I often talk about the multiple competitive selling environments of auctions – before the auction, the auction itself and post auction.
There is often a lot of focus on the auction, where bidders compete for the property, and the post-auction phase, where unsuccessful bidders and buyers who want to make offers subject to sale or subject to finance compete against each other.
What about before the auction?
The perception is that sellers can either accept an offer or not in this phase and if they do, the property is off the market and the auction is cancelled. Ideally they should only accept an offer from a cash unconditional buyer, after all a seller wants their property sold, not under offer.
However, not everyone is in a position to make a cash offer and they may receive an offer subject to finance or subject to sale. Maybe the buyer is unable to attend the auction or has been introduced to the property at a late stage in the campaign and are unable to arrange finance in time. Should sellers accept these types of offers?
In these situations sellers start to wonder ‘what if’ – what if the buyer can’t get finance and I miss the chance to sell to other buyers, what if I miss out on a cash buyer because I didn’t wait, what if I went to auction and got a getter price?
I always encourage people to take the property to auction, unless they receive a premium cash offer beforehand, but you don’t want to ignore a reasonable offer from any buyer.
In these situations you can use an auction continuation clause. It allows the seller to accept an offer from a subject to sale or premium subject to finance buyer and continue to market the property and take it to auction.
It seems to only favour the seller, but the clause gives the buyer preference for negotiating if the property is passed in. And if they sell their property or get finance before the auction the seller can choose to finalise the sale.
We see something similar in private treaty sales, with the 48 hour clause for subject to sale offers, but this doesn’t benefit the buyer in any way.
The auction process doesn’t ignore subject to finance or sale buyers, it just gives the seller the option to negotiate with cash buyers first.
This pre-auction phase allows you to accept all offers, but is the only selling method where the seller will only cancel the auction if they get a cash sale.
It is also the only method of sale that has a designated cash unconditional phase/environment. Let’s face it, if you’re selling anything surely you would always want to offer the product to cash unconditional buyers first.