So, you’ve decided to have a go at purchasing a property through an auction. Or perhaps you have an eye on a property that is up for sale by auction and are considering whether it’s a good idea.
Auctions are intimidating. The stakes are high and the environment is generally high-pressure, fast-paced. If you’re not careful, you could get swept up in the moment and end up promising more for a property than you can afford.
Thankfully, we’ve got some important tips to help you confidently bid at your next auction.
Do your research
If it’s your first time ever attending or participating in an auction, this step is the most important for you. You need to be sure that you know the rules and the general process of an auction.
Firstly, do you need to register?
No, if you’re within Western Australia or Victoria. There is no requirement for you to register or make yourself known to the auctioneer or vendor before you make a bid on a property.
Secondly, do you know the general process that happens if you win the auction?
Not knowing what the process is after you win an auction is a surefire way to lose money. One important thing you need to know is that if you win the auction, you and the seller are legally obligated to exchange contracts and complete the purchase – there are no cooling off periods. This usually means also paying a deposit on the spot (which is usually around 10% but do your research about the property specifically).
Get pre-approval. Financial pre-approvals are a valuable price guide for indicating how much you can afford to spend on a property. Getting pre-approval will help speed up the process of getting formal approval later.
One thing to note about financial pre-approvals is that you can fully rely on them as a confirmation that you will get that money. The lender can still reject your application. It is important that after you have paid your deposit for the auction property, to go to your lender and start the formal approval process.
Have your deposit ready to go. You’ll need your deposit on hand as you’ll be expected to pay it on the spot. Generally, it is 10% of the full purchase price, however you’ll want to read through the contract of sale for your specific auction to confirm this.
Bid strategically on the day
If it’s your first time bidding at an auction, you may not necessarily know the tips and tricks to help you get a better deal. The first thing you need to know is the reserve price. The reserve price is basically the lowest price the seller is willing to accept.
You may want to consider not bidding until bids have exceeded the reserve price. However, if it looks like the auction will not exceed it, aim to be the highest bidder. This way, you’ll get the first chance to negotiate a price with the vendors.
Be aware of body language: your body language, other bidders and the auctioneer. People will be looking for signs that you have reached your maximum bid and you should do the same. Couples are susceptible to showing their intentions through their language. For example, if they look at each other, it may indicate that they are about to reach their maximum bid. Auctioneers also use body language to try and get more bids. They may do this by picking up the gavel or calling out ‘first, second and third’.
Lastly, bid in odd increments. What this does is help you control the pace of the auction. It may also put you at an advantage to secure the final, winning bid. For example, instead of starting the bid at 800,000, start it at 795,000. This way, bids are likely to go up in $5,000 increments rather than $10,000.
If you’re still in doubt and are inexperienced in bidding at auctions, you may want to get someone with more experience and market knowledge to bid for you.