The auction process can be an emotional experience, however being armed with a solid strategy may help you to come out as a winner on the big day.
In Melbourne Real Estate, sale by auction tends to be the preferred method of marketing. You need at some point to attend on a weekend auctions especially if you would like to buy a property in one of the great places in inner ring localities of Melbourne.
I was not familiar with the process of Auction before I started to get interested in real estate. Since then I have attend many auctions, lost some and fortunately for me I also managed to win at Auction.
So, I would like to propose some tips based on my own experience.
Attend as many auctions as you can, to understand how they work. Go to see the strategy of the winner and check the sold price compared to the advertised price range.
Get familiar with the terminologies of the real estate agent.
Until you hear the magic words: "the house is on the market", being the highest bidder does not guaranty you will get the house. So all the bidding before the reserved price is reached is pure bluff.
Property inspection is an essential part of the buying process and it’s worth visiting a property several times so you can be sure it really is what you’re after.
Take the time to get to know the agent representing
the property as they will be familiar with all of the facilities in the
local area and may reveal how much competition to expect and what other
people think the property is worth. However, do not forget the agent works for the vendor.
If you are really serious about a particular property, you could consider having it thoroughly inspected by a licensed building inspector, an architect and a pest inspector prior to the auction taking place.
As the auction is unconditional, you will need to check everything prior to the auction. If a property needs a bit of renovation, it is worthwhile to ask a builder to give you a quote. In that case you could define the limit of your budget.
Always get the vendor statement, known as Section 32, checked by a solicitor or a conveyancer. The Vendor Statement gives full disclosure to the prospective purchaser to avoid any hidden trap.
A Vendor Statement must be provided to you, the prospective purchaser, prior to signing the Contract of Sale.
But sometime if you do not ask, the agent will not provide it to you prior to the Auction.
The first time I went to an Auction, I had the Section 32 only few hours before the Auction. So, if you are serious about a property make sure you ask for the Section 32 after your inspection.
Again an Auction is unconditional, so be sure you had at least the pre-approval of your home loan before going to the Auction.
It’s a good idea to arrive a little early and find a spot that allows you to read the room and watch other bidders. Having some spare time will also allow you to do a mental checklist so that you feel fully prepared for the event. It could also be a good idea to dress to impress the other bidders.
When bidding, bid with confidence so that the auctioneer knows you exist - just make sure that the bid is realistic so that your interest in the property is taken seriously. Keep in mind that a strong bidder may create a psychological advantage over the competition.
Do not bid too soon, ideally do not bid before the reserve price is reached.
Once the property is declared to be "on the market", your best strategy now is probably to bid firmly, confidently and quickly to suggest to rivals that you really want it, you have the money, and they won’t win.
At one of my first auctions, nobody wanted to bid, so I did not bid either and the property passed in. It was a big mistake because it became very messy, the agent was negotiating with different people at same time including us. It became an auction without the 'transparency' of the real auction. You never know if there is an actual fight for the property or the agent is just playing you.
So my advice if you feel the property will be passed in is to try to always be the highest bidder. Then, you have the exclusivity to negotiate with the vendor.
Once you hit your limit, just stop bidding.
I've been there and I know how easily you can become emotional. An auction can be very nerve-wracking.
When buyers bid at auction, they bid to win and in the process lose connection to the initial goal of achieving a purchase within a predetermined budgetary limit.
So do not forget, there is plenty of property for sale out there. When you reach your limit, walk away.
When you win at auction, as the buyer you are required to sign the
contract and pay a deposit once the property has been ‘knocked down’ to
you. The deposit, which is usually 10 per cent of the purchase price,
will be held in trust until settlement occurs. So take your check book with you.
Then go home and celebrate!