Around Australia, weekend property auctions have become almost a national pastime.
When we’re not lockdown people go along to have a sticky beak, to get an idea of the market, to fantasize about their dream homes or just to watch the street theatre unfolding before them.
It’s a bit like watching buskers – you see an auction being conducted you just have to stop and gawk for a while.
Of course, over the last year, we have had to learn to adapt in many auctions are conducted online, but auctions are still a particularly popular method of selling properties, especially when the market is strong.
For all the street theatre and entertainment value, auctions represent a lot of stress and tension for those involved so today and in the next episode of the Michael Yardney podcast, we’re going to concentrate on how to win at auctions.
And even if you’re not planning to buy a property at auction in the near future, there will be lots of information for you as I chat with my son Bryce Yardney, and you get inside the mind of a very successful investor and buyer’s agent who has bought hundreds and hundreds of properties at auction for our clients at Metropole.
Before the auction:
- Preliminaries include: getting finance preapproved, understanding what ownership entity you’re using to purchase, having a strategic property plan if it’s an investment, understanding what you must have, what you’d like to have, and what you don’t have if you’re buying a home and doing due diligence on your suburb.
- Attend a lot of auctions to feel at home with them and watch how the auctioneers work.
- In particular watch the auctioneer who will be showing the property you’re interested in.
- Determining the value of the property
- Understand what’s comparable in today’s market.
- End up with 3 figures:
- what you think the property is worth
- The price you’d like to get it for
- The stretched price you’re prepared to go to
- The purchase price shouldn’t be determined by borrowing capacity.
- How do you find out the reserve?
- It doesn’t really matter. Often the auctioneer doesn’t know until the day of the auction.
- Finalizing contract terms
- Check with the agent to find out how should you pay the deposit
- Request any changes you’d like
- The real reason the vendor is selling
- The price range the owner wants
- How many other buyers are really interested and possibly the range they are likely to pay
- Things that are wrong with the property
In today’s market, because vendors are more confident that they will sell at auction, however, there are a number of reasons why vendors may be prepared to sell before auction.
- Nervous vendor
- Sensitive sellers – Sellers going through emotional challenges like death, divorce, illness.
- Time-sensitive vendors – they have already bought a house and the certainty of selling their old property outweighs the potential benefit of a higher price at auction.
- There isn’t much interest in the property
- The agent is in a hurry to sell
- You have a premium offer on the table
- Show up early
- Note the body language of the other players
- Know your competition – it’s the underbidder, not the auctioneer
- Project confidence
- Open high
- Don’t procrastinate over the next bid
- Avoid not bidding – that’s not a strategy
- Know what bidding strategies don’t work, like moving up in small increments or trying to swoop in at the end of the auction after staying silent
- 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.
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Some of our favourite quotes from the show:
“Auctions do bring out emotion and, at the moment it’s FOMO.” – Michael Yardney
“Most adults start with the same amount of money. They just have a different philosophy.” – Michael Yardney
“Poor people spend their money and save what’s left, while rich people save their money and spend what’s left.” – Michael Yardney
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