MOST properties listed for sale by auction find a buyer on auction-day, or soon afterwards.
But in recent weeks, a string of grazing properties listed for auction across the country have been sold beforehand – in some cases just days before going under the hammer.
This week, three property agents give their insights into why their recent vendors took up an advance offer, rather than waiting for the ‘competitive tension’ created by the auction process.
Just three days prior to its intended May 17 auction, the Northern Territory’s Mt McMinn Station, pictured above, was placed under contract.
Vendors Daniel and Michael Cahill, who manage Cahill Transport – a family-owned NT transport company and a general logistics service provider with strategically-placed depots across Australia – purchased the 80,900ha Roper River breeding property in 2005 for $3.55m.
In March this year, the brothers announced plans to amicably dissolve their partnership and listed the cattle enterprise, 140km east of Mataranka and 250km south east of Katherine.
Mt McMinn was expected to sell for more than $4.9m bare, with the successful bidder to be offered 3000 head of Brahman cattle, plant and equipment at market price.
“Some buyers don’t want to be locked-in to an auction situation. They want to make a good offer before the day.”
But Nick Myer from Elders Real Estate Regional Victoria said the Cahills were presented with a ‘very favourable’ offer prior to auction, which included the cattle purchase.
“It was combination of price, as well as favourable terms and conditions including short settlement, no finance clauses and early release of deposits that sealed the pre-auction deal, in this case,” Mr Myer said.
“There was no muster involved, which was also advantageous to the vendors.”
The sale of Mt McMinn was also negotiated by Alison Ross from Elders Katherine. She said some vendors are realising the market and buyer situation with banks.
“In this situation, there was an offer prior to auction meaning there was no valuation or finance, and attractive conditions. The risk of going through to auction was no bids or buyers requesting contract changes. Some buyers don’t want to be locked-in to an auction situation. They want to make a good offer before the day.”
Ms Ross said there had been good interest in Mt McMinn, with several people making offers to purchase prior to auction.
“The prices offered were comparable, however the terms and conditions offered by the successful purchaser sealed the sale, including a four-week settlement,” she said.
It is believed Mt McMinn was secured for around $7.5m including cattle and plant. While the agents refused to reveal the identity of the offshore investor, it is a family from South Africa keen to secure the property prior to any further competition. The property will be settled this Friday.
Chris Meares from Sydney-based Meares & Associates recently secured the sale of Nowendoc’s The Two Mile. The blue-ribbon grazing enterprise, pictured above, was being offered for sale at auction and online on May 24, but contracts were exchanged four days before auction day.
Located in the tightly-held New England region, the 1046ha property boasts some of the best natural fattening country in Eastern Australia.
“The offers must be attractive to drag vendors out of their comfort zone – and they are.”
When The Two Mile was listed in April, it was expected to achieve between $8.5 million and $9 million. It is believed the purchaser, an Australian family investment company, secured the property for around $9.3m.
Mr Meares believes strong offers prior to auction are giving vendors cause to stand up and take notice.
“Interested buyers, who refuse to go to the physical auction, are making attractive offers. They are prepared to pay a premium because they are serious about purchasing the place,” he said.
Mr Meares said such premiums ranged from 10 to 15 percent, which was significant.
“It is big money. The offers must be attractive to drag vendors out of their comfort zone – and they are. There is a shortage of good property and demand is strong due to good wool, beef and lamb prices.”
Mr Meares said some buyers were prepared to take a punt and pay extra, because they were working on the basis that they could have to pay more in the auction room, if a competitive situation arose.
“A pre-auction offer with a perceived premium attached often gets a result, and is advantageous to both the vendor and the buyer, because they can avoid the pain and anguish of an auction process.”
Last week, Ben Forrest from Colliers International sold the 12,184ha Muttaburra grazing property Verastan, pictured above.
It had been on the market for just two weeks, and had been listed for auction this Friday, on June 8.
A local Western Queensland producer seeking grass made an offer ‘too good to refuse.’
“There is nothing quite like true competition on the day (in the auction-room), but there are good reasons why vendors take offers prior to auction.”
Mr Forrest would not disclose the sale price, but said the value reflected recent sale prices in the area.
“I can’t say whether a premium was paid, because there is no time machine to prove what the auction room would have made. Realistically, it was an offer that the vendor was willing to accept knowing there was a risk they might have made less at auction,” he said.
Mr Forrest said the reason why offers are made prior to auction was often that some buyers are concerned they will get ‘beaten at the post.’
“As a result, interested parties are displaying urgency on some (better quality, in-demand) properties, and offering sooner rather than later. It is not happening in all cases, and there are plenty of listings that are still going all the way through to auction.”
Mr Forrest said an offer accepted prior to auction was usually unconditional, otherwise vendors would be more likely to go to auction.
“An offer accepted prior to auction must meet the auction terms – normally a cashed-up initial contract. So, a potential purchaser who comes in prior to auction and makes an offer subject to finance, is unlikely to secure the property.”
“Such an offer is less palatable to the vendor who is trying to keep it on their terms.”
Mr Forrest said there was other interest forming for Verastan at the time, but it was less ‘mature’ – and sometimes a bird in the hand was worth two in the bush.
“Not every auction goes off like a firecracker. You need to work hard to protect your price when you go through an auction process.
“There is nothing quite like true competition on the day (in the auction-room), but there are good reasons why vendors take offers prior to auction and they wouldn’t do it if they felt they weren’t getting the best deal.”
“Sometimes, when you go to auction there is not the depth, or the prior offer can also be just as attractive as on the day. Generally, vendors have a price in their mind, and when buyers are prepared to make an offer, they accept knowing the risk they take,” he said.
There was an incorrect reference in last night’s email alert to property readers, pointing to the listing of Inverway Station in the Northern Territory. The listing is in fact for a grazing property called Inverway in NSW. Apologies for any confusion – Editor.