Should you accept a pre-auction offer? Five questions every home seller should ask

Auctions have long been a common way to sell property, but their appeal has shifted recently amid an environment of market uncertainty and buyer caution.

As a seller, you might be wondering whether it’s still worth going to auction if buyers are hesitant, or whether you’re better off taking a strong offer before the big day.

Certainty can certainly be tempting, but accepting early isn’t automatically the best move – and neither is rejecting a pre-auction offer with the hope there might be more.

These five questions may help guide you towards a clearer answer.

1. Is the offer in line with market values?

An offer could arrive squarely within your target range, or it may even surpass it – but the price alone isn’t always enough to go on.

Kathryn Fantov, founder of Sydney Vendor Advocates, says the offer should be assessed in the context of the broader campaign, including buyer feedback, the level of buyer interest, and, most importantly, where the offer sits relative to recent comparable sales.

“A good offer is one that stands above all the other buyer feedback, and is in line with or better than the sale prices of similar homes in the surrounding area,” she says.

Fantov says that instead of looking at similar properties that sold a year or even six months before, the previous three to four months will tell a more accurate story.

“The market does change very quickly, and you need to understand what a realistic price range for your property in the current market actually might look like,” she says.

2. How much real competition do you actually have?

Thirty groups at an open home is one thing, but genuine buyers who will turn up and compete are another.

Cristine Jones, sales consultant at Ray White Ferntree Gully, says there are several key signs that prospective buyers are more likely to bid on the day.

“If there is some genuine competitive tension – so there are several buyers with similar views of value, repeat inspections, buyers who have indicated that they’re willing to attend the auction and to compete on the day – then it definitely would be better to follow through with the auction,” she says.

Fantov says a pre-auction offer can itself be a sign that a buyer is trying to beat the competition.

“Sometimes pre-auction offers come in because the buyer is worried that they’ll end up paying more because they know that there is competition,” she says.

3. Where are you in the campaign, and what could change before auction?

When an offer comes in is just as important as what it’s for. Earlier in the campaign means there’s still time to generate interest from other buyers, while closer to auction means you’ve already got a much clearer picture of competition and what people are prepared to pay.

“By then, you should have had a good number of buyers through,” Fantov says. “You should understand who the most genuine interested parties are, at what level and what their price feedback has been.”

That said, waiting too long also carries risk.

“If you get an offer early and then decide you want to continue on and see how it goes, holding that buyer’s interest may be difficult when new properties come on – and that may take their attention away from your property,” Fantov says.

Jones puts it bluntly: “That buyer might find something else.”

4. What are the terms of the offer?

A price may look attractive, but the terms can make all the difference to how compelling the offer actually is.

“Sometimes settlement terms can make or break a deal,” Jones says.

She says offer terms may or may not work for you as a seller, particularly if the proposed settlement timeline doesn’t match your plans. For instance, the buyer might propose a 30-day settlement, but that could create problems if you haven’t yet secured another property.

Other terms to assess include the deposit amount, settlement period, clauses around finance and building/pest reports, and any other special conditions or unusual contract amendments.

Fantov adds that unconditional contracts can be more attractive.

“An unconditional contract can sometimes be more favourable than a little bit of a higher price for the vendor,” she says.

Even if the offer appears to stack up, Jones says it’s essential that your agent gauges the seriousness and preparedness of the buyer.

“You could get someone who’s really excited, and they give you an offer. [But maybe they] don’t look at the contract, or look at the contract a week later,” she says. “And there might be a covenant there or some kind of restriction, and then all of a sudden that offer is no longer there.”

5. If you say no, who is going to replace this buyer?

What should you do if only one buyer comes forward with an offer? It’s not necessarily a sign the auction won’t deliver.

“Having only one serious buyer doesn’t necessarily mean the seller should sell prior, because some agents are very skilled at managing a one-buyer auction and they can negotiate strongly with that buyer on the day,” Fantov says.

“The key is just understanding whether they have a credible strategy to improve the result, rather than simply hoping auction day will produce more.”

In other words, don’t just ask your agent if they think you could get more at auction – ask them whether another buyer might push the price higher.

“That buyer may already be at that limit, and unless another buyer can push them beyond it, there’s no reason that they will pay more. The vendor can find themselves in a very difficult position where they may even end up selling for less than what they had originally offered.”

The decision of whether or not to accept an offer before auction is rarely clear-cut. But this is where your agent is crucial: a good one will be able to present concrete evidence and give you a thorough and accurate understanding of the offer’s value, whether there’s genuine competition to support a higher auction result and the potential risk of accepting or rejecting it.

As Fantov puts it: “Hope isn’t a pricing strategy, and neither is fear.”