In practice it can seem more like a fast-paced shootout fuelled by adrenalin and ego as buyers fight for the front door keys.
While that might sound like a daunting place to buy your first home, a little preparation can improve your chances of success.
Here’s a list of some things you should consider doing before you bid:
Watch some auctions
To get a feeling for the auction atmosphere, visit a few just as a spectator. You’ll see how the auctioneers operate and be able to observe the bidding strategies of the buyers. Giving yourself some experience of the real thing will help make things less imposing when you decide to bid.
Research the area
Auctions only state an expected selling range, not a fixed sale price as 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.
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 or Approval in Principle from your lender. Remember an auction contract is not subject to finance. If you buy, you need to be certain you can get the money.
Set your limit
As we’ve already said, if you win the auction, there’s no backing out. If you can’t produce the balance of the purchase price at settlement, you could lose your deposit. So don’t go over your borrowing limits. Emotions can run high at an auction, so it’s important not to get carried away.
Conduct your inspections
If you’re serious about bidding, 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.
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.
Register your interest
Depending on which state you’re bidding in, you may need to register your intention to bid with the agent. Check with the agent beforehand to confirm the requirements in your state.
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 will let the market decide the price by going to auction.
Ask someone to bid for you
If you don’t want the pressure of bidding, you can nominate someone else. You could pay a buyers’ advocate. As experienced professionals they’ll stick to your limit and won’t be intimidated by other bidders’ tactics. Or you could ask a family member or friend to help. Make sure it’s someone you can trust to bid within your budget. Even if they make the winning bid, you’ll be obliged to buy the property.
To sum up
- Be well prepared. Do your research.
- Organise your finances and building inspections before the auction.
- Stick to your budget. Once the hammer falls, the property is yours.
- You can nominate someone to bid for you.