If you’ve never been to an auction before, it can be quite a confronting experience. But that’s not reason to shy away from them, and exclude yourself from the chance to get a fantastic deal on a property…
It’s just a matter of going in prepared, understanding a few key principles- and sticking to them.
So don’t let the word ‘Auction’ cause you to tune out from what could be a great opportunity- just take note of these important points:
#1: Attend Other Auctions
Attend two or three other auctions beforehand to get a feel for the process. You’ll quickly learn about bidding strategies and what type of body language to convey. This should also allay any fears you may have and will expose you to an auction- without the stress of being a bidder.
#2: Set A Limit – BUT REMAIN FLEXIBLE…
Setting a budget is vital. When it’s your turn to buy, have a set limit in mind. A few extra dollars is generally OK, however you must be prepared to bow out and walk away if the bidding goes beyond your limit. One tip is that other buyers often set their limit as an even number, so make yours a little more than the round number.
#3: Make Sure You’re Prepared Financially
Organise firm finance from your lender. Successful bidders are usually required to present a deposit cheque of 10% of the final price after the auction has concluded. Ensure you have this amount set aside in your bank account, ready to go.
#4: Arrive Early
Feeling confident? Make sure you know the exact time of the auction and aim to arrive early. Check that no late changes have been made to the contract of sale. Position yourself where you have a good view of the other bidders and (most importantly) where you will be seen and heard by the auctioneer.
#5: Get Someone Else To Bid
If you don’t trust yourself to bid on the day, get someone else to do your bidding for you. Buyers Agents or other Real Estate Agents are reliable people for this.
#6: Don’t Be Afraid To Bid
Opinions vary as to the “best” bidding strategy, but the key is to stick with what’s most comfortable for you. Some people prefer to start bidding early and make large bids to scare rival bidders off. Others hold back for a while and trump the competition at the last minute. Either way, bid when you feel ready, bid with confidence and bid without emotion. Don’t be distracted by others and try not to reveal how much you like the property, as this may drive the price up.
As a bidders you’re also permitted to ask the auctioneer to accept a lower bid increment, if you feel it’s too high.
When the auctioneer says that the property is “on the market”, it means that the reserve – the seller’s minimum accepted price – has been reached. Many wait until this point to place their bid. The reserve price can change at any time while the auction is in progress.
#7: What If The Property Will Be “Passed In”?
If the property has not reached the reserve price and is “passed in” at auction, there may still be hope. The highest bidder prior to the close of the auction will be given first option to negotiate a sale price with the owner and agent.
If you have participated in the bidding or have been sitting back watching how it is progressing, and the auctioneer announces the property is going to be passed in, it is a good strategy at this point to bid up to obtain the right to “first negotiate” with the owner.
Securing the right to first negotiate does not cost anything and you have created a contract between yourself and the owner entitling you to negotiate before anyone else. Your contract comes into existence the moment the auctioneer concludes the auction by passing the property in.
#8: I’m a successful bidder!
If the property has reached the reserve price and you are the highest bidder, congratulations- you are a new home owner! You will be expected to sign the contract of sale and to provide a 10 per cent deposit cheque on the spot, as there is no “cooling off” period with auctions, as happens with a private treaty sale.
Being the successful bidder may not happen at your very first auction attendance, but don’t despair: one day the winning bid will be your own.
So take these notes on board, make sure you’re fully prepared- and happy bidding!