Bidding at property auctions can be stressful, there is no doubt about it.
If you’re inexperienced, emotionally attached to a property or not sure how to bid, then you’re likely to feel intimidated.
But here’s the thing…auctions are here to stay, especially in our capital city markets and if you avoid them you’ll miss out on many of the better properties for sale.
In fact, the auction markets in Sydney property market and Melbourne property market have heated up again with auction clearance rates rising as keen purchasers battle to secure good properties amongst the slim pickings currently on the market
So here are a few tips on how to succeed at auction:
1. Watch and learn
Think of bidding at auction as a bit like an apprenticeship.
You need to watch, study and learn before you become comfortable with something new.
If you’re a relatively new investor, it’s important to attend a few auctions before you bid.
This will help you see how the auctioneer conducts proceedings, how bidding unfolds, and give you a sense of how much heat is in the market.
Auctions are transparent.
You can see what the market thinks a property is truly worth.
You can see and watch how other buyers bid.
You can study their body language and learn how to tell when they are reaching their limit.
This is invaluable knowledge for any investor.
Of course if you lack the confidence to bid yourself, you could always get an experienced buyers agent to bid on your behalf – that’s what they do every weekend.
2. Project confidence
Like so much in life, auctions are all about confidence.
Be prepared, do your due diligence in advance, turn up early, dress smart and project an air of confidence.
The auctioneer will usually spend a bit of time going through the features of the property and this is a good time to check out the competition.
Who looks serious and who looks like they are just curious neighbours?
In Sydney where bidders need to register in advance, get to the auction early and see who registers – you’ll then see your competition and know who’s serious and who’s just sticky beaking.
While some people like to hold off and only bid in the final moments of the auction, I don’t think there is any real advantage to this.
I prefer to go in early and don’t be afraid to open the bidding high.
It signals you’re more than a bargain hunter and have every intention of buying the property.
Then bid assertively and with confidence.
Don’t um and ah when the auctioneer offers you the counter bid.
Beat them to it, if possible, to give the impression to other buyers that you have limitless pockets -even if you don’t.
Very few of us do!
Make your last bid as positive as your first one.
Of course you can only bid with confidence if you go to the auction prepared, so:
- Have your finance preapproved so you can bid unconditionally – remember if you’re the highest bidder – the property is yours.
- Have your solicitor check the contract prior to auction.
- Do any necessary pre purchase due diligence or building and pest inspections.
3. Know your limits
Before bidding starts, investors must formulate a walk-away price.
This is the figure you have in your mind that amounts to the absolute limit you’re willing to pay for the property.
Then if bidding goes beyond this figure, be prepared to walk away.
Don’t change your mind in the heat of the auction or listen to the auctioneer’s suggestion “that it is only $500 extra”.
Stick to your guns.
There will always be another property around the corner.
4. Prepare to negotiate
If the bidding fails to reach the vendor’s reserve, then the property will be passed in to the highest bidder.
If you’re serious about buying the property, make sure that you are in the position to have this first right of negotiating with a vendor.
Now this is where it becomes even more important to hold your nerve.
The agent will try and bring you up a little bit in price to meet the reserve.
But remember: you’re in a strong position here so firstly ask:
- What is the vendor’s reserve?
Then ask the cheeky question:
- What is the vendor’s reserve now that the property has passed in?
If the agent puts pressure on you, politely remind him or her that the property has been tested in the open market and your offer is the best they have had so far.
Don’t feel obliged to buy the property, or pay the price the vendor asks, just because you have entered post-auction negotiations.
Plenty of potential buyers walk away at this point and so should you if you don’t get the price you want.
Follow these basic tips and you will find auctions a lot less daunting.
In time, you may come to enjoy them as much as I do.