So you’re looking to buy a property! That’s such an exciting decision and it’s a process you’ll remember forever. Buying at auction can be an overwhelming process. However, there are so many benefits to doing it this way.
Firstly, you can gauge the competition as you know who else will be bidding. You can also watch the negotiation process happen before you, and this will often give you valuable insights into the true market value of the property.
Finally, once that hammer drops if you’re the highest bidder the property is yours (provided it meets the reserve price). No one can out-negotiate you now; you’ve won!
Here we’ve compiled a few top tips to make sure you’re 100% ready going into auction day.
1. Make sure you’ve been pre-approved for a loan
Being pre-approved for a loan will definitely help you on auction day and it is one of the most important things you can do to prepare.
Pre-approval means you walk into the auction knowing the amount the bank will loan you. Therefore, you can be certain when making bids and you know when to stop. Remember, don’t bid over the amount you’ve been approved for, as a sale at auction is final.
You will be expected to pay a deposit for the property upfront as the sale is final. Therefore, pre-approval is an essential first step.
2. Know the value of the property before bidding
If you have a rough idea of how much the property is worth, this knowledge will help you recognise when you’re getting a bargain and also when you’re overpaying.
How do you find out how much the property is worth? Research, research, and more research. Prior to the auction, ask the selling agent for a list of comparable sales. While they’re not allowed to tell you the reserve price of the property being auctioned, they are able to give you information about other sales in the area so you can know what other people have been selling and buying for.
You can also look into getting a buyer’s agent, but more on this later.
3. Take your time and bid early
By bidding early, you’re taking a little bit of control over the auction. You’re also allowing yourself to take some time and make considered thoughtful bids.
Auctions are fast-paced but don’t rush yourself. If you enter your first bid late, the chances of you being swept up in panic and adrenaline are higher. You’re also more likely to bid outside your price range, which is not at all what you want to do.
4. Have a chat to the seller’s agent
Most websites and resources will tell you to steer clear of the seller’s agent and not to tell them anything. While we understand their logic behind this, there are a lot of reasons why you should talk to the seller’s agent.
For a start, it will help them understand what it is you’re looking for in purchasing a property. Hutton & Hutton principal Peter Hutton says he likes to have a discussion with buyers to understand their motives for purchasing and get an understanding of what they need in a home.
He also believes it’s a fantastic opportunity to get into the closed-door negotiations. In Queensland, auctioneers don’t have to call the property is on the market. This means people can submit their bids and the auction can proceed much unlike the Hollywood-esque speed-talking and fast-paced bidding.
Speaking to the seller’s agent will allow you to bid and negotiate without feeling panicky when you hear the hammer coming down. When you feel calm and in control, you won’t outspend your budget or spontaneously pay more than you perceive the property to be worth. If the property doesn’t sell for the reserve price, the interested bidders will then be privy to backroom negotiations. It’s important to express interest in the property so you don’t miss out on these negotiations, as they can sometimes lead to the property selling for under reserve price!
5. Consider a buyer’s agent
Buyer’s agents are an increasingly popular method of purchasing at auction. For a percentage of the sale price, these agents will do the market research and attend the auction for you. They may even be able to negotiate a sale prior to auction by asking the right questions.
Ultimately their experience will help you get the best price at auction, but make sure you check in regularly with your agent, keep communication open, and always make sure you understand what they’re doing and saying on your behalf. After all, it’s your money!