Auction Tips

Buying at auction

One of the most important things to remember at auction when buying a property that there is no cooling off period as there is when you buy 'for sale'.  The Auction sale is legally binding on the day.  The following guidelines should help you with understanding the Auction process.

Prior to the auction

Definately one of the most important things to make sure you do is Research.

You will need to start looking around the area you want to buy and research both prices that are advertised ‘for sale’ or through Auction what price did they sell for.  Finding this information is easily done either through checking on the internet or asking a Real Estate agent for a list of sales that they are aware of in the area you are looking to buy. 

Checking out this information prior to auction is a must as this way by checking similar types of properties you will get a feel for what an average price will be in order not to pay too much at auction and you will be bidding from you head and not from your heart.  This happens a lot when people go to auctions to not done any research start bidding from the heart and end up paying far too much.
Attend Auctions in the area

It is valuable experience to attend as many local Auctions as you can to see how the Auction proceeds, the various personalities attending.  Observe the person there that loves the house and is prepared to pay whatever it takes, against the person who tries to slow the bidding down eg: the last bid was $5,000 the person slowing the bidding might offer only half this amount at $2,500 if bidding is slow this bid maybe accepted bearing in mind the agents are there to push the bid up.  If you just stick to your plan and don’t be swayed too much with emotion you will do a lot better than the person who bids with his heart and will end up paying too much for the property. 

A definite must is to pre Arrange your Finances

Ensure that you have your Finance in place prior to the Auction.  Establish you bidding limit. Make sure you allow for all extra costs, eg legal, stamp duty, finance fees etc.  

When you have decided on the property

Register your Interest with the Agent

Advise the Real Estate Agent if you are interested in the property. Also ask the agent if the Vendor would consider sale prior to Auction, and as you have done your research you know what is a fair price.  This sometimes will be expected and it doesn’t hurt to ask.

Establish your Bidding Limit

It is important that you set your own bidding limit.  Decide what the property is worth to you based on what you can afford. To make sure you can afford a property work out the limit on your loan and add 3% to the interest rate. If you could still make the payment then that is a very safe limit.

Set an Uneven Limit

Wherever possible, it pays to set an uneven limit, rather than stopping on a round number. For example, rather than stopping at $310,000, try going to $311,000. A small increase of $500 bid could make the difference if the other bidder is close to their limit.

Check the Paperwork

If you are interested in a property and it gets all of your ticks then you should get a copy of documentation from the selling Agent and have your Solicitor inspect the Contract of Sale. It is a good idea to have a good read through all the paperwork related to the Auction beforehand. The documentation should be available at anytime leading up to the auction.  Pay attention to details such as settlement terms, deposit and fixtures before the auction commences.

Inspections

In different states have different criteria regarding building inspections, in Canberra for instance this is part of the selling process and this report would need to be done and available on request at anytime leading up to the auction.
If not you will need to organise a building and pest inspections done before the Auction with access to the property through the agent. If the property reveals some faults you were not aware of you would determine how much it would take to fix the problem and negotiate with the agent to offer a lower price due to the fault, or if the fault is major you might consider not taking the property at all!!

Ask for Help

Many people find the Auction process daunting.  Don't be afraid to ask a friend, relative or Real Estate Agent, to assist you with your bidding. Many people ask someone else to bid on their behalf as they may be less inclined to bid emotionally and will not exceed a predetermined limit.  Make certain that they have very clear instructions in writing on what they can and can't do on your behalf - remember, there is no cooling off period with an Auction.

On Auction Day

Presentation is Important

If you look like a confident property buyer, this will help convince your competition that you won't stop until the property is yours. Remember that it isn't always the person with the most money that wins at auction. It is the person who convinces everyone else to stop bidding.
Check the Contract of Sale again
On the Auction Day you should always check that your copy of the Contract of Sale is exactly the same as the original Auction Contract and that there have been no late changes.

Bidding

The Auction from the Auctioneer's perspective is that they are often looking at a large number of people who are invariably turning around, whispering etc.  If you are standing at the back of this scene, or hidden in the shade of a tree, the Auctioneer may well miss your bid, particularly when you are bidding for the first time. Stand in clear sight of the Auctioneer and make your first bid obvious to them.

Make sure the Auctioneer understands what you are doing. Bid early, clearly and confidently, and avoid unusual sign language that may be misunderstood. Buyers are usually reluctant to start bidding at Auction but the best policy is to bid loudly and confidently signalling to all other bidders you intend to purchase the property or should the reserve price not be reached that you are given an opportunity in any further negotiations.

Keep Control of your Bidding

If the bidding is increasing in larger denominations than you are comfortable remember earlier tips and start offering a lower denomination as your bid. The Auctioneer does have the right to refuse it, but there is absolutely no harm in trying.

It is important not to be drawn into a bidding war on a property you want. Emotion is the killer here and many a time people do pay too much because of it.  And remember there is no cooling off period with an Auction.

Making a Deposit

When the property is sold at the Auction you are required to sign the Contract of Sale and pay a deposit of usually 10% on the spot but again this can be negotiated prior to auction and you may then know that 5% will be accepted. This can be paid by Personal or Bank Cheque or subject to prior approval with the Agent by Deposit Guarantee.

The End of the Auction

Hopefully, now you are celebrating your successful purchase.  Time to break out the champagne and congratulate yourself at winning a property and knowing that you didn’t pay too much for!