Auctions are a popular method for selling a home, and while they can be a nerve-wracking experience for first timers, these tips should help you bid on your dream home with confidence.
What should I do before the auction?
Know your limit
Thoroughly analyse your finances and know how much you can afford to spend on a property. This may seem like a no-brainer, but it’s easy to get carried away at an auction and commit yourself to a price that you either can’t afford (more on this later) or will put you under severe financial strain.
Get pre-approved on your home loan
It pays dividends to have your home loan pre-approved. Not only can you take the time to shop around and get the best deal on your home loan, but it will also be one less thing to worry about on auction day and means you can bid with confidence.
Conduct a thorough inspection
Just the same as if you were buying a property via private sale, you need to make sure you’ve conducted your due diligence on the property before making a bid. Have a building and pest inspection done for the property you are interested in and make sure you pay thorough attention to structural elements of the building when inspecting the property.
Request a copy of the contract of sale
The owner needs to have this drawn up prior to listing the property for sale, and it is important you acquaint yourself with the document prior to auction day. It’s a good idea to engage a solicitor to help you read over the contract of sale.
Research recent auctions
There are a plethora of online tools you can utilise to research price trends, but the best way to get a feel for an auction is to show up to one yourself as a bystander and see how it’s done.
Familiarise yourself with the standard terms of auction
These are available on the REINSW website and are on display at the auction as well. They stipulate the rules and conditions of the auction.
What should I do on the day of the auction?
Arrive with plenty of time to spare and register to bid.
In NSW you will need to provide a form of identification such as a driver’s licence and will be assigned a bidder number. You must register in order to bid.
Should I make the opening bid?
Different auctioneers and agents will give you varying advice on whether to place the opening bid or not, but really, there’s no hard and fast rule. If you’re confident you know what the property is worth, feel free to post the first bid, but keep in mind the auctioneer can reject it and call for something higher if they feel it is short of the mark.
Is there a special art to winning?
There’s no ‘secret tactic’ that will see you ward off all the other bidders, but it does pay to be confident in your bidding. That doesn’t mean rocking up to the auction in your Sunday best, but it does mean making clear bids and standing in clear view of the auctioneer.
Going all in on the first bid or holding off right until the auctioneer starts making their final call are unlikely to help either. Just make sure you know your limits and stick with them.
What if I’m too nervous to bid?
You may want to consider employing the services of a professionally accredited buyer’s agent to do the bidding on your behalf. You may either attend the auction with them or monitor the auction remotely (on the phone) if you wish to maintain anonymity. The buyer’s agent can be authorised to sign the sales contract on your behalf.
What’s a vendor’s bid?
In NSW, an auctioneer can exercise the right to place one vendor’s bid during an auction if they feel bidding is far of the reserve they are hoping to achieve. This will often happen towards the start of an auction as the auctioneer seeks to establish bidding. The auctioneer will make it clear that is what they are doing.
Why does the auctioneer say they’re seeking instructions from the vendor?
This could be for a variety of reasons. It could mean that the property has reached its reserve price, and the auctioneer is confirming with the vendor whether they’re willing to sell. It could mean that the auctioneer is seeking instructions on whether to place a vendor’s bid, or it could be that the auction looks unlikely to reach reserve and the auctioneer wants to know whether to sell the property under reserve or pass it in.
Will the auctioneer tell me when the property is ‘on the market’?
Usually, but not always. If and when the auctioneer does make this call, it does not necessarily mean that the reserve has been met, but that the owner is willing to sell for the current price.
After the auction
What happens if the property is passed in?
Despite what you may have heard, and what the auctioneer will likely tell you during the auction, being the highest bidder when a property passes in does not guarantee you the first right to negotiate with the owner for the sale of the property. When a property does pass in, the owner will usually negotiate with interested parties for a sale. If you want to be included in these negotiations and aren’t the highest bidder, let the agent know as soon as the auction finishes.
Signing contracts
If you’re the successful bidder, you will be expected to sign and exchange the contract of sale straight after the auction has concluded. You will need to pay a deposit on the day before leaving the auction. This is usually 10 per cent of the purchase price, although it pays to check with the agent prior to the auction. Bank cheque or personal cheque are the typical forms of payment.
Is there a cooling-off period?
No. If you buy the property at auction, or on the day of the auction (by negotiating with the seller) you will not be subject to the five day cooling off period associated with private sales. Therefore, the advice listed above about due diligence and having a clear idea of your financial situation is incredibly important.
Don’t be disheartened if you don’t win
Most importantly, remember that buying at auction in the current Sydney market is a tough game. It’s more than possible that you may lose at one or more of the auctions you bid at. Keep a positive outlook and keep on searching – there are plenty of properties out there. Come and talk to the team at DiJones Real Estate if you need help with your search.
Disclaimer
DiJones Real Estate, together with their directors, officers, employees and agents have used their best endeavours to ensure the information passed on in this document is accurate. However, you must make your own enquiries in relation to the information contained in this document and seek advice from your financial advisor, broker or accountant to ascertain its application to your circumstances.
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