Pre-auction offers: are you aware of the risks?

It’s a question I hear every single week: “Cate, should I make a pre-auction offer?”

The motivation is usually clear. A buyer has found a home they’ve fallen for, and the thought of losing it under the hammer is unbearable. On the surface, a pre-auction offer seems like the smart, proactive move. It takes the property out of the competitive arena, cuts out the stress of an auction crowd, and secures the home without the public theatre.

But like so many things in property, it’s not that simple. Pre-auction offers come with real risks, and buyers need to be aware of how quickly a campaign can shift from transparent to murky. The biggest danger? Triggering a “best and highest” process, and being faced with bidding in the dark.

Auctions Offer Transparency

One of the most misunderstood advantages of an auction is transparency. Every buyer in the crowd sees each bid. You know who you’re up against, how strong the competition is, and you have comfort that the other buyers are real.

It’s not perfect—auctions can be emotional and intimidating—but there’s comfort in knowing that if you’re the last bidder standing, you’ve paid one increment more than the next best buyer.

Auctions also offer social proof; another challenge for buyers to navigate, but a reassuring psychological phenomenon all the same.

The Pre-Auction Curveball

Now, imagine this scenario. You decide to make an offer before auction. You think: If I go early and strong, maybe I’ll knock out the competition.

The more naïve expectation is that the agent will sell the property to you for the agreed price without talking to any of the other potential buyers.

What often happens next is this: the agent calls every other interested party and says, “We’ve received a pre-auction offer. If you’d to participate, please submit your best and highest offer by 5pm tomorrow.”

Suddenly, the entire campaign has flipped. Instead of an open, transparent auction, you’re in a sealed-envelope style competition. You have no idea what others are offering, and no ability to reconsider your offer.

The “Best and Highest” Trap

This process disadvantages buyers in several ways:

• You lose transparency. There’s no visibility of where other buyers are sitting. You could overshoot the winning bid by tens of thousands—or miss out by a hair’s breadth.
• You lose control. You don’t get the chance to read the room, take a pause, or adjust your strategy like you can at auction.
• You lose time. These processes often come with tight deadlines designed to pressure buyers into quick decisions.
• Overpaying or underpaying. Without the open bidding process, you can’t truly test the market.
• The agent could be bluffing you with other buyers: This is the toughest of the list of disadvantages. Agents don’t always bluff; in fact an agent would be taking a risk if they bluffed with ‘other buyers’ who aren’t actually in the mix. But the use of the “Best and Highest” method is based on inciting a fear of missing out, and extracting the buyer’s highest bid.

For many buyers, the irony is brutal: the very act of making a pre-auction offer creates the exact environment they hoped to avoid.

How Buyers Can Protect Themselves

If you’re considering a pre-auction offer, here are some key safeguards:

• Establish whether the property can be sold prior to auction. Some auctions must legally be run. Other auctions are mandated by the vendors, and even a strong pre-auction offer won’t tempt them.
• Ask the question. Before offering, ask the agent exactly how they will handle pre-auction offers. If the answer is “best and highest,” proceed with caution, unless you are quite confident that the property value sits above your maximum budget.
• Do your due diligence first. Have your finance approved and inspections done before making any offer. You don’t want nasty surprises after signing.
• Get legal advice. Always run the contract past your solicitor or conveyancer.
• Know your ceiling. Decide the maximum price you’re willing to pay and stick to it. Don’t let urgency push you past your limit.
• Be prepared to gear up for auction. Sometimes the smartest move is to hold your nerve and wait for auction day. If the campaign is not going quite as strongly as the agent hoped, your chances of securing the property for a sharp price is far higher on auction day.

When Pre-Auction Offers Do Work

Despite the risks, there are situations where a pre-auction offers can be effective:

• When the agent’s process for dealing with competition suits you. Many will host a zoom auction, or a boardroom auction within a 24 hour period. In situations like this, buyers are afforded the opportunity to see each other in a transparent auction style environment.
• When competition is thick, and the vendor is motivated and your rapid timing shuts out other buyers. For example, when you are privy to information about other buyers who may not have their finance approved yet and the agent supports a quick process.
• When your budget upper limit sits at or below the appraised value of the property. A ‘Best and Highest’ bid may just secure you the property, and you’d have no regrets either way.

In hot markets, most vendors want the theatre of auction day to push prices higher. In balanced, or softer markets, the “best and highest” play is often tempting for an agent to utilise.

Conclusion

The lure of the pre-auction offer is strong. It feels decisive. It feels like you’re seizing control. But in those situations where “Best and Highest” is applied, it often hands control back to the selling agent, who can flip the campaign into a process that strips away transparency and ramps up pressure.

Before you put pen to paper on a pre-auction offer, ensure you aren’t setting yourself up for a scenario that is more stressful than the auction itself. And if “Best and Highest” is the agent’s preferred metho for dealing with competing buyers, as yourself this;

Am I prepared for this to turn into a best-and-highest race?

If the answer is no, then the most strategic move might be the simplest: wait for auction day, keep your powder dry, and let the transparency of the process work in your favour.