Auction is a popular selling method, especially in sought-after areas where there is good competition for homes. Prospective buyers have to bid against each other in a public forum, with the property selling to the highest bidder if their bid matches or exceeds the reserve set by the seller.
Competitive bidding amongst prospective buyers allows the auctioneer to drive the selling price up. However, for buyers, it can be a daunting and intimidating experience, particularly for an inexperienced bidder who does not understand the auction buying process.
If you are considering buying your property at auction, here are our top 5 auction tips.
1. Do proper research Go to lots of auctions to familiarise yourself with the rules, procedures and conditions.
The auctioneer will usually read out the auction conditions before the bidding starts and provide you with a bidder’s guide.
Listen and learn the terminology used (“passed in” and “fall of the hammer”) and observe the body language of the bidders and auctioneer (pace, tone and engagement). Importantly, watch for different bidding strategies and their impact.
“A strong opening bid can immediately scare off the competition,” said homes.com.au Founder & Managing Director, Pat Carbone. “It shows you mean business.
“Small bids can slow an auction down; and a large incremental bid, known as a ‘knock-out bid’, can make your competitors give up, especially towards the end of the auction.”
It is also important to research the market. Investigate recent selling prices in the area and talk to lots of local agents. Inspect properties and increase your knowledge of prices, which will help you feel more confident about buying at auction.
1. Get your mortgage sorted On the day of the auction, the seller will normally require a deposit of 10% of the selling price. You must have your finances in order before bidding. Speak to your lender and obtain unconditional loan approval first. Then you’ll be able to set your financial limit for the auction.
1. Inspect before you bid It is important to inspect the property several times before auction. Make sure you are satisfied that the property is exactly what you are after and that all the inclusions are in good working order. You should also have the property thoroughly inspected by a licensed building and pest inspector before the auction.
1. Legal advice Take the contract to your solicitor or conveyancer well before the auction for review. They will advise you of any risks and ensure you understand all the terms and conditions.
One of the most important auction buying conditions to understand is there is no cooling-off period or any chance to change your mind once the hammer falls.
Your solicitor or conveyancer can negotiate some of the terms and conditions of the contract on your behalf, if you want to make changes.
1. Consider using a buyer’s agent If you don’t feel comfortable bidding, don’t be afraid to ask for help. Consider hiring a professional buyer’s agent or approaching a friend or family member to bid on your behalf. They will stay within your financial limit and not allow their heart to rule their head.