As a means of transacting property, I think it is safe to say that the traditionally competitive environment of an auction is not always the preferred option for buyers and sellers.
Nevertheless, it is difficult to deny that auctions can be an effective tool for buying and selling real estate, particularly when national auction clearance rates hit robust levels on a consistent basis, as they have done in recent months.
Savvy buyers and sellers will know to keep their auction techniques well-honed.
The following sets out my top tips for buyers and sellers to maximise their results at auctions.
Tips for buyers
It is important to research the market around your property of interest as there are a number of key factors to look out for that can affect a property’s long-term value.
To start with, try to view several properties in the area to ascertain the buying environment within the local market.
Aim to get a good understanding of what stock is available and what properties have recently sold (and for how much).
It is also important to consider amenities such as public transport, educational facilities and shopping centres, as well as geographical factors such as surrounding noise and the aspect of the property.
Get a feel for auctions
It is wise to observe other auctions in the area before going in to bid on a property.
Doing so will not only allow you to get a feel for how auctions are conducted; it will also help you to get exposure to different auctioneers, one of whom may be the auctioneer on the day that you decide to bid.
Make your interest known
If you come across a property that you’re interested in buying at auction, make sure to let the selling agent know of your intentions.
Some buyers try to be secretive about their intentions and end up being disappointed when the property sells prior to auction.
Ask the agent to provide a sale contract for your solicitor to review, go back to the property for second and third inspections, take measurements and, if necessary, get a building inspector or builder to examine the property.
Get pre-approved finance
If you are planning to bid at a public auction, it is important to make sure that you have your finance formally approved before auction day.
A 10 per cent deposit is usually required for auction buys, unless arranged otherwise.
You will also need to have a personal cheque, bank cheque or deposit bond (if acceptable) to pay and exchange on the day.
Know your limits
Buyers at auction generally fall into two main categories – those who are bank-limited (approved up to a certain amount of money) and those who are self-limited (those who have a self-imposed limit that they will stick to).
Often, success or failure at auctions comes down to the last one to two per cent of bids, so try to maintain a degree of flexibility as to how high you’ll go.
The last $5,000 to $10,000 is where most buyers fall short.
In saying that, it’s equally important to stay level-headed and avoid bidding far beyond what you perceive the property to be worth.
At the end of the day, there will always be more properties, and you stand a better chance of making money in the long-term if you buy at the right price.
Have a game plan
Be prepared with a game plan for bidding – that is, know when you’d like to begin bidding, what the sale price is likely to be, and what your price limit is.
Strong bids can be used to intimidate other bidders and shut down the auction process sooner rather than later.
As such, it often benefits to make strong and decisive bids.
For example, if the majority of bidders were raising their offers by $1,000 increments, you might look to increase your bid by $5,000.
It is also important to remain in good eyesight of the auctioneer to ensure that they can see you during the auction.
Remember, once the gavel goes down, the property is sold and the auctioneer cannot accept additional bids – so make yourself visible.
You must have a driver’s license or passport on-hand to register as a bidder.
Generally, the terms you are bidding under will be displayed on your bidding card, and most auctioneers will supply you with a bidder’s guide.
At a residential auction, the terms of auction must be on display.
Your bidding card is important as the auctioneer will need to cite it in order to accept your offer.
If you have a lucky or favourite number that you’d like to bid with, you may be able to do so, provided you get permission from the agent first.
It is also important to arrive at the auction well in advance to register and be ready to bid when proceedings commence.
You can register during an auction – however, it is advised to do so beforehand. Also, remember that registering doesn’t mean you’re obligated to bid.
Be in it to win it
The adage “you need to be in it to win it” rings true when it comes to auctions.
Don’t sit on the sidelines and miss out on your dream home or prime investment because you are too scared or tentative with your bids.
Positive body language and strong, firm bidding are essential to coming up trumps on auction day.
Generally, if a prospective buyer looks or acts weakly, a stronger bidder will secure the property – so try to be confident and decisive.
Once you have secured a property at auction, contracts will be signed immediately and a deposit will need to be paid.
Standard settlement periods are 42 days, however, this period can be varied to 60 or 90 days, depending on the vendor’s circumstances.
As soon as these dates have been arranged, it is wise to start planning your move or getting the property ready for tenancy.
It is wise to arrange an inspection the week prior to settlement to ensure that the property has remained in the same condition as it was when you bought it.
It is also advisable to check in with your bank, solicitor and removalist the week before to make sure that there are not any last-minute issues.
You may also want to hire a professional cleaner to get the property spic-and-span prior to moving day.
However, before doing this, it’s always best to check with the vendor because they may have already had the property cleaned for you.
Further to this, make sure that your pick up all of the required keys, remotes and controls for the property, as these can easily be overlooked or lost in the seller’s move.
Tips for Sellers
Presentation is an integral component to achieving a successful sale at a premium price.
Discerning buyers are often drawn to the negative, rather than positive, features of a property – so it is important to wow them with great styling and presentation from the outset.
Fresh flowers can make a home feel and smell fantastic, and a fresh bowl of fruit placed in the kitchen can provide a nice and homely touch.
Mirrors can work to create a sense of space or capture an attractive view, while lamps and candles can generate warmth and mood lighting.
Marketing is crucial
An effective marketing campaign is essential for a successful auction.
Most marketing experts recommend spending one per cent of the property’s value on marketing.
For example, if you were selling a million dollar home, you would spend around $10,000 on marketing the property.
We often see sellers get a five to ten per cent higher return when they spend at least $10,000 on their marketing campaign.
An effective marketing campaign will incorporate a number of online and traditional marketing components including print, multimedia and website advertising.
It is important to remember that you have three opportunities to sell your property – before, on or and after auction day.
Keep this in mind throughout the auction process to ensure that you don’t accept a price well below your expectations simply to sell.
The worst case scenario is that you will have to move to stage three and put a price on your property, but don’t make a premature or irrational decision because you let stress get the better of you.
Pay attention to feedback
Your agent should consistently provide you with buyer feedback from inspections and inquiries.
Be sure to take these comments into consideration when presenting the property and setting your reserve price.
After all, the more you cater to the wants and needs of buyers, the better chance you have of achieving a strong sale price.
Meet regularly with your agent
As auction campaigns are often condensed and high impact, a 15 minute face-to-face discussion with your agent at least once a week is a must.
You should also meet with your agent the week prior to auction to finalise your instructions and bed down your reserve price.
On auction day
It is best – if you can – to be present on-site when your property goes under the hammer.
On auction day, you’ll be looking to sell one of your most valuable assets, and through directly observing the auction process and buyer interest in the property, you’ll position yourself to make better informed decisions in any post-auction negotiations.
Be prepared to adjust
If buyers bid close to your reserve price, it is possible to adjust your price in writing to secure a sale.
However, beware that if your property is sold during the auction, the sale will be binding.
If, on the other hand, you decide to pass aside and negotiate after the auction, there will be no obligation on the buyer to proceed.
In these types of situations, you can put yourself at risk of losing the sale if negotiations stall or the buyer changes their mind.
In light of this, I would I recommend reaching an agreement on price during auction if possible.
Vendor bids are commonly made on behalf of the auctioneer to start the bidding or to protect the seller’s reserve price during the auction.
Australian states vary in terms of the number of vendor bids they permit at auction – however, I would caution against bidding too high as this may scare off buyers and kill the momentum of the auction.
After the auction
Make sure that all parties sign the sale contract with the correct names, price and settlement dates.
Also, ensure that the contract is dated and that buyers have paid their deposit before you pop the celebratory champagne.