Passed-In Properties Make For Good Buying
Successful negotiators often seek to create a sense of urgency to influence the other party.
When an agent tells you that interest in a property is high, or that his/her vendor is seriously considering an offer from another buyer, your heart rate goes up – you don’t want to lose it!!
Auctions create urgency amongst buyers, because an auction campaign galvanizes interest towards a specific point in time, and encourages buyers to confront each other in a heated/emotional environment. Agents want buyers to face up to each other, and ultimately bid competitively with their hearts instead of rationally with their minds.
I’ve sold a fair few properties via auction, and afterward, my wife (bless her heart) usually feels sorry for the underbidders who didn’t secure the property, whereas I (coldly, I know) usually feel sorry for the successful bidders who overpay!
When buying, wherever possible, I seek to put the urgency on the vendor. I do so in different ways. One method goes like this…
I view a property at the very beginning of the campaign; if I’m interested, I ask for the contract quietly at the open to ensure that I’m notified of any pre-auction offers; then I ‘go dark’ and refrain from further enquiry until late in the campaign, at which time I’ll view the property for a second time, seeking to understand the level of interest from the selling agent.
If interest is low, I may put in a cheeky pre-auction offer, making it clear that there are other properties of interest and I can’t be counted on to attend the auction. Or, I may break the agent’s balls about how overpriced the property is, with the hopes of bringing down the vendor’s ultimate reserve price.
If interest is high, my primary aim at auction is often to see the property passed in.
A few of my own properties have passed in, and I know the feeling of urgency that unsuccessful auctions create on vendors:
I’ve invested all this money on advertising and all my time preparing for opens, I’ve followed my agent’s advice, and here I am with no suitable offers – I don’t want their property to languish on the market. Urgency!
Some of the best purchases are made following an auction pass-in, ideally, a few weeks following.
This graph shows the average discount vendors can expect after their property passes in. Clearly, vendors are willing to expect less the longer time goes by.
As a buyer’s advocate, I monitor properties that have been on the market for a while, hoping to find a seller who has shunned genuine early interest from parties (who have likely moved on) and just wants to sell and get on with his/her life.
Fundamentally, it’s about turning the tables and creating urgency on the seller. In this tough market, we’re in right now, sellers are already under pressure. By creating a bit of urgency as a buyer, you can put the seller into an emotional state in which they’re more likely to accept below market value.
Simply understanding the importance of urgency will help you identify clever buying and selling tactics that are designed to increase emotion. Ultimately, you want to negotiate with your head, not with your heart.