Making a “Knock-Out” Bid

On most occasions, when negotiating an offer on a private sale or an offer prior to auction, people like to make low bids to see what counter-offer the vendors make, and then negotiate until a deal is struck.

Sometimes, however, purchasers just want to secure a property without “pussy-footing” around. They want to make a bold “Knock-Out” bid that will surprise and delight the vendor, and bring about a quick and decisive sale.

Purchasers who offer the best price up-front
The most crucial part of any offer, in most cases, is the price. Vendors look at the bottom line, and first impressions in terms of price are very important.

Having said this, however, we do acknowledge that the highest price does not always constitute the best price. Consider this: You’ve worked out the highest possible price you can offer, and you think that someone else may be able to better it. By submitting your offer as a “knock-out” offer you may be able to make it more attractive than other offers.

But, all things being equal, the price is what will make the difference.

Purchasers that are committed
A committed purchaser is one who clearly wants to “get the job done”. The committed purchaser has done all of the ground-work.

These purchasers seek legal advice which in Victoria eliminates the “cooling off” period. This means that when the contract is signed with confidence, the deal is final. These purchasers also ensure that all offers are made in writing (making the offers legally binding), and don’t make verbal offers which are never taken as serious by the vendors as there is no real commitment when an offer isn’t made on a legally binding contract note.

Committed purchasers also obtain written financial approval before making written offers. A bid is less attractive if the vendor has to wait to see if the purchaser’s loan will be approved. Cash sales are solid. Finance should be approved before the sale, so that the final contract is not subject to finance.

Additional conditions are also something that a committed purchaser avoids. The vendors don’t want to wait for building and pest inspectors to give the “all clear”. Such delays, together with the risk that the sale could be cancelled later, can make a bid quite unattractive. Any necessary inspections and checks should be conducted before the offer is made.

Purchasers that take the “no nonsense” approach
“Knock-Out” bids are final. They’re not accompanied by

“…and can you let me know if anyone else puts in a higher offer?”

The “Knock-Out” bid speaks for itself. The purchaser is telling the vendor, “I seriously want this property and I’m prepared to buy it right here and now.” The “Knock-Out” bid either wins or it loses. If it’s accepted by the vendor, then both parties are winners. If the bid is rejected, then both parties can walk away without looking back.

A tip on paying the deposit
The obligation to pay a deposit does not arise until the contract has been signed.

It is generally advisable to offer an immediate deposit of 10% of the purchase price. Sometimes there are financial benefits to the purchaser in offering a 20% deposit, however this is something to be discussed with your financial advisor before making any offers.

Conclusion
Making a “Knock-Out” bid isn’t for everyone. But for those who are prepared to carry the risk, there is every chance that a “Knock-Out” bid will secure the property instantly, for a price the purchaser is willing to pay, while other intending purchasers are still trying to negotiate. All of the above advice is relevant also to auction day sales also. A “Knock-Out” bid will always intimidate all other bidders on the day and those who bid boldly generally come out on top.

Peter Konidaris
Real Estate Advisor
0421 274 996
peter.konidaris@raywhite.com
Specialising in real estate in Cheltenham, Mentone and surrounds

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