7 tips for buying a property at auction

Auctions are a common way to buy and sell properties, but many buyers are still fearful of buying at auction.

Auctions are a common way to buy and sell properties, but many buyers are still fearful of buying at auction.

This aversion to the bidding process can severely limit the homes available to you, so being prepared and knowing how to win at property auctions can make it a lot easier to land your dream home.

Do your ‘home’ work and due diligence

Before you attend an auction, here are a few things you should do in preparation.

1. Prepare your finances

Speak to a mortgage broker to find out where you stand financially. You should get your finance pre-approved so that you can write a cheque after the auction, should you win.

2. Attend other auctions

A great way to gain an understanding of the auction process is to attend others that you are not bidding in first. This can help you be much calmer at the property auction that you intend to bid on.

3. Research similar properties

To work out how much a property is worth, it's a good idea to see what nearby properties and similar-sized houses or apartments have recently sold for.

Set a limit to your property purchase

One of the big fears people have of auctions is that they'll get caught up in the moment and end up bidding too much. This goes against common sense and is normally easy to avoid, but to do so you need to know how much you can bid up to. It's a good idea to keep this figure to yourself, and not give away too much information to the real estate agent who's listed the property.

A helpful tip is to write down what your upper limit is. Having a physical reminder is a great way to help you stick to your budget and bow out of the bidding at the appropriate time. And to really ensure you don’t overbid, engage a buyer’s agent who can advise you on a realistic price and bid on your behalf, helping you stick to your ceiling price.

Once you've done your research and viewed the property, there's very little that should influence how much you're willing to bid, so don't let other interested parties sway you. There are always other properties available, after all.

Don't be afraid to make the first bid

People often feel nervous about opening the bidding, but if you're there to buy the home then there's no reason why you shouldn't start proceedings.

The only thing to avoid is starting with a high bid. Some people think this strategy can scare off other bidders, but from time to time there will be auctions with only one or two interested parties, and by starting high, you're just pushing the price up for yourself.

A good guide is to bid 10 per cent under what you see as the real value, so you get the ball rolling and put yourself in a strong position.

Don't wait for the auctioneer's cues

One myth that many bidders believe is that the auctioneer has to make it official when the bidders have reached the home's reserve price, often with an announcement that the house is on the market.

In reality, the auctioneer is under no such obligation. A property can be called without this announcement; if you haven't made your bid yet, you'll lose out on the purchase.

Read the body language of others

Although it's not a robust science, body language can help your cause. Bidders often give off subtle clues when they're approaching the end of their budget. They look dejected, with a slump of the shoulders, or they start to get nervous and hop from foot to foot or fiddle with something.

If you notice these actions in those around you, it could be a sign that their involvement in the auction is coming to an end. Keep an eye on their behaviour; they might be casting furtive glances towards you to ‘size you up’ too. If you notice this, stand tall and proud, so you project an image of someone who's in the auction for the long run.

Bid what you want

The auctioneer is there to get as much money for the vendor as possible, and they'll use small tricks to encourage bigger bids. The most notable of their repertoire is asking for bids in increments of $10,000. There's nothing set in stone that says you have to bid that much more, but by asking the question the auctioneer often gets the answer they want.

In response, feel free to bid in smaller increments ‒ say $5,000 ‒ to slow down the bidding and gain back some control.

Win the bid after the property is passed in

There are times when an auctioneer can't muster the reserve price out of their assembled bidders. In such cases, the property is ‘passed in’ and the owners can negotiate with the bidders to come to a mid-point agreement.

Should the owners or the real estate agent choose to continue, the negotiations start with the highest bidder at the time, which puts them in a very strong position. Even though you don't win the auction outright, you can still come away with the keys.

Like anything in life, bidding at auctions is a skill that gets better with time. Most people don't buy many homes in their lifetime so don't get many opportunities to practice, which is why a buyer’s agent can be immensely helpful. Although there's a fee to engage a buyer’s agent, their experience and expertise can end up saving you money, and stress, in the long run.

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