Hands up who is daunted by the idea of bidding at an auction. It can be a daunting prospect, can’t it? As both an agent and auctioneer, I can identify with these sentiments because I see it in my clients and bidders regularly.
Within the real estate world, an auction is commonly regarded as the “fairest way to value a property” because it brings all interested parties to the market and the highest price is obtained. This may mean you have one hundred buyers or zero. It is a favoured method of purchase for buyers who value its transparency and ability to have control within the exchange. While this seems all well and good, there are key pieces of advice every home buyer must know before going into an auction should they wish to come away with the prize.
Finances in form
Going into an auction without knowing what finances you have to work with could be fraught with danger. It is easy to get carried away being within such a highly charged environment, so you need to ensure you enter the auction with a clear budget that you have to work with. On auction day, you will need at least 10% deposit of the sold amount so you can exchange unconditionally under auction conditions. For example, if the property you won at auction sold for $800, 000, you would be liable to pay the vendor $80, 000. Sometimes this can be negotiated, however this needs to be agreed upon with the agent and the owner’s legal representative prior to auction. Further, if for some reason after the exchange is made but the buyer cannot settle, the deposit will be forfeited and the owner is eligible to sue should the property result in selling at a lower amount than the price which the buyer initially offered.
Enter an auction knowing as much about the property as possible. While not mandatory, it is certainly advisable to arrange for a pest and building inspection to be done prior to the auction. While this may seem like just another expense to add to the list, it will be invaluable in the long term should the property be revealed as high risk or costly to repair. Further, the satisfaction one gains from their home can go beyond the property itself- the neighbourhood, its residents, the local amenities all contribute towards this. It could be worth taking the time to talk to neighbours or other residents about what it’s like to live there.
Be in to win
If you are planning on bidding at an auction, you need to be in to win. Ensure that you arrive early and show a valid form of ID at auction registration to be able to sign up for auction participation. Once this is done, you will receive a bidder’s number which you will need to display to the auctioneer each time you make a bid. It is a requirement in Australia for any auction participant to register on the day, however do not let this deter you- you are not liable to partake if you do register.
Auction day ‘strategy’
An auction is just as much a psychological game as it is anything else. If you want to win- you need to play the part. Give the impression that you are serious and are there to purchase the property. Ensure that you dress smartly. Position yourself where you can be seen by fellow bidders and the auctioneer and where you can see them also. While experts will have different theories on game day ‘strategy’, I suggest to clients to avoid keeping their cards to their chest and coming in at the last minute. If there are three words I would use, it would be “loud, fast and clear”. Signify to your fellow bidders that you intend to come away with the prize. This can be achieved by coming in first, and speaking loudly and clearly. If you start with a significant bid straight away, this can indicate that you have ample resources at your disposal- even if this may not be the case. At the end of the day, you want to know that by the time the property is “going, going, gone”, you have done everything possible.
About the writer: A licensed real estate agent and a qualified auctioneer, Geoff Luby got his start in real estate in 1978, bestowing him with a wealth of experience, knowledge and wisdom. He thrives on being in a position to help people, acknowledging that buying and selling property is one of the most important undertakings in people’s lives.
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