So you’ve done all the legwork and located the perfect property purchase. The problem is, if the property is going to auction, finding the right place to purchase is only half the battle. The auction process can be a scary and emotional experience, for both buyers and sellers alike. But if the numbers of auctions conducted this spring are anything to go by, you can expect to be thrown in the deep end of the auction process if you’re looking to make a property purchase. Here’s a few important tips to help you succeed at auction.
1. Get a valuation
A lot of time and heartbreak can be saved by understanding the true market value of the property you want to purchase prior to auction day. Remember, the guide price advertised by the real estate agent is likely to be much less than the property actually sells for. Getting an independent valuation from a registered valuations expert or a lending institution will help you to get a realistic price and prevent you from wasting money, time and effort pursuing a property you can’t afford.
2. Make inspections prior to the auction
Inspecting a property several times before purchase is always a good idea. But in the case of an auction, if you are really serious about purchasing the property you should consider having it thoroughly inspected by a building inspector as well as a pest inspector before deciding to attend the auction.
This is because an auction purchase is unconditional, and you will have no opportunity to complete these inspections afterwards. Going to auction without completing these inspections is risky and could result in you overpaying or having to pay extra to complete repairs after purchase.
3. Know the rules
The rules of auctions vary from state to state and auction to auction. If you are seriously interested in a property you should obtain the contract of sale and/or auction contract from the real estate agent or auctioneer and give it to your solicitor to review prior to the auction.
This will give you a clear understanding of the auction conditions, so you can prepare yourself for auction day. These documents will provide you with information such as the number of days to settlement, the amount of deposit required, exactly what is included in the auction price, the rules of your particular auction and so on.
By bidding at the auction, you agree to the terms of sale. However it is possible to vary the auction terms beforehand on the advice of your solicitor and with the agreement of the vendor. Reviewing the contract prior to the auction will give you the opportunity to ask for changes.
4. Get your financing in place
If you win at the auction, you will be required to pay a deposit on the spot so take along your chequebook. The deposit is usually 10% of the purchase price of the property, but may vary so you should remember to check the auction contract.
Additionally, the winning bid at an auction is a binding contract. That means you should have your financing in place before you bid at the auction, so talk to us as soon as you find a property that you’re interested in buying. To be financially prepared, you will need a written loan approval in hand as well as your deposit.
5. Set a bidding limit before you go
With your property valuation and written loan approval at the ready, you should be well prepared to set your bidding limit before you go to the auction. Remember this is your walk-away price and you should stick to your limit even if the auction bid goes as little as $1,000 over. Setting a bidding limit is one thing, but sticking to it during the heat of the moment may prove to be a bit tricky!
Remember that going over your limit may involve over-extending yourself financially and may also be risky in terms of securing the additional finance later. If you’re at the auction and the bidding goes over your limit then stop bidding immediately and consider leaving the auction to stop yourself putting your hand up again.
If you reach your maximum bid and the property is passed in, you may be offered the opportunity to negotiate with the vendor over price. If this is the case, remember your limit still applies.
6. Get familiar with the auction process
The capacity to bid with confidence is important when attempting to secure a property at auction. Attend as many auctions as you can prior to your auction day so you are fully familiar with the auction process. Some real estate agents recommend that you attend as many as 15 or 20 auctions, so you can eliminate the possibility of failing through inexperience on the day.
Make notes about the strategies implemented by the winning bidders. Take notice of the price a property is advertised for and the price it actually sells for. Talk to other bidders about their opinions of the auction and ask questions of the auctioneer so you understand how they identify bidders.
If you don’t feel comfortable bidding, consider engaging a professional purchasing agent. It may also be possible to get a more experienced friend or family member to bid on your behalf.
With these handy tips, you’ll know exactly what to do to be a success on auction day. Remember that bidding at an auction is not as difficult as it may first appear. And whilst the auction process may appear to favour the vendor, you can make it work in your favour if you have the know-how. The first step in succeeding at auction is having your financing in place, so talk to us today.