Property auctions can quickly descend into fast-paced shootouts fuelled by adrenalin and ego as buyers fight for the winning bid. While it might seem daunting, our tips for buying a home at auction could help you be prepared to improve your chances of success.
1. Check out home auctions: Trying to bid on a property at your first auction can be overwhelming, so visit a few as a spectator to get a feel for the atmosphere. You’ll see how the auctioneers operate and can observe the bidding strategies of the buyers. Getting some experience of the real thing will help you understand what’s going on and what to do when you decide to bid.
2. Research the property value: Properties being sold at auctions only state an expected selling range, not a fixed sale price as usually happens in a private sale. This could make it difficult to know if you’re paying too much on auction day. So do some investigating. Check the recent sold prices for similar properties in the area where you’re looking. Take advantage of our free Property Profile reporting, which includes property price information, comparable sales results and sales and rental history, when you’re doing your research.
3. Organise your finances: You need to know how much you can afford to bid. An effective way to do this is to seek pre-approval via your broker. Remember an auction contract is not subject to finance. If you buy, you need to be certain you can get the money to pay.
4. Set your limit: If you win the auction, you’re committing to buy the property. If you can’t produce the balance of the purchase price at settlement, you could lose your deposit. However, emotions can run high at an auction. That’s why it’s important to work out how much you can borrow and what you can afford beforehand, so you don’t get carried away and go over your borrowing limits or what you can afford to repay on an ongoing basis.
5. Conduct your inspections: Arrange building and pest inspections before auction day. The reports can estimate how much you might need to spend on repairs and that gives you a clearer idea of how much you can bid. If the inspections uncover serious problems, you may choose not to bid at all.
6. Check the contracts: Send copies of the contracts to your solicitor before the auction. Identifying any legal issues upfront could save you money and future headaches.
7. Register your interest: Depending on which state or territory you are bidding in, you may need to register your intention to bid with the agent. Check with the agent beforehand to confirm any requirements.
8. Make a prior offer: You can generally make an offer before the auction. If your offer is above the reserve price the seller may choose to accept it. More often the seller may just let the market decide the price by going to auction.
9. Bid with your head: Auctions pit potential buyers against each other so competition can be fierce and prices can shoot up quickly. Set your price range based on what you can afford and what you believe the property is worth. Stay calm during the auction and bid within your range. If you think your emotions might get the better of you, bring someone with you to the auction for support.
10. Ask someone to bid for you: If you don’t want the pressure of bidding, you can nominate someone else. You could pay a buyer’s advocate. As experienced professionals, their job is to stick to your limit and not be intimidated by other bidders’ tactics.
Your Choice Mortgage Brokers Pty Ltd ATF Halo Innovation Trust trading as Heart Mortgage Services - Australian Credit Licence 38643.
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