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3 Negotiation Tips For Passed in Property

3 negotiation tips passed property

3 Negotiation Tips For Passed in Property

You have done your research on the property, used the appropriate auction strategies, and the property has been passed in to you. The first thing the agent will say is, ‘Come inside.’ Do not go into the house!  Stay outside and let the auctioneer or agent go back and forth to the owner.

I’m often asked how to negotiate passed in property so want in this article to share three negotiation tips that will help home buyers .

Here is how to negotiate passed in property:

  1. Use time effectively
  2. Negotiate directly with the vendor
  3. Walk away if necessary

It might sound easy – but you need to know that there’s a lot to each step which I provide more detail on below.

Here’s how to negotiate passed in property.

1. Use time effectively

If the property has been passed in to you at $650,000, the agent may come out and say that the reserve is $725,000.  The reserve is probably only $675,000 because they will expect you to make a counter-offer.  So, do not believe the reserve price you have been given.  The most important thing when the property is passed in to you is to do absolutely nothing. There is not time limit on your first right of refusal.  If you are still thinking about it 10-15 minutes later, the chances are other interested parties will have left by then.  The agent will have other issues to deal with.  More than likely they have another auction in 15 minutes and a client at that property is already asking where the auctioneer is, while the vendor at the current auction is saying, ‘Well, I’ve spent all this money, the buyer is out there, go and negotiate.’   The goal posts have moved in your direction.  Use this time effectively.

A modern, architect-designed house in an inner-city suburb was passed in to me for $1.1 million.  I had $1.35 million to spend.  Negotiations began 20 minutes after the auction as by then my clients and I were the only people still standing outside the property.  Everybody else had left.

I asked my clients to remain in their car so that the agent could not speak to them or see how strong their emotional interest in the property was and how keen they were to buy it.  This meant the agents were negotiating blindly.  After quite a bit of discussion, one agent had to leave to go to another auction.  With that agent out of the loop, I told the other agent that the only way we could go forward was to be able to meet and negotiate directly with the owner to discuss the options available.  I was able to talk with the vendor and bought the property for my clients for $1.15 million.  It was a substantial saving on what they had been prepared to spend.

Always use time to your advantage as it is the one commodity that the agent and auctioneer don’t have on a busy Saturday.

When a property is passed in to you, the first thing you should do is reduce your terms.  If you have negotiated a 120-day settlement prior to auction, now break it down to a 90-day settlement.  No one else is going to come along and offer more than the amount the property has been passed in for.  You are in a strong position.

You should always negotiate the terms of settlement with the vendor before the auction; in most cases vendors are accommodating.  While an owner may want 10 per cent deposit and the balance in 30 days, you should always ask for an extension to the terms even if you don’t need it.  First, if you have negotiated a 120 days and everybody else is bidding on a six-week settlement, the cost to the vendor in time and money makes your winning bid often substantially lower than the underbidder’s bid on a shorter settlement.  For example: if a purchase price was $800,000 on 30 days and you had bought it for $801,000 on 120 days, you have probably saved in the vicinity of $14,000 and secured the property for $13,000 less than the underbidder’s offer, which was only $1,000 off the ultimate purchase price.  Time is money.

Secondly, if you ask for longer terms and the vendor refuses, it usually is sending you a subliminal message that they are comfortable that they have multiple bidders coming to the auction.  However, if they accept your terms, you should read between the lines that there is not as much interest in the property as they would like and they don’t expect multiple bidding.

Thirdly, you can always renegotiate after the contract has been signed, e.g. will settle in 30 days, even if the contract states 120 days, but expect some financial consideration for accommodating the vendor’s wishes.  You will get money off the purchase price if the vendor wants to avoid bridging finance.

2. Negotiate directly with the vendor

Ask to see the owner.  Say, ‘I want to sit down in front of the owner and discuss this.’  Once you are sitting with the owner, the agent is out of the loop and you can really start meaningful discussions.

My partner went to the auction of a deceased estate in Sydney where the reserve was supposedly $2.2 – 2.3 million.  The property was passed in to him (after he had been able to isolate the vendor bidders) and he started to negotiate with the beneficiaries.  In fact, the real reserve was $3 million!  After two hours of negotiation, with all the beneficiaries of the estate, he managed to secure the property for considerably less than what his client was prepared to pay.

3. Walk away if necessary

Sometimes, an important factor is not to be afraid to walk away. If you have been negotiating with the agent and you are not getting anywhere, move towards your car.  The agent will quickly race back inside to talk to the vendors.  Agents don’t want you to leave, because they are not interested in the extra $20,000 or $30,000 the vendor might make if they have to work all the next week and the weekend after; they want to cement the deal on the day and move forward.  So, once the property has been passed in to you, the advantage is in your court.  Don’t give it away and don’t be afraid to walk away.

The property had been passed in and I had first right of refusal.  After a lot of to-ing and for-ing, negotiations had bogged down and there was still a $50,000 difference between the parties.  Deciding to use some theatre, I asked my clients to drive away.  At this the agent quickly asked for 5 more minutes.  I was able to buy the property for the clients’ price, not the agent’s.  A little bit of theatre can help your situation.

The underbidder has had their opportunity to make a bid at the auction; they will rarely increase their bid post-auction.

If you are caught in the situation where the property has been passed in to another genuine bidder and you suddenly have a change of heart, you still have an opportunity to buy the property.  The first right of refusal, and it is questionable where there is a right at all, is available to the highest bidder to treat at the reserve price.  So if the property is passed in for $800,000, and the reserve is $900,000, if the highest bidder doesn’t pay the reserve figure, then that bidder has no further rights to exclusive negotiation that you have.  Don’t let the auctioneer or the agency assistants tell you that you had the opportunity and you lost it.  If the agent or auctioneer won’t talk to you, knock on the door and make a direct offer to the owner.  If the contract hasn’t been signed, you are still in the game!

– David Morrell


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Between April 2016 and May 2017, the median accuracy of REALas predictions was within 5% of the final sale price. REALas predicts potential final sale prices for properties currently advertised for sale. Search for REALas price predictions by address or suburb using the search box above. Happy home hunting!


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