Buying property at auction can be both exciting and nerve-wracking. But careful planning can make the process a whole lot easier. Here are our top tips for nailing the bidding experience and maximising your chances of success on the day.
Attend plenty of auctions before you bid
Before your bidding debut, it’s important to observe several auctions to understand how they work. Get a feel for the language used and the process involved.
In general, here’s what you might expect:
The auctioneer will run through any relevant state or territory laws and auction rules. In some states, you may need to register to bid.
The auctioneer will request an opening bid and nominate an amount by which bids must increase (for example, in $5,000 increments). Smaller bids may also be accepted, but it’s up to the auctioneer.
The reserve price is the minimum amount the vendor will accept as a winning bid. Once the bidding reaches this amount, the property is said to be ‘on the market’ and will be sold to the highest bidder. The auctioneer will say “going once, twice, three times… sold” on the final bid.
The auctioneer may make vendor bids on the seller’s behalf to progress the auction. These are legal, but the auctioneer must disclose vendor bids. Rules vary depending on the state or territory.
If the bidding isn’t progressing, the auctioneer may go inside to seek instructions from the vendor about whether they are willing to sell to the highest bidder.
If the reserve price is not met and the property is ‘passed in’, the highest bidder will have the first opportunity to negotiate with the seller.
A deposit is required on auction day (usually 10 per cent of the purchase price), with the balance due on settlement. Contracts are signed immediately after the auction, then it’s time to celebrate.
Make sure your finance is in order
As the auction heats up, it can be easy to get caught up in the excitement and bid more than you intended. For this reason, it’s extremely important to have your finance pre-approved before you don your auction hat.
Home loan pre-approval is a written indication from a bank of the amount they are willing to lend to you. Pre-approval gives you a clear understanding of your spending limit and greater confidence when bidding. Speak to us and we’ll sort out pre-approval for you.
Also, don’t forget to plan for how you will pay the deposit on the day. Check with the selling agent which payment options are accepted in advance (personal cheques, bank cheques and deposit bonds are commonly used).
Get building and pest inspections
Be sure to have building and pest inspections performed before the auction. There’s no cooling off period when you buy at auction, so if you’re the winning bidder, you are obliged to purchase the property. You don’t want any nasty surprises once the property is yours.
It’s vital you go into the auction with a bidding strategy in mind. One common tactic is to knock out the competition with a strong bid early in the game. For example, if the bidding is hovering around $520,000, you may come in with a confident bid of $600,000. This shows other bidders you have the money and are prepared to buy.
Other approaches include starting low and early and progressing with slow bids, or avoiding hesitation and counter-bidding straight away. Whatever your strategy, be sure to call out your bids loudly and with confidence.
Call in back up
You don’t have to go it alone. If you’re concerned about staying within budget, you could ask a friend or relative to support you on the day to help keep you accountable. Another option is to have a professional bid on your behalf.
Auctions are stressful, but with a little preparation you’ll be able to navigate your first auction like a pro. For advice about your borrowing power, deposit, pre-approval and home loan options, please get in touch. We’re here to help!