Thinking about buying a property at auction? Whether it's your first time or you're a seasoned pro, there are key steps you can take increase your chances of winning.
Auctions can be a highly emotionally charged event – rightly so as the stakes are also very high. While it can be difficult to keep those emotions under control, if you work to a plan you can establish control over the process and ensure you're making great decisions at each stage of the purchase.
While you might hear stories of people 'winning' auctions on the spur of the moment, the truth is you will win or lose the auction in the weeks prior to the actual event.
The first step is to ensure you're not slugged out of the game before the starting gun has even gone off. Make sure the property is within your budget range. Avoid falling victim to the real estate pricing trap – where they guide at the lower end of the seller's expectations – by reviewing recent sales of comparable properties.
Establishing the value and expected sale price for a property can be challenging. If you want to really focus in on price, check out our Buyer Success Pack
which covers how to pinpoint your property price.
If you find the property is within your target range, then move through the three key stages of the auction process taking the following steps.
This is the period of time leading up to the auction, during which interested buyers can inspect the property and submit their offers. During this stage, your focus should be to evaluate the property as well as gathering information to build an attractive offer. Even if the agent tells you the property will be going to auction, always be prepared to submit an offer prior to the auction.
Offers should ideally be made a few days prior to the auction, though you can submit your offer and continue to negotiate right up to the time the auction is scheduled to commence.
If offers are not accepted and the agent advises the property will definitely progress to auction, ensure you're prepared for the auction by reviewing all documentation available and negotiate any special terms or conditions with the agent at least 24 hours prior to the auction.
This is when potential buyers place their bids on the property, either in person, by phone or online. The highest bidder at the end of the auction wins the property. To maximise your success, you'll leverage off the information you gathered during the pre-auction stage.
Ensure you have your finance in place and can provide up to 10% of the purchase price as your deposit immediately after the auction if you are successful.
With the logistics out of the way, give some thought to your bidding strategy. Who will bid for you if you don't want to do this yourself, what is your walk away price, how fast or slow do you want to bid and how visible do you want to be.
If no one meets the reserve price during the auction and the property is passed in, there will be further opportunities for you to negotiate the purchase. Negotiations will take place between the highest bidder in the first instance, but don't walk away if you're not the highest bidder.
If the auctioneer can't reach a sale price that is acceptable to both parties (ie – the highest bidder and the seller) then they will move down the list of bidders in an effort to achieve a result. Make sure you remain in touch with the agent. Be flexible but don't stray too far from your original 'walk away' price.
Author: Debra Beck-Mewing
Debra Beck-Mewing is the Founder and CEO of The Property Frontline. She has more than 20 years' experience in buying property Australia-wide, and is skilled in helping buyers use a range of strategies including renovating, granny flats, sub-division and development. Debra is experienced in identifying tailored opportunities, homes and sourcing properties that have multiple uses. She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business. As a passionate advocate for increasing transparency in the property and wealth industries, Debra is a popular speaker on these topics. She is also an author, podcast host, Editor in Chief of Property Portfolio Magazine and participates on numerous committees including the Property Owners' Association.
Disclaimer – This information is of a general nature only and does not constitute professional advice. We strongly recommend you seek your own professional advice in relation to your particular circumstances.