Buying At Auction
A little preparation can go a long way in improving your chances of being successful at an auction.
Organise your loan pre-approval before you go to an auction and know the maximum you can bid.
An auction contract is not subject to finance. That means, if you buy at auction you need to be certain you can get the money. A 10% deposit is usually required for auction buys. You will also need to have a personal cheque, bank cheque or deposit bond (if acceptable) to pay on the auction day.
If you win the auction, there’s no backing out and there is no cooling off period. If you can’t produce the balance of the purchase price at settlement, you could lose your deposit. Emotions can run high at an auction, so it’s important not to get carried away.
Auctions only state an expected selling range, so do some research. Check the recent sold prices for similar properties in the area, look on-line and check with real estate agents. Your mortgage broker can also help with this information.
If you’re serious about bidding, arrange building and pest inspections before auction day. The reports can estimate how much you might need to spend on repairs. That gives you a clearer idea of how much you would be willing to bid. If the inspections uncover serious problems, you may choose not to bid at all.
Consider making an offer on the property before it goes to auction. If your offer is above the reserve price the seller may choose to accept it. After all, the vendor will be nervous before the auction too and may be tempted to accept a reasonable offer and avoid the uncertainty.
If you’re serious about buying the property, you can ask the real estate agent to give you a copy of the contracts, so your solicitor or conveyancer can identify any legal issues right away.
To get a feeling for the auction atmosphere, go to other auctions in the area before going to bid at the property you want. You’ll see how the auctioneers operate and be able to observe the bidding strategies of the buyers. Giving yourself some experience of the real thing will help make things less imposing when you decide to bid.
Depending on which state you’re bidding in, you may need to register your intention to bid with the agent. Usually it is before the auction, although sometimes you can even register during an auction. Check with the agent beforehand to confirm the requirements in your state. Arrive at the auction well in advance and be ready to bid when proceedings commence. Also, remember that registering doesn’t mean you’re obligated to bid.
Remember that you have three opportunities to buy your property – before, on, or even after auction day if the auction is unsuccessful. Keep this in mind throughout the auction process to ensure you don’t pay a price well above your limits. Taking a friend or family member along can be a good way of remaining calm and remembering your priorities.
Be prepared with a game plan for bidding. Know when you’d like to begin bidding, what the sale price is likely to be, and what your price limit is.
Positive body language and strong, firm bidding are essential to being successful on auction day. Strong bids can be used to intimidate other bidders and shut down the auction process sooner rather than later. Generally, if a prospective buyer looks or acts weakly, a stronger bidder will secure the property, so be confident and decisive.
If you don’t want the pressure of bidding, you can nominate someone else to bid on your behalf. You could pay a buyers’ advocate to do this. As experienced professionals they’ll stick to your limit and won’t be intimidated by other bidders’ tactics. Alternatively, you could ask a family member or friend to help. Make sure it’s someone you can trust to bid within your budget because if they make the winning bid, you’ll be obliged to buy the property.
We’re here to help you
Dealing with banks can be a stressful experience but rest assured that our mortgage broker based in Glenelg (but our mortgage broker services the entire Adelaide Metropolitan area) can help you make the right decision about your mortgage. We will guide you at every stage of your loan process.
Contact us on 08 8376 0455 or drop into our office at 593 Anzac Highway, Glenelg SA 5045.
Any advice contained in this article is of a general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regard to those matters. Information in this article is correct as of the date of publication and is subject to change.