What To Do When A Property Passes In To You At Auction
In This Week’s How's The Market | Edition 97
What To Do When A Property Passes In To You At Auction
A Slice of Italy on the Prestigious Golden Mile
What’s shaking up the housing market in 2025?
What To Do When A Property Passes In To You At Auction
There aren’t many countries in the world that sell properties at auction and for good reason.
It’s a daunting experience that has little privacy and can make even the most strategic or confident of people feel emotional and doubtful.
Though sometimes what people fear more than bidding at auction is the experience of the property passing in to them where they then need to go inside and negotiate directly with the real estate agents against the vendors reserve price.
Many people don’t know how this works and what to do when you’re placed in this situation.
So here is a breakdown of what happens, what to watch out for and some strategies to put you in the best position to get the best price and best deal.
What Actually Happens?
Most times when the property passes in, the highest bidder will enter into the property and sit down at the dining room table across from the real estate agents whilst the vendors are in a different room of the house.
The real estate agents will disclose to the highest bidder what the reserve of the property is and offer the bidder the chance to purchase the property for the vendor's reserve price.
Occasionally a purchaser will accept the reserve price if it is reasonable, however, they can also make a counter offer like another bid and negotiate with the real estate agents.
The agents will then usually run between rooms and present the vendor with the highest bidders new offer and then run back to the dining room where they will present the bidder with the vendors new counter offer and this process will repeat until both parties can come to an agreement, whereby the property is sold, or the bidders will leave and the property will still be available for sale and readvertised on the market.
What To Watch Out For
There are a few important dynamics to be mindful of when entering into a pass-in negotiation.
Firstly, you need to know that the reserve price can change.
Take the below for example:
14 Smith Street has an advertised price of $900k - $990k.
Before the auction the vendor sets the reserve price of $1m.
During the auction two parties bid up to $980k before bidding stops and the property is passed on to the highest bidder.
When the highest bidder comes inside to sit down at the dining table, the agents can then, after discussion with the vendor, give the purchaser a reserve price of $1.1m.
This is done to try to squeeze the most out of the highest bidders.
In most cases if you were to offer $1m and be firm and justify this you will secure the property for this price, however, sometimes a bidder will get emotional and give their max budget to try to secure the property.
Some agents will also tell other potentially interested parties to wait around outside the front of the house if they are not confident the highest bidder will secure the property and they can use this to leverage the buyer to give them their best and final.
How To Prepare & Strategies Of Your Own
I always prepare for an auction as if it is going to pass so that no matter the result, I am always prepared. Here are some of the things I want to make sure I am aware of before the day:
My client's absolute maximum walk away number for the property. This needs to be sent in writing before auction day. We do this so that the emotions of the day can never get the best of our clients.
Why the vendor is selling, their preferred settlement date and the reason behind this. For example, if a vendor is selling and they have already purchased the property they will be moving into and they need to sell their current property in order to settle on their new one, this is extremely valuable information for when it comes time to negotiate.
Two to three recently sold comparable properties. I like to have memorised what they sold for, their land size, bedroom & bathroom count and whatever makes that property better or worse than the property we are bidding on.
Once the property has passed in, I try to drag out the process. Ask for a glass of water, look around the property again, chat with the agents, you could ask to make a phone call to an ‘advisor’. This can benefit you for two reasons;
Firstly, if there are people waiting around outside to make an offer, if you don’t secure the property, they may leave after 10 minutes.
Secondly, the agents likely have another open home or auction to go to and if you get close to their cut off time it may create urgency on their end to get a deal over the line.
Always be prepared to walk away at your max price. Never go over this number.
Staying Firm On Price
Whilst it can be an extremely nerve wracking and emotionally potent conversation, make sure to stay firm on the price.
Once you have made an offer, make sure the agent has delivered it to the vendor before you offer an increase.
Keep the increments small and remember, if the property was worth more than what it passed on to you at, then somebody else would have paid it.
Good luck!
The Wow Factor!
7 Victoria Avenue, Canterbury, Vic 3126
This charming home in Canterbury's Golden Mile neighborhood is a unique example of Victorian Italianate architecture from the 1890s, combining century-old details with contemporary comforts.
This residence in Canterbury's Golden Mile district features a stately façade with 12-foot ceilings, Baltic floors, marble cast-iron fireplaces, intricate cornices, and ornate ceiling roses.
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Experience the Romance of Italianate Elegance.
Price Guide: $6,800,000 - $7,480,000
In The Media
What’s shaking up the housing market in 2025?
Inflation is expected to drop to 3.2% in November, leading to interest rate cuts in early 2025, with two major banks anticipating a rate cut in February.
The industry should be prepared for the possibility that rate reductions may not significantly impact home values and transaction activity this year.
A median-income household could afford a $593,000 home despite a 135 basis point drop in average mortgage rates by the end of 2025.
By 2025, the lending rate is expected to be 3.1%, surpassing the pre-COVID average of 2.55%, which facilitated robust lending volumes in the 2010s.
Changes to macroprudential settings, such as lowering the mortgage serviceability buffer from 3.0 to 2.5 percentage points, may impact housing finance availability, potentially boosting home buying activity.
APRA warns of financial shocks due to high household debt, indicating potential introduction of measures like limits on high lending to counteract rising debt levels.
The RBA predicts unemployment to rise to 4.5% by 2025, but the labor market remains tight, with unemployment at just 4.0%, below the pre-covid average of 5.5%.
The labor market's expected loosening this year due to lower inflation and economic demand may not significantly impact the housing market, as rising unemployment triggers lower interest rates and real incomes for those employed in 2025.
Net overseas migration reached 556,000 in September 2023, declining to 446,000 by June 2024. The Centre for Population predicts 340,000 by mid-2025 due to COVID-catch-up effect.
New home approvals are low, with only 169,000 approved by November 2024, a 24% drop from the decade average and 30% below the Housing Accord's annual target. Despite signs of recovery, approvals bottom out in early 2024.
Final Thoughts
In 2025, with evolving market conditions and buyer sentiment playing a key role, it’s more important than ever to approach post-auction negotiations with confidence and preparation.
And also this year is predicted to see lower value growth and sales despite rate cuts and inflation easing, with a mild recovery due to lower inflation, real incomes, and low housing supply.
If you or someone you know would like assistance to buy this year, book in a call and we can discuss if we can help.
Thanks for reading this far!
We value feedback and if you have any suggestions on what you would like covered in the future please email me at tristan@tomii.com.au
Happy Buying!
Note: This is general advice and does not take into consideration your objectives, situations or needs. Please consider if this advice is suitable for you and your circumstances and speak to a professional before making any financial decisions.
