There is no black and white answer to this.

It is a question that I get asked all the time. There is no black-and-white answer, but there are some considerations that can help you make the best decision.

In Sydney, an auction is a very standard and normal part of any on-market campaign for a property. Most on-market properties will fall into one of three categories:

1. The property must* go to auction

This is most common where it is for sale by:

• The NSW Trustee (a deceased estate)

• A mortgagee in possession

• Under court order (e.g. A divorce settlement)

• Is owned by an organisation or company with a board of decision-makers 

*must does not mean it is illegal if they don't go to auction, but to avoid any legal dispute about achieving the best possible price, 99% of the time these properties will go to auction.

For these properties, confirm with the agent if there is an opportunity for offers prior to the auction. Usually, there is not, but if you don't ask you don't know.

2. The property has so much interest that an auction is definitely going ahead

Where a property has strong interest and an agent is confident there will be multiple registered parties on auction day who all plan to bid, the agent will strongly advise the owner to let the property run to auction. 

The majority of the time, the person selling wants the highest possible sale price and they will take the agent's advice to go to auction. 

For these properties, you can always ask the agent "Is there any price that the owner would accept as a pre-auction offer?"

3. The right offer will buy the property pre-auction. This is most common where:

• The property has had slow to moderate interest 

• There is uncertainty in the market (e.g. the current market conditions are neither favourable to buyers or sellers - it is a neutral market)

• The owner is motivated by a quick sale with certainty e.g. They have already purchased elsewhere and would like to move on

• The owner has made minimal investment in marketing the property e.g. No styled furniture and/or the property presents in average condition 

For these properties, it is likely the agent and owner will be open to offers prior.

If they are open to an offer, then what do you do next?

• Confirm with the agent that the owner is open to receiving offers prior 

• Ensure you have all your due diligence completed e.g. finance approved, contract reviewed, building or strata report reviewed, and can pay a deposit

• For an on-market property in Sydney, you will likely have to provide a 66W certificate (you agree to waive your cooling-off rights), which is why you need everything else organised before you can make an offer 

• Understand if there are contract terms other than price that are important or favourable to the owner e.g. The owner may have a preference for a shorter or longer settlement 

• Research fair market value and try to be objective about this (this can be challenging if you are buying a home to live in). Do not submit an insultingly low offer - it will not do you any favours

• Do not think of the real estate agent as your enemy - you need them to help you get your offer over the line

In real estate, everyone needs to feel like a winner to make a deal happen. Put your offer forward with that in mind.

There are many different ways a negotiation can play out and different tactics and strategies that I use as a buyer's agent. No two deals are ever the same. Pre-auction offers are all about:

• Objectively convincing the real estate agent about why your offer should be accepted 

• The language you use to present your offer

• The way you respond to the questions the agent asks you 

Where possible, I will always try and buy for my clients pre-auction. This is because you have a lot more control over the scenario, you avoid being in a 'pressure cooker' environment, and being organised puts you ahead of the competition.

If you find yourself in this scenario and unsure how to negotiate with real estate agents (who do this for a living), then feel free to give me a call and I will negotiate on your behalf.