Real estate agents are often among the professionals that investors can rely on during auctions, which could be a little chaotic for most, but smart buyers know that making the most out of the opportunity lies in asking the right questions.
According to buyer’s advocate Cate Bakos, some agents tend to share little white fibs to potential buyers in order to get the best result for their client.
Cate shares some of the questions a buyer can ask to counteract an agent’s negotiation game:
1. What reserve are your vendors likely to set on the day of the auction?
According to Cate, some real estate agents like saying “We’ve got buyer interest in the vicinity of X-Y” in order to gain more interest and offers.
In this type of situation, it’s best to remember that agents are committed to underquote from 10 per cent to 20 per cent. “I attended an auction this Saturday… [a property] was quoted at $670,000-plus and the reserve was $770,000,” she shared.
2. What recent comparable sale would you say best matches this property?
Identifying recent sales results in the area for similar houses will help a potential buyer gauge the acceptable price range of a property, as well as whether or not they are actually scoring a good bargain.
3. What figure did you quote on the sales authority?
Some agents may still withhold information, but Cate reminds property investors that good manners will often go a long way.
“An agent will be less likely to speak frankly with you if you are being loud, intimidating, rude, or insensitive to the presence of their other buyers who are in the room. If they know you are genuinely interested, they’ll be likely to assist you with a bit more truth,” she said.
4. What sort of limit do you suggest I set to have a strong chance at buying the property?
This question is a good counteraction for when a real estate agent tells a buyer that he is unaware of the vendor’s expectations—another negotiation tactic often used during auctions, which is usually a little white fib.
According to Cate: “Every agent knows what their vendor would like. Every agent is required to let the vendors know what the likely selling range will be for their property.”
5. Why would the vendor prefer to accept an offer prior to the auction?
Some real estate agents tell potential buyers that they are happy to present any offer to the vendor prior to auction—do not take this bait. While some vendors do prefer to accept offers for reasons such as having a specific date that they need to settle the purchase by or being in a tough financial situation which has placed pressure on their timing to sell, more often than not, this tactic is used by agents to “test” buyers.
“It gives the agents a firmer idea of where the likely sales range will be and it helps them prepare the vendor for setting their reserve on auction day,” Cate said, “The worst thing that can happen is that an agent will get an insight into a generous and emotional buyer who could stretch beyond reasonable market value. In this case, they could deliberately set a super high reserve so that the property passes [to] this unsuspecting buyer and the agents then have the opportunity to negotiate an even higher price inside,” she added.
As in all ventures, a good preparation through research can equip property investors with the right knowledge to navigate their way through auctions, score a good bargain, and ultimately grow their portfolio and achieve their financial goals.