Flipping FOMO on its head: How a pre-auction offer can benefit buyers and sellers

But securing a sale pre-auction can help buyers make a more rational decision on how much they are willing to pay.

According to Henry Single from Pivot Property Buyers, making a strategic offer prior to auction offers benefits to buyers and vendors, both of whom are plagued by FOMO - the fear of missing out.

“Typically fear of missing out is spoken about in the context of buyers, but vendors also can feel this and it can be a powerful tool when it’s used to the buyer’s advantage,” Mr Single says.

“Sellers also have a need for certainty, and an offer that’s a sure thing is far more attractive than an offer that never materialises at all.”

By making a pre-auction offer, homebuyers with smaller budgets can still come out ahead, without having to engage in a bidding war come auction day, Mr Single says.

Avoiding the auction process altogether, buyers can avoid potential for a budget blowout, and instead propose a guaranteed sale to the vendor during the campaign - even if it’s a lower price.

 “It’s just as nerve wracking for sellers as it is for buyers, and this is something I don’t think many buyers consider. Vendors are looking for certainty just as much as buyers are. They might have already purchased another place, in which case they need to meet the settlement.

'The advantage of going to auction': youtube.com/realestatecomau

“Making an offer mid-campaign limits the time other buyers have to get their ducks in a row. So, you can face less competition, and less competition usually translates to a lower price.

“Although it might be marginally less than what vendors could get on auction day, it may still be something they're open to.

“It's a conversation vendors are more willing to have than people would initially expect.”

The uncertainty of who will turn up on auction day weighs heavily on vendors’ minds and if, for example, a comparable property to yours becomes available during the campaign for a lesser price, it can dilute your buyer pool, Mr Single adds.

Buyers looking to buy prior to auction should be clear on their terms and clearly understand the property’s value, in order to act decisively.

The timing of the offer is also important, as it will be more effective if the campaign has not yet run its full course, he adds.

Also research an agent’s recent sales to determine if they are typically selling properties before auction, Mr Single says.

Australian median home prices dipped 0.17% to $795,000 in December, the first monthly decline since December 2022, PropTrack data shows.

REA Group executive manager of economics Angus Moore says the good news for buyers is there is more choice than they have had for a while, particularly in Sydney and Melbourne.

“The total number of properties listed for sale towards the back half of last year was around the highest level we've seen in over a decade, and that has a couple implications for buyers,” he says.

REA Group executive manager of economics Angus Moore says home price growth is expected to soften. Picture: supplied

“One, there are more homes and therefore more opportunities to find something that fits what you're looking for, but it also means any given home is probably that little bit less competitive.” 

That can be seen in the softening of auction clearance rates over the latter half of 2024 and slightly longer time it takes a property to offload, Mr Moore says.

“Selling conditions are a little bit softer than perhaps we have been seeing. But it remains faster than pre-pandemic,” he says.

"The flip side is that in many cases, vendors are also looking to buy. So it cuts both directions.”

Home price growth is expected to soften over the year, given housing affordability is “extremely strained”.

“That is going to be a headwind for many buyers who will struggle to afford what perhaps was more affordable a few years ago,” he adds.

'How interest rate cuts affect the property market': youtube.com/mortgagechoice

“Countervailing that … we’re going to see some interest rate cuts this year. How many and when is to be determined, but it's fairly likely there's going to be at least some and that's going to be a bit of a support for home prices.”

The strained housing affordability has dampened first home buyer activity and Melbourne-based Mortgage Choice broker David Thurmond says many first home buyers are having to lower their expectations.

“First home buyers would have had friends purchase a couple of years ago when rates were at 2% and watched their first home buyer friends buy a house for $800,000 on one wage or two average wages. Now someone earning a decent wage of $70,000-$90,000 a year is struggling to buy a house for $600,000 on their own, so they’re having to lower their expectations.”

Thurmond advises generally buyers should have a 5% or 10% deposit on the purchase price, and research the market to understand what their ideal purchase price buys them.