BUYING AT AUCTION
At an auction, a home will be sold to the highest bidder (subject to any reserve) but there are ways you can tactically prepare to be at the end with the last bid.
As a prospective buyer, you’ll see a lot of places before the one but even after you find what may be the perfect place for you, you need to put together a strategy to ensure you are successful on the day. The process can be a nerve-wracking thing, but it doesn’t need to be and with no clear strategy this will result in missing out on your dream home.
To avoid that happening you can put in some very simple strategies,
- Dress to impress – Dressing to impress can create an impression that you have an endless budget and can intimidate others, so they stop bidding earlier. Something as simple as appearance can knock other buyers confidence right out of the park.
- Bid with confidence – Part of an auction is guesswork. How much money does the other person have and should I stop because I don’t stand a chance? If you confidently bid to your max limit you may have other buyers second-guessing their chance to buy the home as your pockets will seem much deeper than they really are. Don’t be afraid to place a higher bid or many call it a knock out bid. For example, if you are bidding for a home within your budget and bidding is at $700,000 increasing in amounts of $10,000, a higher increase bid such as $40,000 shows the competition you are bidding to win. Strong bids often knock out more than 1 bidder, it has the potential to remove several bidders.
- Bid again immediately as soon as someone bids against you – Don’t wait 5 or 10 seconds or until the auctioneer starts his count to 3, go straight in with your counter bid. It always gives other bidders the impression you will keep going and you won’t give up.
- Visit auctions before you bid – Bidding at an auction is a skill. It is an experience you don’t want to be dropped into cold. I recommend going to 5-10 auctions before you bid at an auction. Observe how buyers are bidding and what discussions are being had. Have a chat with the agent and the auctioneer. A buyer’s agent can also bid on your behalf or if you have a friend or contact within the real estate industry ask them to come along on auction day. A little bit of knowledge can be very useful.
- Set yourself a limit – It’s not a good idea to bid more than your budget. Your limit should be set well before auction day and with due consideration and thought on your situation and of course what the bank is willing to lend you. A pre-approval is probably a good idea before heading into auctions.
- Ask the selling agent for comparable sales – A selling agent should provide evidence as to why the value of a property has been set. They can help by providing you with past sales within a block or in a street. The selling agent is there to help you throughout the buying experience and particularly on auction day. Don’t be afraid to ask them for anything you feel could help you and a great idea is discuss with the agent what you need to do to be the last bidder.
- There’s no rush – It’s not a race, take a moment if its needed but keep in mind the auctioneer will be starting a count to 3. Bid before this and don’t be afraid to ask the auctioneer for a minute if required.
What happens after the auction?
If you’ve won at auction, you’ll need to pay your deposit straight away, (usually 10% of the purchase price). You need to have this ready as a form of payment when you are bidding at an auction. The most common forms of payment are a personal cheque or a bank cheque. You’ll also need to sign your contracts. Remember, until the contract has been signed the seller is under no legal obligation to follow through on the sale.