How to compete for a property, even when your rival is cashed up

Despairing home buyers competing for properties against cashed-up downsizers and first-timers shored up by the bank of mum and dad can, with a fair share of cunning, still give themselves the best chance against their wealthier rivals, experts say.

But it requires plenty of research beforehand, daring and steely nerves.

It’s a growing challenge for anyone relying on a mortgage to buy, as more than one in four properties on Australia’s east coast were purchased entirely in cash in 2023, figures from settlement platform PEXA show. This totalled $129.6 billion in value compared with $127.7 billion in 2022.

“It is difficult at the moment for those with less money,” said Ray White auctioneer James Keenan. “In a number of auctions I’ve done recently, you get down to the last couple of bids, right at the end, and mum and dad will nudge a bidder in the back and say, ‘It’s OK, have another bid, we’ll give you more money’.

“So for those without that kind of backing, or who don’t have a lot from selling a previous property, they have to realise that any slight edge might help them. That means doing a lot of homework and research to be familiar with likely prices so they know exactly what they’re in for and can be confident.”

It also means building a relationship with the sales agent too, he advises, and being transparent about how much money you have, so he or she might prove a useful ally.

Trying to understand the vendor is another valuable tactic, BresicWhitney chief executive and chief auctioneer Thomas McGlynn said.

It might be an elderly owner who hasn’t yet found somewhere else to go or a young family still searching for their new home.

“Letting them know, via the agent, that you’d be willing to buy their property and then let them rent it for three to six months while they find an alternative could be a great way to get you across the line,” said McGlynn.

“You could also offer either a longer or a shorter settlement, but often that’s not as important to a vendor as more money.”

For those who are lucky enough, another tactic when the research reveals you can’t succeed with the sum available to you against rivals is to … find more money, he recommends.

“It’s important to have extra conversations maybe with family members, your mortgage broker or bank prior to that auction,” he said. “Sometimes, just even a little more might be enough.”

“Your competition might be on their very last bid, and a small sum extra could be enough to secure the sale.”

Cooley Auctions managing director and auctioneer Damien Cooley favours making a pre-auction offer auction, particularly if there’s a lot of interest in a particular property and bidders pushing the price up.

“In an auction, buyer emotions can take over and people can spend more money than they intended,” he said. “A prior offer avoids that, but some buyers try to negotiate too hard; instead, they should be putting their best foot forward.

“That might not necessarily mean their very best offer, but it needs to be strong enough for the owner to take the property off the market. A lot of owners are nervous about auctions – it might fail to sell or go for a lower price – and want to avoid that rollercoaster.”

It’s possible to put conditions on an offer, too, with a time set for it to expire to prevent too much shopping around for a better one.

McGrath Estate Agents chief auctioneer Scott Kennedy-Green also advises cash-strapped buyers to try with a pre-auction offer. “We’re seeing high rates of sales prior to auction at the moment,” he said.

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If the cash-strapped buyer has to go to auction, they should act confidently and aggressively to try to out-psych their richer rival bidders. In a straight race between a V8 car and one with two cylinders, the V8 will always win – unless the driver is tentative, Kennedy-Green says.

“But if the two-cylinder driver comes out fast and hard, that could well put off the driver of the more powerful car or the bidder with more money,” he said. “Stamp your authority on the auction straight away to deter others.”

Cooley agrees. “My advice is to make the first bid a really strong and confident one. If, for instance, you have $1.68 million, and you know the price could go above that, open at $1.5 million and go up quickly.

“You could knock out a few bidders at the start. Carry on without fear and aggression, and always make sure you finish on your best bid; don’t let someone else finish on your best bid!”

And, at the end of the day, if all else fails, set your sights on something more affordable, says Graeme Hennessy of Premier Property Auctions. “The market is very, very strong at the moment, so a solution if you keep missing out would be to buy a villa or townhouse instead of a house or move further out.”