22 November 2019

8 Things You Absolutely Must Do Before Bidding at Auction

Adrian Atelj
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Around a fifth of all property sales in Australia are auctions. These properties usually attract a high level of buyer interest and competition, and often go for far more than similar homes sold using other methods of sale.

That’s why there’s a good chance that when you do find the right home or investment it’ll sell via auction. To help make sure you give yourself the best chance at securing the property you want, follow these simple tips before you bid.

1. Get mortgage pre-approval When you win an auction, you’re legally required to complete the sale. If you win and then find that you can’t secure a home loan you could lose your entire deposit. To make sure this doesn’t happen seek advice from a mortgage broker or lender at least a month before your auction. Get pre-approved so that you can be confident when you bid.

1. Understand the sale contract A sale contract is a legally binding document and if you don’t understand what you’re getting into you might find yourself in deep water when you sign. Have a conveyancer inspect the contract before the auction to explain its contents and identify any red flags.

1. Perform due diligence When the gavel strikes and you win at auction there’s no going back. To make sure you know what you’re buying you should perform thorough and detailed due diligence well in advance of auction day.

That means:

  • Visiting the home and inspecting it.
  • Spending time in the neighbourhood.
  • Arranging a building inspection.
  • Arranging an electrical, plumbing and/or pest inspection if the property is older or has obvious issues.
  • Checking with the local council to see if there are any proposed or granted planning permits for nearby developments.

Be as thorough as possible when you do your due diligence and factor any issues you find with the property into your eventual bid.

1. Know the market Research the market in the area so that you can be absolutely sure you’re paying the right price. Find out what similar properties in the area have sold for, if the average price in the suburb is increasing, and how quickly nearby properties sell. Speak to a local sales or buyer’s agent for help with this step.

1. Set a bidding limit Once you’ve researched the market and had your finance pre-approved, decide how much you’re willing to spend on the property – this is your bidding limit. Under no circumstances should you exceed this.

You should also make sure your bidding limit leaves space in your budget for the extra costs of buying and owning a home like stamp duty, maintenance, insurance and moving.

1. Understand the auction rules Before you bid you need to know the auction rules. These should be on display for at least 30 minutes before the auction, but it’s always better to understand them a little further in advance. You will be able to find a summary of auction rules by your state’s Consumer Affairs department.

1. Attend an auction Auctions are loud, exciting and intimidating. When you’re in this environment for the first time it’s easy to make rash, impulsive decisions and get swept up in the atmosphere.

Attend an auction or two before you bid so that you know what it’s like and can stop yourself from getting carried away.

1. Bid confidently When you’ve done all your due diligence and ticked all the boxes we’ve listed above, it’s time to win that auction. Keep your bidding limit in mind at all times but bid confidently right up to it. Sit near the auctioneer with a clear view of the room so that you can also see other bidders and read their body language.

With a little luck and a lot of planning you could win that auction and buy your dream home or investment. Take the time to get ready before hand and you’ll improve your chances tenfold.

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