Open for inspections are now once again permitted. It’s great news for Melbourne’s resurgent property market, as it continues to gather momentum into 2021 and rebound from COVID-19. It's also a timely moment to pay tribute to property industry workers and customers alike, and their ability to successfully overcome what’s been a very challenging year for Victorians.
How to make your Expression of Interest a smile
Expressions of Interest are the squally waters of the residential property high seas. Even experienced buyers navigate with great care, and proceed at low knots.
A property sold by ‘expressions of interest’ (EOI) is essentially a private sale where the agent doesn’t provide a sales price. The onus is placed on prospective buyers to submit their best offer.
They are more common for higher valued properties – ones often worth several million dollars – where there is usually a relatively small pool of buyers and where there may have been few comparable sales in recent months. In some cases there might only be one likely buyer in the market. But you do come across EOIs from time to time for more common or garden variety of accommodation.
An EOI can be treacherous for buyers because the agent does not need to reveal what they would accept before buyers have indicated what they would be willing to pay.
Moreover, agents can ratchet up the pressure by demanding that a best and final offer is submitted within a short time frame, and many agents will allude to numerous other buyers who, of course, are unseen to you and whose existence is unverifiable.
In an auction environment, bidders actually benefit from the efforts of each other, even if it doesn’t feel like it at the time. The final price is the culmination of all the research, analysis and judgements of each participant. With an EOI, you are on your own. The competition is silent and you are blind to their insights. It is therefore vital that exhaustive research is undertaken regarding recent comparable sales to know what the value of the property is.
When comparable sales are few and far between, take the information you do have and undertake some cautious extrapolation of fair value based on trends in price and land values. Also reflect on how important securing this property is to you and whether you would be willing to pay a premium above what the technical analysis is telling you to pay. Perhaps this is a particularly unique property on an exclusive street and you know you will want to live there for the rest of your days. Or maybe you have been looking for two years without success.
Don’t be afraid to engage with the agent to try and tease out some more insights about the vendor’s price expectations. Some agents won’t respond, but others will understand that buyers need a guide of some sort. That conversation alone may stop you from paying over the odds.
Note, given the non-standard nature of an EOI sale, there may be some unusual terms or special conditions surrounding the sale, so review the contract closely.
Personally, as a buyer, I’m not willing to concede all the control to the vendor’s agent when it comes to EOIs. All other things being equal, I am prepared to pay a premium for a property in the open forum of an auction if that’s what the market signals is required. But I won’t do it under an EOI’s cloak of secrecy. With EOIs, the lack of transparency means there is a higher risk of over-paying, so buyers should be conservative in their own judgements about what the property is worth.
And there’s the rub. Vendor’s agents need to be careful about over-employing EOIs. Perhaps they appeal to those – dare I call them control freaks – who aren’t attracted to the free-form nature of auctions or who think an EOI will get them a better deal for their client. But they may find that savvy buyers just aren’t willing to play along. Richard Wakelin.