Auctions are a popular way of selling property when the market is strong and sellers are confident they can fetch a good price. For buyers, the process can be emotional, so going in with a solid strategy can help you come out a winner on the day.
One of the benefits of buying at auction is that you get a definite result. Contracts, once exchanged, are unconditional, and once signed by both parties they’re binding. But before you get to that stage there are a number of factors to consider. Like making sure you have the authority to bid. In certain states, all bidders need to be registered, to combat the planting of ‘dummy’ bidders to raise the price artificially. Do check the laws with your estate agent or local Real Estate Institute to be absolutely sure.
Once you’re ready to bid, bear in mind that it pays to keep your emotions in check. You’re making a significant financial investment and you don’t want to get carried away. So use these ten tips to boost your auction knowledge, build your confidence and stay focused on your goal of owning the property you’ve set your heart on.
1. Start studying
Before you bid on any property, get a realistic view of the market value. Properties sold at auction (unless advertised differently) are subject to a reserve price. This is the minimum the seller is prepared to accept. The agent cannot tell you what it is, so it’s up to you to monitor recent sale prices in your area. For a fee, your lending institution or a registered valuer can also give you an opinion of the value.
2. Practice makes perfect
Attend as many auctions as you can, to familiarise yourself with the rules and procedures. Note down any strategies used by winning bidders. They’ll also give you an insight into the prices properties are advertised for, and what they sell for on the day.
3. Inspection is everything
Property inspection is an essential part of the buying process, and it’s worth visiting several times so you’re absolutely sure it’s what you’re after. Get to know the agent representing the property. They know the local area inside out, and may be able to give you an idea of how much competition to expect. If you’re really serious about a property, you could consider having it thoroughly looked over by a licensed building inspector, an architect and a pest inspector before the auction.
4. Get legal advice
Ask your solicitor or conveyancer to inspect the Agreement for Sale, which is held by the auctioneer. They may suggest making additions or variations. These can be negotiated between the solicitors of both parties and, if agreed, the contracts amended accordingly.
Also, check that yours is an exact copy of the auction contract, and that there haven’t been any late changes. Make sure you have a clear understanding of what is included in the sale. All fittings, furniture and other relevant items should be clearly listed.
5. Be financially prepared
The winning bid is a binding contract and, if you are successful, your finances must be in order. Once you decide to start searching for a property, contact your lending institution for finance approval. That way, you’ll know your borrowing power and can set your limit for the auction. You’ll also need written approval of the loan before the day, and of the deposit – usually 10% of the purchase price.
6. Register your intentions
Even if you were required to register, you may still need to show some ID at the auction. A driver’s licence with your name and address is usually sufficient. But remember, being registered doesn’t mean you’re obliged to bid – so don’t feel pressured if you change your mind.
7. Keep your cool
If you don’t feel comfortable bidding and think you’ll get too emotionally involved, consider asking a professional purchasing agent, friend or family member to bid on your behalf. If you’re using a proxy bidder, make sure you talk to the agent or auctioneer to understand their requirements. And do bear in mind that a proxy will bind you to the purchase if their bid is accepted.
It’s a good idea to arrive at the auction a little early and find a spot where you can watch the other bidders.
8. Be bold
Bid with confidence, so the auctioneer spots you and takes your interest seriously. Showing that you’re a strong bidder can even give you a psychological advantage..
9. Know when to stop
You’ll know your limit before you go into the auction room, so stick to it. Once the bidding has reached your limit, stop. If you can’t resist the temptation to keep going, then walk away.
If you weren’t successful, accept that over-extending yourself is not in your interest and that there will be plenty more properties. And if you were successful, congratulations – it’s nearly time to start celebrating!
10. Be prepared
If you’re the successful buyer, you just need to sign the contract and pay your deposit once the property has been ‘knocked down’ to you. The deposit will be held in trust until settlement. The next step is to organise insurance, to protect your interest in property. And if you need early access to your new home, speak to the agent because they may be able to arrange it.
For more information on the auction process and the regulations in your state, please contact the Department of Fair Trading.
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