is actually pre-market, and it often only runs for two weeks.
So they want to see if they're going to get the premium they're looking for, and if they don't, then they will run that four-week auction campaign afterwards. So basically, it's a six-week campaign all up, but that first two weeks is an opportunity. As long as they get the premium that they're looking for, you can make an offer then, but it would still most likely have to be unconditional, which I will get to in a second.
So if you want to be in the running, then you'll have to act within that off-market period, right? Because if you make an offer after that and the vendor has already committed to advertising on Domain and realestate.com.au and continued paying for styling and photos and all that kind of stuff, then they may well go, well, you kind of missed the boat. So then it's, again, after that second Saturday, most likely.
So make sure you know what it is you're looking at in front of you. Is it a genuine off-market? Is it one of those pre-market off-markets? Or is it an actual auction campaign, in all the portals for everyone to see? I'm going to go into off-markets and what they are in a couple of episodes' time, just to talk you through what that actually all means, because I think people are getting quite confused with that. It's mostly now just a marketing line to get you through the door and thinking you're getting to see something super special.
So you have to think about where you are in that campaign, what the agent's doing, and whether the vendor has seen enough value from the agent to be ready to take any offers seriously, right? So make sure you're ready early and you've timed it right. And now we're going to talk about the rules of how to make an offer, right? Because before you make an offer at all, you need to understand who you've got in front of you and how they're going to play the game, for want of a better word.
Because agents, believe it or not, all act differently. They'll act within the rules of the law, but what one agent thinks is fair on how to handle an offer and all that kind of stuff is very different to how the next agent might handle it. So if you don't know their actions before you put in an offer, this is a very risky situation and you don't want to be flying blind. The more questions you ask up front, the better, right? So for example, if I were to make an offer, James, do I get the last right of refusal, or is it one bid, best and final, sealed, done deal?
Or are you going to do ring-a-ring-a-rosy and go around till there's only one person left standing? And when you do that, are you going to disclose my number to the other buyers, right? Because some agents think any one of these options is fair, and others don't. They don't think it's fair. So just ask the questions. Will you discuss my offer with other buyers? And how are you going to extract the best offer from everyone?
And even if it's best and final, because I pulled the trigger, do I still get the last right of refusal, for example? Or are you going to turn this into sealed bids, right? Because that one shot is very dangerous. Sealed bids are the worst-case scenario and I would actually, in most cases, choose not to partake in that, because you could literally win the property by five dollars or you could overpay by a couple of hundred grand. In fact, it has happened to me. The very first property that I bought in the UK was a sealed-bid thing and I didn't know what I was doing. I was still a stewardess working for British Airways at the time.
I was 22 years old and I was looking at a place in Brighton for myself. It was a one-bedroom unit, and I think the selling agent sort of took pity on this Dutch girl wanting to buy this unit who didn't know what she was doing. He sort of coached me through it, and I literally won the sealed-bid auction by £50. That's how it happened. But unless you know exactly who is going to put in what, I wouldn't recommend it personally. So once you know what the agent's going to be doing, you can then make an educated decision on whether you're actually going to make an offer or not, right?
We already know the state of play. If I make an offer, boom, boom, boom, like dominoes, this is what's going to happen. So if you have been out there in the market trying to avoid auctions, which is what part one was all about, did you even consider asking the agent the rules of the game, the state of play, so to speak? Because that is one of the most important things you could ever do: ask the agent ahead of time, okay, what are you going to do with my offer? Once you know the rules, you actually have a much improved chance of getting your deal across the line.
So then we need to think about what happens if your offer doesn't get accepted. I mentioned this before, a rejected offer will move the guide and it will show your hand. So you need to decide what happens after you get a no from making an offer. In order to make that decision, you really need to be, well, in my case, I'm always at least 80 to 90% confident that I can get the deal done.
I can get the deal across the line, because the risk of not pulling it off means that you are showing your hand to the agent and everyone else. And so what happens next, right? You need to step back a little bit when determining what your offer is going to be. You've got to do your pricing research. You've got to look at what the numbers are out there. What are the comparable sales? What are the recent sales in the area, recent sales in the building?
Sometimes a particular building can be pricier than other buildings. I'm talking about strata apartments in this case. Some complexes are much more expensive than units in other buildings because they're better looked after, people are living there, et cetera, et cetera. So make sure you get that context right and set your auction limit first. Then you've got to think about how much room is going to be left between your pre-auction offer and that limit, right? How much fat is left if you make that offer and they say no? Because that's effectively all you're left with when you then do end up at auction. The number that you put forward to the vendor as your offer needs to be the number that makes the vendor think, will I actually get this at auction? If it's too low, they're just going to ignore it and the guide still moves up.
If it's too high, the vendor's laughing all the way to the bank and you've paid a premium to avoid that auction. And certainly in this market, it's not worth it. In a rising market, a hot market, then that's a different story. But still, it's got to be at that tipping point, right?
And you've got to convince the vendor with it, but you've also got to convince the agent with it, okay? At this point in time, agents are much, much more inclined to take the bird in the hand. Done, deal done, let's move on. Because they want to get paid as well. And they also know that the people out there that are now making offers are confident.
And if they don't get an answer quickly, they move on to something else. So yeah, that tipping point, that's where your sweet spot is. So look at the comparable sales and go, okay, what can I get away with, if you like, right? Because you may well have to back it up. You may well have to go and defend your offer to the agent and say, well, my offer is this, based on these comparable sales, the pluses, the minuses, et cetera.
And then you've got to decide, okay, if your offer was knocked back, what are you going to do about auction day? Am I going to leave enough in the tank so that I can still show up confidently, or am I going to throw everything at it? That depends, I guess, on your budget as well. Are we looking at something that you're really stretching yourself for, and you're just going to have a punt at it, and if you don't get it, okay, nothing ventured, nothing gained, it was always meant to be out of your league anyway and you just move on? Or have you got a little bit of gas left in the tank, so you can still go to auction and put that paddle up before someone outbids you?
That's, I guess, where you need to think about these things before you make an offer. So then let's talk about the actual offer itself. Now, I've spoken about this before, where with auction campaigns, actual auction day is unconditional, right? There's no cooling-off period. You sign on the dotted line, you're locked in.
If you walk away, you lose your 10% deposit, even if you have negotiated it down to 5% paying on the day. That's why the front page of the contract always states 10%, even though you're paying 5%, because if you pull out of the contract, you're still liable for that full 10%. Okay. Now, this has been contested in court a number of times, so it's less set in stone than it used to be, but yeah, that's the basic rule. And of course, if a vendor is going to take your offer prior to auction, then why would they give you five days to think about it and alert the rest of the market that it's under offer but not exchanged yet, not gone unconditional? Because if I were a buyer and I saw your property was under offer, I'd be like, well, I'm not going to sit around and wait for this other buyer to make up their mind. And if they pull out, does that mean there's something wrong with the property, right? I'm just going to move on to another property.
And that's the logic, I guess. If you make an offer prior to an auction, it needs to be an unconditional offer. You do that by adding a 66W certificate to the contract, and that is provided by your solicitor or your conveyancer. It's basically a piece of paper that says, I'm Janet, the solicitor, and I've spoken to James, the buyer, and he understands that by adding this piece of paper to the contract, we are now making this an unconditional contract. He does not have the five-day cooling-off, and he understands that if he walks away, he forfeits 10%, right?
So we need to add that to the contract. By doing that, you are already beating a huge percentage of buyers who don't know that this is something they need to do. Or maybe their broker is saying, don't do that, don't add it, because even though they're trying to help them, they're actually giving them bad advice, because potentially they're in a different state where things get run differently and they don't know how this works here. So we want to make an unconditional offer. That means you have to have done all your due diligence, so you know exactly what you're going in for, the good, the bad and the ugly about the property.
You can't negotiate after you've got a building and pest report if you've already got a 66W, right? It's locked in. It is what it is now. So here's a little story about why it's so important to have a 66W at the ready, or to be working with a solicitor who can get it to you after 5pm. I recently got a deal across the line for less money, and I'm talking, I think it was $10,000, $15,000 even, I can't remember, but it was 9pm, right? Someone else had pulled the trigger on a pre-auction offer, so we got involved. We were ready, we had the 66W ready. Someone else trumped us by, I think, $10,000, but then couldn't get hold of their solicitor. Now, okay, it was 9pm, but they had promised that they were partaking in this pre-auction negotiation, and they couldn't get hold of their solicitor in the end. They also came in late, so I wasn't competing with them up to that certain price anyway.
And then they thought they were just going to trump me. The other buyers were out and I was at the top. And then someone else said, I'll pay $10,000 more, but you'll have to wait till tomorrow for the 66W. And the vendor said, no, thank you. We'll take the bird in the hand. We'll exchange with Michelle and her clients tonight.
So that's something you need to be aware of. If you trigger a pre-auction offer, you need to ensure that you've got that 66W ready to go, right? I think I've covered everything now, because if you do these things that I've just talked you through, you are going to be in a much better position than you were before listening to this episode, if you do decide to make an offer prior. There's lots of amazing parts to this, but by knowing now what you need to do and what you need to ask, you can make a much more educated decision and decide whether making an offer prior is the right thing to do.
Now, my team and I have about an 80% success rate at auction. And like I said, pre-auction about 80 to 90% as well. So it is a taught skill, which is why I'm doing these episodes for you guys. It's not luck. There is a strategy behind it. Now, if you are out there on your own and you've found a property and you're staring down the choice of offer now or hold for auction, please don't make that call blind.
We've got a service called Evaluate & Negotiate. We do all the research on the property first. That is what you need to be doing. Do all your research on the property first, and then you can make sure that you are actually in a position to make that decision, whether you're going to make an offer prior or go to auction, right? If you want help with that, reach out. That's what I'm here for. That's what I do on the daily.
My team and I are always out there helping buyers make better property buying decisions. I hope this episode has been helpful. If you've got any questions around this or any other property-related questions, by all means reach out: hello@buyyourside.com.au. Thank you for listening, and until next time.