The auction process can be a daunting and emotional experience, however being armed with a solid strategy may help you to come out a winner on the big day. Auction is an ever-popular method of selling property, particularly when the market is strong and sellers are confident that their property will fetch a good price. One of the benefits of successfully bidding at auction is that you get a definite result. Contracts exchanged at auction are unconditional and once signed, are binding on both parties. But before you get to this process there are a number of factors to consider. First up is making sure that you have the authority to bid. In certain states, all bidders are required to be registered – a tactic designed to counter collusive industry behaviour, in particular the practice of planting “dummy” bidders to artificially raise the price at auctions . You will need to check the laws with your real estate agent or Real Estate Institute in each state.
Ten Hot Auction Tips
Once you’re ready to go into battle, keep in mind that it will pay to keep your emotions in check. You are making a significant financial investment and this will help ensure that you don’t over-extend yourself financially if you get carried away on the day. Use these 10 tips to boost your auction knowledge, build your confidence and keep you focused on your goal of property ownership.
1. Start Studying
Before you start bidding on any property, try to develop a realistic understanding of its true market value. Properties that are sold at auction (unless advertised differently) are subject to reserve price – the minimum price that the person selling the property will be prepared to accept. The agent cannot disclose the reserve price, so it’s up to you to monitor the prices properties in the area have recently sold for. For a fee, your lending institution or a registered valuer can give an opinion of value.
2. Practise Makes Perfect
Attend as many auctions as possible to familiarise yourself with the procedures, rules and regulations and take special note of the strategies implemented by the winning bidder. This will also give you a realistic insight into the prices properties are advertised for and the prices they actually sell for.
Property inspection is an essential part of the buying process and it’s worth visiting a property several times so you can be sure it really is what you’re after. Take the time to get to know the agent representing the property as they will be familiar with all of the facilities in the local area and may reveal how much competition to expect and what other people think the property is worth. If you are really serious about a particular property, you could consider having it thoroughly inspected by a licensed building inspector, an architect and a pest inspector prior to the auction taking place.
4.Get Legal Advice
If you are seriously interested in a property, you should have your solicitor or conveyancer inspect the ‘Agreement for Sale’ which will be held by the auctioneer. Your solicitor or conveyancer may suggest making additions or variations to the agreement. These can be amended accordingly.
Also check that your copy is an exact copy of the auction contract and check that there have been no late changes. Make sure that you have a clear understanding of exactly what is to be included in the sale – all fittings, furniture and any other relevant items should be clearly listed.
5.Be Financially Prepared
The winning bid at an auction is a binding contract and, if you are successful, your finances must be in order before auction day. As you decided to start searching for a property, contact your lending institution for finance approval – that way you’ll know your borrowing power and can set your limit for the auction. You will need a written loan approval before the day of auction, as well as the deposit, which is usually 10% of the purchase price.
6. Register Your Intentions
Even if its a requirement for you to register, you may also need to show identification on the actual auction day. A driver’s licence that shows your both your name and address is usually sufficient. Being registered does not mean you are obliged to bid, so don’t feel under any pressure if you change your mind.
7. Keep Your Cool
If you don’t feel comfortable bidding and suspect that you will get too emotionally involved, you may want to consider a professional purchasing agent, friend or family member to bid on your behalf. When using a proxy bidder, make sure you talk to the agent or auctioneer to understand their requirements. It’s important to remember if you use a proxy, they will blind you to the purchase if their bid is accepted on the day.
It’s a good idea to arrive a little early and find a spot that allows you to read the room and watch other bidders. Having some spare time will also allow you to do a mental checklist so that you feel fully prepared for the event – make sure you have your cheque book with you.
8. Boldly Go Forth
When bidding, bid with confidence so that the auctioneer knows you exist – just make sure that the bid is realistic so that your interest in the property is taken seriously. Keep in mind that a strong bidder may create a psychological advantage over the competition.
9. Know When To Stop
You will know your limit before going into the auction room but the trick is sticking to it. Once the bidding has reached your limit and doesn’t look like slowing down, STOP bidding. If you can’t resist the temptation to keep going, simply walk out of the room. If you were not the successful bidder, accept that over-extending yourself is not in your best interests and that there will always be other properties on the market. If you were successful, then you will need to sign the sale contract and pay the deposit. Then you can start celebrating!
When you win at auction, as the buyer you are required to sign the contract and pay a deposit once the property has been ‘knocked down’ to you. The deposit, which is usually 10% of the purchase price, will be held in trust until settlement occurs. The next step to organise insurance cover to protect your interest in the property. If you require early access to your new home, this can sometimes be arranged via the agent but is not given right before settlement. For more information on the auction process and relevant regulations, contact the Department of Fair Trading in your state.