Madeleine’s Guide to Buying at Auction

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 definite results. Contracts exchanged at auction are unconditional and, once signed are binding on both parties.

The auction process can be a daunting and emotional experience, however being armed with a solid strategy may help you come out a winner on the big day. Here is Madeleine’s guide to buying at auction:

1. Make sure that you have a full understanding of the auction rules. In some states you need authority to bid. Do you have to be registered to bid on the property? Do you know the difference between a reserve and a vendor bid? Do you know who, when and how a reserve is decided? Are you aware that the reserve can be changed at any point during the auction as long as instructions are given to the auctioneer?
2. Although it might sound painfully obvious, it is vital that each prospective buyer pre-determines the maximum price they are willing to pay for the property. This price should be set the night before auction and should be entirely independent of the likely level of competition on auction day or what other bidders may possibly bid. These are things that you have no control over, and should not influence the price you are prepared to pay.
3. Before you head to auction, it is a good idea to check how much you can borrow and what the repayments will be like.
4. Once you have set your maximum price, don’t hesitate to bid. Many bidders try to play coy and shake their heads vigorously when they should actually be bidding confidently with each bid. If there are several other bidders you are likely to get the best outcome through the transparency of the auction bidding process.
5. 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 negotiated between the solicitors of both parties. 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 what is exactly is included in the sale – fittings, furniture and any other relevant items should be listed.
6. Bid early, start low. Confidence is key. If you bid early and low, you are far more in control of the situation than if you jump in late. By the time the property goes on the market and the serious bidding begins, your nerves should have settled.
7. Be sure it is the one! There are no cooling off periods when you buy at auction. So if you win the auction, you are obliged to buy the property off the vendor. It is advisable to ensure that you have completed pest and building inspections before the auction if you intend to buy. And you cannot make the contract subject to conditions, it’s as it is at the day of sale. So be sure to have home loan pre-approval before bidding at auction.
8. Keep your maximum price a secret. Once the property reaches the sellers’ lowest price (the reserve) it will be sold to the highest bidder. It is very likely that you will be the highest bidder before you reach your maximum price.
9. Be careful not to bid against yourself. This happens more than you may think. Typically the highest bidder gets caught up in the moment of the first call, second call and ends up bidding against themselves through fear of missing out as they are not sure if they are the highest bidder at that time.
10. Be prepared. When you win at auction, as the buyer you are expected to sign the contract and pay a deposit once the property has been “knocked down” to you. The deposit, which is usually 10 per cent of the purchase price will be held in a trust account until settlement occurs. The next step is to organize insurance to protect your interest in the property. If you require early access to your new property this can sometimes be arranged with the agent but is not a given right before settlement.

To check for upcoming auctions via Hicks Real Estate please keep an eye on our website. Our next auction is set to take place on December 5^th at 42 Costello Place, Stafford Heights, Queensland, 4053.

If in doubt, you can seek expert advice and guidance. The team at Hicks Real Estate are highly skilled, dedicated and people focussed professionals. Call us today on: 07 3355 6845 for any of your auction or property purchasing questions.