How to handle an auction
Buying a property is an emotional process, and it’s best to keep those emotions under control at all times. This is hardest in the pressure-cooker environment of an auction situation.
If you’re competing against another buyer who has their heart set on the property, this can drive prices up to an extraordinary level. On the other hand, it’s possible to pick up a great bargain. It’s this element of risk and uncertainty, plus the theatrical aspect of the auction process, that adds to the emotional overload.
Here are some tips you could consider if you’re likely to be involved in an auction:
- Attempt to purchase the property before it goes to auction. That way, you can use your knowledge of the market and the vendor’s circumstances to swing the process in your favour. After all, the vendor will be nervous before the auction too, and may be tempted to accept a reasonable offer and avoid the uncertainty of the auction process. (Tip: the only downside to this approach is that if the auction goes ahead, you’ve indicated how much you’re prepared to pay).
- Go to a couple of auctions on properties that you’re not intending to buy. Observe the process and the way the auctioneer runs the show. Take note of the strategies employed by those who are successful.
- Before the auction, get your solicitor to check the contract and strata report. Check with your lender that you’re covered and make sure you’ve received pre-approval on lender letterhead before the auction.
- Make sure you’ve had the necessary inspections done on the property, because when the hammer falls, the winning bidder is legally obliged to purchase the property.
- Check the terms and conditions that come with the property sale. If you want to change these, make a request. You don’t need to accept the terms laid out, and equally, the vendor doesn’t need to accept the changes you’re requesting. But it is always worth enquiring.
Before the big day, in your mind, set the absolute maximum price you’re prepared to pay—and stick to it in the heat of the auction. Winning bids are usually just over a round figure, so bear that in mind. It’s the little bit extra that knocks the opposing bidder out of the game. TIP: Deposits required on the spot are usually 5-10% of the purchase price but need to be negotiated before auction. It’s a good idea to have the deposit made out to 5% or 10% of your maximum price to ensure you don’t go over your limit during the bidding.
If you think that this sounds like a stressful process for both the buyer and the seller, you’re right. And if you’re not sure of your abilities to handle that stress, consider getting a Buyer’s Agent to bid on your behalf and advise you in the run-up to the auction.
