Updated: Jun 10
As the Melbourne property market starts to cool, the real estate agent's sales tactics are changing. We are starting to see less property auctions, and more properties being sold "Sale by Set Date", "Private Sale" or "Sale by Negotiation".
If you have been following our blogs, you would be familiar with Auctions, and Best and Final Offer Sales and how to manage them. But what does a "Sale by Set Date" mean? How do you manage a "Sale by Set Date"? What do you need to know when it is a "Sale by Set Date"?
What does "Sale by Set Date" mean?
The "Sale by Set Date" simply means the property must be sold by a certain date. The sales campaign will end on a certain date. Or is it? What happens if there are no offers by a certain date? We'll see what happens.
This "Sell by Set Date" is very similar to Private Sale. As with private sales, some agents may called it:
Sale by negotiation; or
Expression of interest (EOI); or
Sale by Set Date; or
Sale by Set Date, Offers accepted prior; or
A single price $x00,000; or
A price range $x00,000-$y00,000; or simply
Therefore, a "Sale by Set Date" campaign should be managed like a private sale or a sale by negotiation. There are little to no difference between these methods of selling. You can also look at this as a closed auction process or "Best and Final Offer", where all interested parties have to submit their offers without knowing what others are offering, within a short notice.
If it sounds complicated, it is. It is one of the sales techniques in the agent's bag of tricks, aimed at creating panic and anxiety and to force buyers to think with their hearts and make irrational offers for the property.
Why are "Sell by Set Date" Sales Method Used?
"Sell by Set Date", just like "Private Sale" is often used in a quiet, or buyers market where there isn't going to be a lot of interests or offers for the property. Short of calling an auction and risk nobody turning up to place a single bid or risk the auction passing in, and creating a bad reputation for the property, the agent may suggest a Private Sale.
Sometimes, it simply means the sales agent do not have any good auctioneer to help auction the property.
How do "Sell by Set Date" work?
There are no right or wrong ways to run the Sell by Set Date campaign. But this is what usually happens:
Vendor and Agent decides to list a property for sale.
They chose the "Sell by Set Date" method, and chose a fixed date where the property are supposed to be sold.
Agent list and starts the advertisement and sales campaign.
Agent make it known to all, that this property must be sold by a certain date.
Agent may also tell everyone that offers are accepted prior to that date, to create a sense of urgency.
When an offer is received, agent would usually let other interested parties know an offer has been received and they are to submit their "Best and Final Offer" by a certain date.
This dateline (can be as short as 4 hours) by when all written offers must be submitted.
Agent then presents all offers to the vendor.
What happens next is where it gets interesting and can vary between campaigns, agents or vendors. This becomes essentially a "Best and Final Offer" or Closed Auction process. As with the BAFO, this is also where the whole "Sell by Set Date" process creates the most anxiety. The selection process may take one of the following paths:
Vendor may simply select the highest offer and end the sales campaign
Vendor may choose the best 2 to 3 offers if they are very similar, and start a closed negotiation process with the bidders
Agent may choose to give the first bidder, a second chance, if their initial offer is not the highest
Vendor may choose not to select any offers, if they believe none of the offers are good enough. The campaign will then continue to its planned public auction or end date.
Problems with "Sell by Set Date" Sales
The Sell by Set Date process may seem docile. It may not seem urgent to an inexperienced buyer, as, afterall, it seems to imply that there is no urgency until that "Set Date". As with a typical property purchase, property auction, Best and Final Offers, this Sell by Set Date sales process should be treated with care. Just like the Best and Final Offer, this is intentional, as emotions are what cause buyers to think with their heart, and the resulting fear of missing out (FOMO) will usually lead buyers to overpay. Agents know that. Inexperienced buyers always fall into this trap. However, this would usually not work with experienced, professional buyers agents. This is the reason why, if you can afford it, you should always seek the assistance of an experienced Buyers Advocates, to ensure you receive the appropriate advice for the property.
Sell by Set Date sales process usually:
appear passive, underwhelming and does not project a sense of urgency to inexperienced buyers;
catch unprepared buyers off-guard and creates panic when being told an offer has been received;
lacking in transparency
conducted with urgency
conducted with poor levels of communications
Some interested buyers might not be informed of the auction, if they had not made their interests known with the selling agent. Or if the agents believe they have sufficient interested buyers, they may stop informing other less promising buyers, due to time constraints.
How do you Prepare for a "Sell by Set Date"?
Generally, to perform your best in the "Best and Final Offer", you need to:
1. Do your due diligence.
Doing your due diligence is critical to preventing yourself from buying a property that doesn't suit you. Understand what you want from the property, why you want the property and your plans for the property. Knowing the real market situation will help you understand the market demand for that property type, in that particular street and in that particular pocket. Remember, every property is different, even if they are next to each other.
2. Know the real price of the property
Most buyers wrongly trusted the price guide in the Statement Of Information (SOI) provided by the sales agent. While the SOI aims to give you an indication of the price for the property, it usually does not mean the auction will end within the price range indicated in the guide.
You should always do your own homework.
If your research is very different from the price guide in the SOI, always feel free to ask why the agent thinks it should be so different. There could be a gold plated toilet in the house. Or a few embedded 1kg gold bars in the bedroom. Or a subterranean termite infestation. Or a history of flood and/or water damage. However, more often than not, you are likely going to get a standard reply "that's based on sales data. We cannot predict how much buyers will be prepared to pay at the auction"...
A good independent buyer's advocate who knows the area, location, street, buyer demand, supply situation, buyer demographics, property characteristics, will be able to confidently give you an idea of the auction price range.
3. Determine your offer
This is where you have to decide what price to offer for the property. No one can do this for you, but as part of our service, our buyer's agents would be able to work with you to guide you to
Know how much you can afford to pay.
Know your serviceability.
Ensure you have sufficient funds for the initial deposit.
Ensure you have the appropriate ways to pay the required deposit.
Determine the absolute best price you are willing to pay for the property. A good test to know if you've set the right price is this: ask yourself "if the property is sold for $100 more to someone else, will you regret walking away".
If you've been following this blog, you will know what happens next, gets murky. While the agent may indicate that you only have that "one chance to make the best and final offer", in Victoria, the agents or the vendors might choose to further negotiate or give everyone "one final chance to review your offer". This means "one final chance to improve your offer". This usually causes buyers to panic and second guess their offer. You might decide to improve the offer, or if you've already submitted your best-best-best offer, choose not to improve the offer.
Now, always bear in mind, you do not know who the other bidders are, and what bids they have submitted. Your bid might already be the highest, and the vendor and selling agent might just want to try their luck to extract a few more dollars from you. There might not even be any other bidders, and you are bidding against yourself. Interesting, eh? If you have done your preparations well, you should be able to confidently know what the likely scenario is. Our buyers agents would usually be able to advice based in their experience and insider intelligence on the property.
Can an Agent Accept an Offer Before the Set Date?
Yes, they can. And very often they do accept offers before the Set Date. When an offer is received, they may inform all other interested buyers that an offer has been received and they are to submit their Best and Final Offer for consideration. For tips on how to manage a Best and Final offer, click here.
Does the best offer in a Sell by Set Date offer always win?
Usually yes. But not always.
It depends on the motivations for this Sell by Set Date property. Remember, as mentioned in our Best and Final Offer tips, the vendor and/or agents may fake "an offer received" to gauge the level of interest. They may or may not have actually received any offers. Creating this fake offer creates a sense of urgency, forcing interested parties to show their level of interests. If any interested person really submit their offer, perfect. The property is sold, if the offer is accepted. Otherwise, the property will continue to be listed for sale till the "Set Date".
So, assuming an offer is genuinely received. The process will almost always result in a sale. But it may not always be awarded to the buyer with the best offer. A Sale by Set Date process is treated like any other standard written offers. IE, you CAN submit a conditional offer, which includes typical conditions such as building and pest inspection clauses, finance clause, or any other clauses you need or can dream of.
It is in the vendor's interest to consider all offers and their conditions when reviewing and selecting the offers. They are likely going to select the offer with the most suitable conditions, even if it is not the highest price. Selling agents may not like it though, as it may mean they are receiving a lower commission. A good buyers agent will be able to help you navigate this.
What is the process to make an offer for a "Sell by Set Date" Property?
So, you have been contacted by an agent, telling you they are holding a closed auction, and you have been invited to submit your best and final offer by X date and time. What do you do next?
How to submit an offer in an Offer for a Sell by Set Date Property?
If you have been contacted and informed by the vendor agent that they are accepting offers for the property and you are supposed to make your "best and final offer", they should also inform you when the deadline is. You should always ensure you submit your best offer before this deadline.
If the agent has not told you how or when they want to receive the offer, ask them. Make sure you know what the expected format it. Some may accept offers in an email. Some may have a formal offer form or an Expressions of Interest (EOI) form, that you have to fill in, sign and submit. Whatever it is, make sure the offer reaches the agent BEFORE the deadline. The agent is not supposed to accept any offers after the dateline. Not even if you are 1 minute late.
Typically, your offer should include:
Your contact details
Your best and final offer price for the property
Any conditions you want to include
Settlement date or period, usually 30, 60 or 90 days in Victoria.
Some agents or EOI offer forms may ask for more information. Make sure you understand what is expected, and provide them if relevant.
What happens after submitting your Offer for the "Sell By Set Date" property?
Submitted your offer? Wait. And keep your fingers crossed. You'll find out what's next.
If your Best and Final Offer is being considered, the agent will let you know the next steps. You might need to be prepared "review your offer" (aka "improve your offer"), or you might win it without any further dramas.
If your offer is the winning offer, the agent will usually prepare the formal contract of sales for your signature, and you will need to pay the holding deposit. If your winning offer is a conditional offer, it's time to start ticking off the conditions. Know when these dateline are. Get those building and pest inspection organised, get that finance process started, or get any other due diligence processes done. And as they say, the rest is history.
Generally speaking, if you have not heard from the agent within 4-6 business hours of the deadline (usually half a working day), your offer is 99% not being considered. If you have done your due diligence correctly, and you can truly put your hand on your heart and say you've genuinely submitted your best offer, you know you have done your best. The property is not meant to be yours. There is always a better one somewhere. But you will have to go through the same process and anxiety all over again. It could be months or even years before you find another one. And chances are, in a rising market, you will need to pay more for the same property or start looking in less desirable suburbs.
If you have not heard from the agent after 4 hours, call them, ask for an update. If you get a vague reply, or an iffy reply, chances are, they have selected other offers. That's usually the bad news. But the good news is, because they have not outright rejected your offer. Your offer is their back up. If the other offers fall through, you might just win the closed auction or you might be called to "improve your Best and Final Offer". The fact is, in a hot market with lots of keen buyers, or if other buyers have the guidance of professionals such as a buyers agents, you are highly unlikely to win it. As a side note, vendor agents secretly prefer to work with buyers agents because experienced buyers agents only work with qualified leads, who are market ready, ready to buy, make realistic offers, and they can close the sale faster.
If you have done the right due diligence, your Best and Final Offer should be your very best for this property. You should not have any "buyer's remorse" and you would not have regretted not offering an extra $500 more. Do not be that buyer. Get one of our professional buyers agents to manage your offer, if you are not confident.
Can You Counter a Best and Final Offer?
Short answer is No. However, there might be ways around this, to achieve similar results. It all boils down to how the agent runs this Best and Final Offer (BAFO) auction. Remember, in most (not all) situations, it is in the agent's and seller's best interest to allow interested buyers a second chance to review (and improve) their offers. So, when the agent gives you the opportunity, make good use of it. Remember, in the BAFO, the agent CANNOT disclose who and what the higher offer is.
So, you do not have to make your decision on the spot. You can always request 10-15 mins to privately review and discuss your offer with your partner, mortgage broker or lender, before confirming or revising your final offer. It also does not mean that you have to improve your offer, if what you have offered is what you believe is the best, and you would not regret if the property were sold for $500 more.
What happens if no offers are received by the "Set Date"?
This is where things get interesting. Does the property get sold as a "fire sale"? Or is the property withdrawn from sale? There is no set rules on what happens next. It all depends on the vendor and why they are selling the property. But it usually takes one of these paths:
The listing continues as a "Private Sale"
The listing changes to "Offers above $x00,000"
The property is taken off the open market, and sold as an "Off-market" property
The property is possessed by the lender and treated as a mortgagee sale
Professional Help to buy in Sell by Set Date offer
We hope you have found the above tips useful. If you're still uncertain how to manage the purchase of a property sold with the "Sell by Set Date" process, or not confident with your preparations, or just want the confidence to buy the property, you might want to consider engaging the advice/service of a buyer's agent.
Our Melbourne based Buyer's Advocacy works for the buyers and we help prevent buyers from overpaying. Our Purchase Only service is popular with hands-on property buyers who are either unable or not confident at bidding in a property auction. We help buyers prepare for the purchase and buy their properties with confidence. Over 95% of our clients buy their properties in 2 months.
Get in touch, find out if our services are right for you.
How to determine market value of a property.
How to win at property auctions in Melbourne.
How can buyers advocates can help you beat the market.
Get in touch with Melbourne Buyers Advocates.