Karina Durham knows all too well how nerve-racking it is to bid for a property at a Saturday auction.
- The COVID-19 pandemic has led to many properties selling before auction
- In early April 2020, 83 per cent of homes sold prior to auction
- The ABC understands some buyers are being pressured to waive their cooling-off rights
“The whole process of being so emotionally invested in a home, going through all the effort of getting the reports and all those emotions, and then to come to auction day and you’re completely unsuccessful [is difficult],” she said.
To remove her nerves, Ms Durham put in a strong offer to secure her apartment in Sydney’s Kirribilli 24 hours before auction day.
“We were trying every way possible to work with the vendor more directly to try and come to some form of arrangement prior to auction,” she said.
“And that’s what we did with this place.
Data shows pre-auction sales on the rise
The fear of never owning a home is producing a spike in so-called “snap” or “on-the-spot” auctions.
It is where property sales are rushed through prior to auction day.
Research shows the number of pre-auction sales have surged over the past few years.
The latest data from CoreLogic show a spike in buyers snapping up properties prior to auction day.
During 2018, as few as 2 per cent of all auctions (January) across Australia’s capital cities sold prior to auction.
But that was a low point.
Later in 2018, auction priors ranged between 20 and 30 per cent of sales.
Fast forward to 2020, and during the height of the pandemic, in early April, as many as 83 per cent of homes sold prior to auction day.
This year 41 per cent of properties sold pre-auction (combined capital cities) at the end of May.
The pandemic clearly skews the numbers.
For example, in Melbourne last week, CoreLogic says of the 629 sold results, 59 per cent sold prior to auction.
“I think agents have been very adaptable in terms of getting a deal done,” CoreLogic Australia research head Eliza Owen said.
“And we’ve seen that with higher and higher portions of results sold prior, but also just higher clearance rates overall.”
Buyers warned to keep a cool head
Analysts say real estate agents like selling prior to auction because it increases the number of sales they can make, and bidders usually pay a “premium” for removing auction-day nerves
“Currently, when there are so many properties for sale and agents have listed a lot, some are still looking after their vendors but [are] making a quick sale so they can move onto the next one,” property market analyst Michael Yardney said.
“The purchaser, who’s missed out on three [previous] auctions, doesn’t want to go through the emotional turmoil again.
“They’re prepared to pay a premium to get into the market.
“Even if they pay a little bit more, when they look back on it next year, they’re going to think, ‘Hey, that was a bargain.'”
Mr Yardney warns the biggest trap property hopefuls can fall into is making a snap decision without getting their due diligence done.
That is, it is recommended property buyers have the contract looked over by a lawyer, have a building and pest inspection done, and obtain finance pre-approval from the bank, before making an offer for a property.
Real Estate Institute of Australia president Adrian Kelly confirmed pre-auction sales had been “happening a lot”.
“These days you don’t need to go to auction,” he said.
“It’s good for the agent because it gets the job done, and that’s what we get paid to do.”
Reports of pressure to waive cooling-off rights
The ABC understands some property buyers are being pressured into signed 66W contracts to secure a property prior to auction day.
A 66W (section 66W of the Conveying Act) is a certificate signed by the buyer’s solicitor or conveyancer that waives all the buyer’s cooling-off rights.
Mr Kelly said that may be happening in New South Wales, but he was not aware of it being an available option in any other state or territory.
Mr Kelly said with all property sales, it was a case of buyer beware.
“The only thing that changes [for the buyer] is the tight time frame, and if people can’t meet the tight time frame, then they shouldn’t be bidding at auction,” he said.
MS Durham is very pleased her property search is over, even if she did pay a premium to secure her Sydney flat.
“I feel the agent did a fantastic job in reassuring the vendor that if she was going to sell prior auction that she was still going to get a good price,” she said.
Analysts say with a continuing strong property market, and lockdowns an ongoing risk for every state and territory, more properties are set to be sold at a premium prior to auction.