Property buyers, both homeowners and investors, have a love hate relationship with auctions. Some love an auction – they like to see what the competition is from other potential buyers and love the excitement of potentially bagging a bargain. However, for others, they’re worried they will get carried away in the moment and pay over the odds.
Buying at auction can be nerve-wracking if you’ve never done it before, (and it can be nerve-wracking even if you have!), but like everything which seems daunting, it’s a case of doing your homework. Remember forearmed is forewarned!
If you are thinking of buying at an auction, here are our tips to help prepare you:
Before the Auction
- Experience an auction: Learn how an auction works first hand by attending other auctions. You don’t have to register your interest in buying, just attend and watch.
- Do your research: Find out the sold price of similar properties in the area for both private and auction sales. That way you’ll get an indication of how much the property is worth. Plus, sometimes if auction clearance rates are low, the seller may consider a reasonable offer before going to auction.
- Know your finances: Check what you can afford by seeing a financial specialist. That way you know what you can realistically afford – and know when to walk away.
- Extra clauses: Ask to see the contract before you bid and if necessary ask your solicitor to look at it – there may be some clauses in there you aren’t comfortable with.
- Advanced viewing: Inspect the property before attending the auction. It may also be worth having an independent building report done. While it will cost you, it maybe money well spent if it saves you from buying a property with hidden problems.
- Know your competitor: Ask the agent how many Section 32 and building report requests have been made so you can gage how much interest there is in the property. Generally, only half the number of people who have requested this information will be genuine players.
At the Auction
- Play the game: Auctions can be a bit of a game in psychology, so dress like you mean business and call out your bids with confidence. Standing at the back will give you a better overview of what is happening. Most importantly don’t be unnerved by other bidders who are doing the same!
- Keep your highest price to yourself: In the same vein, don’t tell the auctioneer your highest bid price. This gives them the upper hand and they may play the room to bring the bidding up.
- Timing your bid: Some swear by waiting until the last minute to be the final bidder, but they may run the risk of losing out if the gavel hits the block before the bid is placed. Others suggest bidding early, but don’t bid at your top price. That way you’ve room for manoeuvre if the bidding continues.
- Know the rules: Did you know that if a property doesn’t reach its price, and you’re the highest bidder, you have first right to negotiate with the vendor? Or if the reserve price isn’t met, the property owners don’t have to sell? Make sure you know the rules, particularly if you’re a successful bidder as you have other obligations to fill such as giving a deposit on the day.
- Hiring a third party: Consider employing a professional bidder to bid on your behalf if you are nervous about attending an auction. While you will have to pay them, they will take the stress and, more importantly, if you really like the property, the emotion out of the auction. They will only bid within your budget and won’t get carried away by the moment.
- Walk away: If the bidding goes above your limit, walk away, no matter how much you love the property. It probably means there’s one more suited to your needs waiting for you to buy just around the corner!
If you’re thinking of selling your house at auction, or would like to know more about how an auction works and what it involves, come in and have a chat or give us a ring on (02) 4954 8833 .