I recently called an auction where two potential bidders wanted to vary the deposit conditions. The conditions asked for a $100,000 deposit. One buyer wanted to pay $10,000 immediately if they were the successful bidder and pay the remaining $90,000 later that day. The other wanted to pay $50,000 on the spot and $50,000 on the next business day.
Did we let them? Of course we did! Asking to vary the conditions showed they were serious buyers who were genuinely interested in the property. We knew we would have some good auction action and saying no would have lost two bidders.
It’s not very well known in the WA market that you can vary auction conditions, but if you vary them for one buyer you need to offer the same conditions to all buyers so that they are all operating on a level playing field.
The most common variations relate to the deposit and settlement date. Most auction conditions ask for a 10 percent deposit, but when you don’t know what the final price is going to be it can be a bit hard for all buyers to have the required funds available. Many ask to be able to pay a certain amount if they are the successful buyer and the rest soon after.
It is less common, but possible, to get a request for vacant possession where the property has a sitting tenant. This can be a bit more difficult, particularly when there is a fixed term lease in place, as it requires the owner to negotiate with the tenant to see if they are willing to leave the property before the end of their lease. This request should be made well in advance of the auction.
One of the more unusual variation requests I’ve seen involved an older property in an area that was undergoing a lot of subdivision. Unfortunately, under the zoning regulations, this particular property was a bit too small to subdivide on its own. One keen buyer said he would bid for the property on the condition that the neighbour “donate” some of his block, in return for a share of the eventual profits, allowing them to turn two blocks into three.
We approached the neighbour well before the auction. He agreed to the condition, and we put it in writing, subject to the necessary approvals. We offered the variation to all buyers at the auction, the particular buyer bid, but in the end was not the successful buyer.
So what do you do when you are asked for a variation? Firstly you need to discuss it with the seller and if they agree you should get it signed off in writing. Then you must announce the variation to all buyers before the auction starts.
While it is best to arrange variations before the auction, a variation can even be agreed to during the auction in order to get a higher bid. For example, I have seen a buyer offer to increase their bid by another $10,000 if they can get another 30 days to settle.
Auction conditions aren’t set in stone. As an agent be prepared to consider variations from serious buyers, and as a buyer, if you are genuinely interested in the property and want to bid but don’t, or can’t, quite meet the conditions, ask for a variation to avoid missing out!