So you have found the home you love and it is going to Auction. Nervous times ahead, especially for the inexperienced. Here are some tips to help you buy well.
Know where you stand financially before looking
No point falling in love with a home that you can't afford. Do these simple things first:
- Use a mortgage calculator to establish what you can comfortably repay.
- Find and compare home loans that best suit your needs.
- Get a pre-approval to know exactly what your limit is.
Work out what you are prepared to pay
Attend other similar auctions, understand the auction process, research recent sales, go to open for inspections and importantly talk to agents. By becoming an expert in the area, you now know what you should pay rather than what you have to. Set yourself a price limit and stick to it!
Get the documentation checked & last minute inspections completed before Auction day
Have your solicitor check the contract of sale to make sure everything is in order. This is also a great time to get a building and/or pest inspection done as it may alter your limit substantially. Setting a budget is vital at this point taking into consideration all of the additional/potential costs.
Position, position, position...
Whilst this is true for property, it is also true for the auction. Be visible to the auctioneer and place yourself in a position where you have a good view of other bidders. It is important to know your competitors and to try and read their body language as best as you can; it could save you thousands.
There is no exact science in bidding and strategies vary from holding back and making a "knock out" bid at the last minute or starting early and bidding strongly in large amounts scaring the competition away. Either way, bidding confidently and without emotion is the surest way to win.
Bidding can often get very spirited and you must not allow the excitement to overshadow your budget; be prepared to walk away. If you don't trust yourself to bid on the day, get someone else to bid for you and write down on a piece of paper your maximum price.
The auctioneer will call for bids and bidders can ask the auctioneer to accept a lower bid increment if they feel the auctioneer's is too high. Once the reserve is met (the seller's asking price) the auctioneer will advise that the property is "on the market" and will be sold to the highest bidder. You must bid at this point to secure the property.
If the property is "passed in"?
If the property does not reach the reserve price and is "passed in" at auction, all is not lost. The highest bidder has the first option to negotiate a sale price with the owner and agent. If the auction is stalling and looks like it may pass in, it is a good strategy to bid to obtain this right to negotiate with the owner.
Once the property is "knocked down" you will be expected to sign the contract of sale and provide a 10 per cent deposit. It really is that simple.
You may be the under bidder at your very first auction but eventually by following the above steps you will gain the confidence to purchase properly and be comfortable with the knowledge that you bid correctly.