Private sales are popular in many places, but – throughout Australia – auctions are also a common way to buy and sell property. Whether they take place outside the property itself (with vendors peering through the Venetian blinds in nervous terror) or at a central location, auctions are high stakes. When the property you want is right there in front of you, emotions can be higher than your budget.
So here’s five insider tips on bidding – and hopefully winning – at an auction.
1. Set your limit, and stick to it
After you’ve inspected a property that you’re interested in purchasing, take a look at previous results for similar properties in the area, understand your spending limits, and set a limit for yourself.
If you have pre-approval, decide whether you’re comfortable spending to thar limit; many lenders offer generous amounts, so make sure you can meet repayments. Remember that not every property is of equal value. Set your limit, and never bid above it.
2. Bid at your limit
If the auction seems competitive, try to structure your timing so that you are the person who bids your maximum limit. If you’ve set a limit of $800,000, don’t let someone else say that number. Imagine if they won!
If another bid comes in, you’ll know immediately that the property is not for you.
3. Be active and visible
If you’re planning to bid at an auction, take a prominent position and bid loudly and clearly. It sends a sign to the auctioneer and other bidders that you’re serious.
At any stage, auction rules permit anyone to ask the auctioneer whether the property is “one the market”. This simply means that bidding has reached the reserve price set by the vendor. Once a house is on the market, it will sell to the highest bidder, rather than being ‘passed in’.
At some stage, the auctioneer will disclose that a property is on the market, although they may not do that immediately the reserve price has been bid. But if you ask, they are obliged to tell you.
4. Be prepared if the property is passed in to you
A property is passed in if it hasn’t met the reserve price set by the vendor. If you have the highest bid at this stage, you will be invited to enter into negotiations to see if you can agree on a price.
Usually you don’t negotiate directly with the vendor. The auctioneer moves between you and the vendor. It’s important to remember at this stage that the agent is not on your side. They want the property to sell for the highest price they can get.
It’s easy to become overwhelmed at this point. It’s a high-pressure environment. Remember, though, that you hold all the cards; you can walk away at any stage. From the agent’s perspective, the only thing worse than not getting a high price is not getting a result at all.
You may decide to offer a little bit extra as a sign of goodwill (as long as you don’t spend over your limit). In many cases, the vendor needs to sell. If they make a reasonable offer, be prepared to take it.
5. Outsource the bidding
If the though of bidding fills you with dread, you are permitted to have someone else bid for you. Buyer’s Advocates are professional bidders, and they can also help you find suitable properties.
Of course, you don’t have to pay someone to bid for you; you can ask a family member or a friend. Letting them know your limit and any other auction strategies is a great way to take the pressure off on auction day.
Contact Mortgage Broker Group today if you’re planning on bidding at an auction. For no cost we help you get pre-approval, advise on previous sales in the area, provide a valuation of the property and assist with other auction-winning tips.