I know that many property investors are a little intimidated by the thought of bidding for a property at auction.
I can understand why auctions are an emotional and exciting event.
Even after bidding at hundreds of auctions, I must admit I still get that surge of adrenaline every time I bid.
Then of course there’s the lead up to the auction with all the suspicion surrounding what the vendor really wants for his property, is the agent underquoting and enticing me to come along on the day, how much competition will there be.
Or the heartbreak many investors feel when falling in love with a property just to be outbid by someone with deeper pockets.
But if you avoid properties that are up for sale at auction, you’re going to miss out on a lot of good buying opportunities as usually the best properties are offered for sale by auction.
An this doesn’t only apply to Melbourne and Sydney anymore – auctions have become a popular method of sale around Australia.
Currently, in our surging property markets, the team at Metropole buys many properties at auction for our clients.
I like auctions:
I believe if you’ve got a good property for sale the auction process is usually the best way to sell it and on the other hand, auctions are the most transparent way to buy property.
I like to know who else is interested in the property and what they’re prepared to pay.
I like that I can see my competition and read their body language.
I watch for the signs that they are close to their limit.
Of course, I know many buyers don’t see auctions this way.
They see them as highly stressful events and they’re worried that they may pay more than they intended to in the spur-of-the-moment excitement.
This only happens when you’re unprepared.
However, if you’ve done your pre-auction due diligence, such as getting your finance in order, checking the contract and prices, and determining your maximum price, you can then just consider the auction as the venue where you execute the decision you’ve already made.
Of course, you could always make an offer prior to the auction, but in today’s sellers’ market, you risk paying more than you need to.
You must also be aware of the dirty tricks some of your competition may use to secure properties at auction.
Preparing to buy via auction
You can make an offer prior to the auction, but you risk paying more than you need to.
In today’s hot property market a vendor would only sell prior to auction if you offer an outrageous price.
If you’re nervous you can also authorise someone else to bid on your behalf.
Choose someone you trust who has some auction experience or hire a buyer’s agent.
You need to organise this before the auction – state laws vary so ask the agent or ring your state’s Real Estate Institute to find out what paperwork is required.
Remember, buying at auction is an unconditional sale so here’s how you should prepare:
Pre Auction Due Diligence
- Have your purchasing entity organised (trust SMSF etc) if you are not buying in your own name.
- Get a finance pre approval so you know your budget and attend the auction ready to write a deposit cheque.
- Attend many auctions to experience the atmosphere and observe different bidding strategies.
In particular watch the auctioneer who’ll be selling the property you’re interested in to learn his particular techniques and the words he uses.
- Do your research by inspecting many properties and seeing what they sell for (not just the asking price).
Know the market, know the value of the property in question and be armed with that power so you can identify a ‘walk-away’ price – the highest price you’re prepared to pay.
- Play your cards close to your chest. Real estate agents are very skilled at prying information out of potential purchasers, including the price they’re prepared to pay for a property.
After all – it is their job! Sometimes you can end up revealing things to them that you never intended to and that might be detrimental to your negotiation power.
By keeping your cards close to your chest and revealing very little about how much you might pay for a home, you maintain an advantage and ensure the agent cannot use your information to sway another potential buyer or to help the vendor set his reserve price.
- Show your solicitor the contract and organise any amendments to the contract he suggests.
- Consider getting an experienced buyer’s agent like the team at Metropole to bid on your behalf and level the playing field.
What to do on the day
- Arrive early – survey the landscape – see who else is there.
- Do they look like serious bidders (they’re inspecting the contract, saying the right things) or are they just onlookers?
- In today’s strong auction climate use the psychological advantage of projecting confidence – make the other bidders think you have deep pockets and no limit.
- Open the bidding high, close to where the reserve will be (the property won’t sell below this), and make your bids fast and assertive.
Procrastinating or agonising over your next bid is a sign of weakness.
- Call out your offer in full (in other words say $550,000 instead of the increments just $5,000).
- If it’s going to pass in, make sure you are the highest bidder, as this allows the first right to negotiate with the vendor.
- Be prepared to miss out. Stick to your ‘walk-away price.
After all, you’ve done your homework and you know what this particular property is worth to you.
If you miss a property at auction, except that it wasn’t meant to be and look forward to finding something better soon.
While no one likes to consider themselves the ‘loser’ in any sort of negotiation campaign, it’s far better to walk away and live to fight another day than over-commit to a property you’ve become emotionally blinded by.
Now is the time to take advantage of the opportunities the current property markets are offering.
Sure the markets are moving on, but not all properties are going to increase in value. Now, more than ever, correct property selection will be critical.
You can trust the team at Metropole to provide you with direction, guidance, and results.
Whether you’re a beginner or an experienced investor, at times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s exactly what you get from the multi-award-winning team at Metropole.
We help our clients grow, protect and pass on their wealth through a range of services including:
- Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family. Planning is bringing the future into the present so you can do something about it now! Click here to learn more
- Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $4Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney, and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment-grade property. Click here to learn how we can help you.
- Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
- Property Management – Our stress-free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years, and our properties lease 10 days faster than the market average.
You may also like to read:
- 5 TOP TIPS TO NEGOTIATE YOUR WAY INTO A PRE-AUCTION PURCHASE
- CAN YOU REALLY BUY A PROPERTY BEFORE AUCTION DAY?
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