Australians are more likely to sell their homes by auction than almost anywhere else in the world: about 70% of us, in fact. Whether it’s our perfect weather, the Australian love of a bet or just be-cause we enjoy a bit of entertainment, the property auction is a fixture of the real estate landscape.
For buyers, attending auctions can be good fun, but it can also be nerve-wracking. If you’ve set your sights on the perfect house, you want to maximise your chances of making sure it’s yours - without breaking the budget.
While you can’t control everything that happens on the day, there are some things you can do to increase your chances of success at auction.
Get your finances in order
Laws vary between States and Territories, but in general, buying a property via private treaty allows you to negotiate more terms. Some of the more common special conditions that buyers ask for include buying subject to finance or sale of their own property. You also have the benefit of a cooling off period. The length varies depending on which state or territory you are in, but is five business days in both the ACT and NSW.
When you buy at auction, you are still able to negotiate special conditions. These must be worked out and confirmed in writing prior to the auction commencing. Contacts signed at auction are un-conditional and the cooling off period is waived.
What that means for you is two-fold.
Firstly, on signing the contract you’ll be asked to make an immediate deposit, which is generally around 10% of the purchase price.
Secondly, if you can’t come up with the finance to settle on the property you risk being in breach of the contract. Depending on the circumstances, you may end up paying penalty interest to the seller and even lose your chance to buy the property after all.
For this reason, it’s very important that you have your finance pre-approved before you raise your hand in the crowd. Banks and brokers will be happy to work with you to obtain pre-approval, which usually means providing evidence of your income, outgoings and other debts. If you’re using a broker, they will provide that information to various lenders, or you might deal directly with the lender. You’ll be given confirmation that the lender will provide finance as long as they can verify your information.
It’s a good idea to get pre-approval for more than you think you’ll need, so that if you do decide to bid a little more than intended, you’re still covered. Don’t forget to factor in stamp duty and moving costs as well.
Check the paperwork
When you buy a property at auction, the contract is unconditional. The sale is not subject to a pre-settlement inspection, and there is no cooling-off period.
This means that it’s important that you understand what you’re signing ahead of time.
If a property is being sold via auction, ask the agent for a copy of the contract ahead of time. Read it carefully, and if you’re unsure what the terms mean ask your solicitor to go through it with you.
The seller is obligated to make extensive information about the property available to you ahead of the auction. Go over the paperwork with a fine tooth comb. This is your opportunities to discover any structural faults or quirks the property may have, along with restrictions on further development and planned works that may affect it. Doing your research now will help you avoid unpleasant discoveries or unexpected costs down the track.
Make an auction day action plan
To avoid feeling overwhelmed on the day, make a plan of action. This might include any or all of the following:
Plan where to stand
If you intend to bid, don’t join the crowd of onlookers at the rear of the group. Get a prime location where you can hear the auctioneer and they can see and hear you in return. That way you can also see the other serious bidders and get a feel for how much competition there really is.
Generally, there will be a chance before the auction begins to walk around the property and grounds, so if you haven’t done so before now is a great time to scope out the site and where to stand. The auctioneer will always choose the best view of the house to commence the auction. If you are in doubt ask the agent where the auction will be conducted on the site.
Think about your image
You’ll be scoping out the other bidders while you’re there, so it follows that they’ll be looking at you as well. If you can project an air of confidence, so much the better.
Dress to impress. That doesn’t mean you should arrive dripping in diamonds but turning up in a suit can’t hurt. It gives the impression that you mean serious business and have the deep pockets to match. Your competitors are less likely to raise their bids if they think you’ll just gazump them again.
Know your limits
It can be all too easy to get carried away at auction and bid more than you’d planned.
There’s nothing wrong with going a bit higher to secure the home of your dreams, but make sure that you’ve planned for that contingency. Have a hard limit in your head, and don’t go over it. If your family are likely to try and talk you into another bid, go alone.
Remember, if the property is passed in, all is not lost. If you’re the highest bidder but the reserve isn’t met, the auctioneer will usually continue negotiations between you and the seller after the auction has concluded. After all, they want a sale as much as you do.
At the end of the day, the person who is prepared to pay the highest price will be the successful bidder. But auctions are emotional experiences, so things can change on the day.
If you go in with your paperwork and finances in order, a plan on how to proceed and a firm limit, you’ll project confidence and calm. If this truly is the house for you, you can bid with confidence knowing that you’ve given yourself your best shot.
Want to find out if there are any auctions coming up for properties that suit your needs? Call one of our experienced agents and we’ll be happy to help!