Successful negotiators seek to create urgency on the other party.
When an agent tells you that interest in a property is high, or that his/her vendor is seriously considering an offer from another buyer, your heart rate goes up – you don’t want to lose it!!
Auctions create urgency amongst buyers, because an auction campaign galvanizes interest towards a specific point in time, and encourages buyers to confront each other in a heated/emotional environment. Agents want buyers to face up to each other, and ultimately bid with their hearts instead of with their minds.
I’ve sold a fair few properties via auction, and afterwards, my wife (bless her heart) usually feels sorry for the underbidders who didn’t secure the property, whereas I (coldly, I know) usually feel sorry for the successful bidders who often overpay!
When buying, wherever possible, I seek to put the urgency on the vendor. I do so in different ways. One method goes like this…
I view a property at the very beginning of the campaign; if I’m interested, I ask for the contract quietly at the open to ensure that I’m notified of any pre-auction offers; then I ‘go dark’ and refrain from further enquiry until late in the campaign, at which time I’ll view the property for a second time, seeking to understand the level of interest from the selling agent. If interest is low, I put in a cheeky pre-auction offer, making clear that there are other properties of interest and I can’t be counted on to attend the auction.
If interest is high, my primary aim at auction is to see the property passed in.
A few of my own properties have passed in, and I know the feeling of urgency that unsuccessful auctions create on vendors. They’ve invested all this money on advertising and all their time preparing for opens, they’ve followed their agent’s advice, and here they are with no suitable offers – they don’t want their property to languish on the market. Urgency!
Some of the best purchases are made following an auction pass-in, ideally, a few weeks following.
This graph shows the average discount vendors can expect after their property passes in. Clearly, vendors are willing to expect less the longer time goes by.
As a buyer’s advocate, I monitor properties that have been on the market for while, hoping to find a seller who has shunned genuine interest from earlier parties (who have likely moved on) and just wants to sell and get on with his/her life.
Fundamentally, it’s about turning the tables, and creating urgency on the seller. In a hot market, with high auction % success, it’s harder to use this tactic. But simply understanding the importance of urgency will help you resist it, and ultimately will see you bid with your head instead of your heart.