Buying your next home is an exciting prospect, but it can also prove challenging. Because when you’re upgrading, most people will have to both sell and buy a home. In the process, there’s a reasonable chance you’ll be either bidding at an auction or sitting nervously watching your home sell at one.
Many people are wary of the whole auction process. But if you’re buying they can be pretty hard to avoid. And if you’re selling they could help maximise the sales price of your home. So to help you become more comfortable with auctions, here are a host of tips and watch outs. Let the bidding begin.
Selling at auction
Alright you’ve chosen a real estate agent. Now it’s time to decide between auction or private sale. Going to auction has some advantages. It can help you set what is usually a relatively short marketing and selling period for your property, perhaps 30 days. Auctions can also generate a lot of competition and excitement, especially in a seller’s market. But remember too, there’s no guarantee of your home selling on the day. Here are some ways to get properly prepared for a successful auction campaign.
Go over things with your agent
Don’t wait until auction day. You have a lot of things to decide on. So in the week before, it’s a great idea to sit down with your agent to ask questions and clarify things.
- Work with your agent to set your minimum reserve price. Compare your home with the sales price of similar homes in the area and be realistic with your expectations. This reserve is confidential and kept between you and your agent.
- Find out how many people your agent expects to show up and if they know how many genuinely interested buyers there are.
- Check what the bidding increments will be, how you will communicate with the agent on the day, how vendor bids will be used and what will happen if the reserve isn’t met.
- Ask your agent for a schedule of procedures. This will outline the agenda for the day, what the selling game plan is and even confirm if family and friends can attend for some moral support.
Make your home shine
It pays to present your home in the best possible light, both during the pre-auction inspections and on auction day. There are many inexpensive cosmetic things you can do to refresh and brighten up your home and make sure it’s looking spick and span. It might even be worth having your home styled, especially for the big day.
Organise to meet your auctioneer
A great auctioneer can be the difference between exciting the crowd into a bidding war and a no sale. So ask your agent who they have in mind for your home and go and see them in action to check you like their style. Then get your agent to organise a pre-auction meeting with them at your home, so you can go through the main selling points.
Stay positive whatever the result
Selling at auction can be nerve wracking. But remember if your home doesn’t sell, all is not lost. An experienced agent at this point will follow up with the highest bidders and other interested buyers who weren’t at the auction. Your home has now been seen by a lot of people too, something an agent will follow up on and an extended advertising campaign can help continue.
Buying at auction
You’ve found your ideal next home, but it’s going to auction. The thought of all that competition and being outbid on a property you love is making you nervous. No need to stress, by doing your pre-auction due diligence not only could you have a better chance of winning the bidding, but perhaps securing a good price too.
Do your research
Inspect as many properties as you can in the area you’re looking to buy and find out what they’re actually selling for (not just the asking price). Real estate agents are a great source of information here. It will help to give you a better idea of what any property you’re interested in is realistically worth and what your price ‘ceiling’ is. Going to auctions to get a feel for them is also a good idea. You’ll experience the atmosphere, how people bid, how different auctioneers operate and can help with your property price research.
Be prepared and set your limits
If you win at auction there’s no cooling off period and you will have to pay the deposit immediately, which is usually 10% of the purchase price. So it’s important to have your loan pre-approval sorted out, including how you plan to pay your deposit. Pre-approval can also help you set and stick to a bidding limit. Your pre-approval is an indication of your ability to borrow funds from your lender (based on the information you’ve provided them), But don’t forget – pre-approval is not the same as formal approval, which can only be given once you’ve found the property you’re going to purchase and you’ve made a formal loan application to the lender.
Pre-approval is an indication of your ability to borrow funds from a lender (based on the information you’ve provided them)
Making an offer before auction
If you would prefer not to go to auction, or don’t want to risk missing out, you can make an offer prior to auction. It can be a good strategy in a buyer’s market, when there may be low interest in the property. You do risk paying more than you need to, but it can be a good way to secure the property.
Got a property in mind?
If you’ve found a home you like and want to go to auction, there are a few things you will need to do beforehand, because remember there’s no cooling off period. So before auction day you should do inspections such as pest and building inspections to make sure the home is structurally sound and ask the agent for a copy of the contract, so you can show it to your solicitor prior to potentially signing it on the day.
Get your auction day tactics ready
Ready to start bidding? On the day you will need to register as a bidder, so bring your driver’s license and arrive early. This will also give you time to have a final look at the property, as well as check out your competition and how many ‘real’ bidders you’re up against.
When you talk to the agent, play your cards close to your chest. Don’t tell them too much, especially about what you’re prepared to pay. It can help improve your negotiating position and ensure the seller’s agent can’t use that information to sway other buyers.
As far as bidding tactics go, there are lots of different opinions. Some say settle the nerves by bidding early, starting low and going slow – to try and set the pace and slow down any bidding wars . Others say to wait until reserve is passed and the property is officially on the market. In the end, it’s all about what works best for you.
To learn more about all the little tips and tricks you can use to your advantage on auction day, take a look at our article ‘Bidding to win: Top tips for auction day’.
Our specialists are here to help
Planning on buying at auction? Our home loan specialists can talk you through your options and help you with finance pre-approval so you’re ready to bid.
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