Several auctions have been cancelled or withdrawn lately on the day of the auction and signs posted on the signboard saying “Under Contract” or “Under Offer”.
A real estate agent interprets this as “There are no buyers”. This might seem cynical but there are several reasons for this. Practically it should not be possible to be “under contract” or “under offer” on the day of the auction or during the course of an auction campaign. One of the reasons sellers choose to market their property for auction is so the pressure is put on the buyer. If you buy at auction or negotiate and buy after auction (until midnight on the day of the auction) you must exchange contracts and put an unconditional deposit on that property, normally 10%. The buyer loses that if they pull out after exchange for any reason. The big difference with “Under Contract” is that the buyer exchanges contracts on a small deposit (0.25%) and has 5 working days to pull out for any reason (otherwise known as exchanging under cool off). The seller can not pull out, only the buyer. Why would a seller accept worse conditions the day before an auction, or on the day of the auction, it just does not make sense.
Even worse is “Under Offer” which means the buyer has made a verbal offer, no contracts signed and can pull out at anytime with absolutely no financial penalty. Better to hold the auction than cancel under those conditions. If you have committed to an auction make sure you go to auction.
Recently there was an “auction cancelled – under offer” sign on a property on auction day, then the ad in the Leader appeared the following Tuesday with the same property advertised “For Sale”. This is interesting as the Leader advertising deadlines mean that they must have known on Thursday prior to the auction that the offer in place on auction day was no longer an “offer”, 2 days ahead of the Saturday auction!!! I am confused are you?
Even during an auction campaign it is not smart to exchange a property under contract with 5 day cool off. In these uncertain times, imagine the situation where a seller accepts an offer of say $800,000, contracts are exchanged under a “5 day cool off” with a $2000 deposit. For 5 working days the seller waits to see if the buyer goes ahead, in the meantime, no one else can buy the property. 5 working days is a long time in a month marketing campaign. Worse case happens and the buyer pulls out. Even mid way through the marketing campaign, all momentum is lost. All the other interest has gone elsewhere as they thought the property was sold. Even worse the buyer could have pulled out for any reason ie decided to go on a holiday or buy a car instead but other buyers start to think the worst, maybe the pest and building was bad…
My advice to the public is, if your agent tells you in the course of marketing your property for auction that you should accept “under contract” or “under offer” conditions, ask the agent why you are paying extra to do an auction campaign and ask him to go back to real estate school!
