I have a lot of buyers following me on social, and the most frequently asked question I receive is how to buy at auction.
I can understand why; auctions are an emotional event! Even though I sell the majority of my properties at auction, when I was looking to buy my first home and had to bid at an auction, I was a nervous wreck! I know that emotional buyers tend to push their budget, and yet there I was with that same surge of adrenaline, bidding from my heart, not my brain! In case you were wondering, I was not the winning bidder, and the post-auction depression kicked in hard.
However, there are a lot of reasons why I prefer to buy at auction.
Most real estate in Canberra is sold via auction. If you choose to avoid auction properties, you could be missing out on some of the best homes in the market.
Auction is the most transparent way to buy a property. You can see exactly who is interested, and where they have placed a bid. Have you ever tried to buy a property via private treaty and had the agent call you for an increase because another buyer has offered more than you? They probably have, but how would you know for sure?
If you are the successful buyer at auction, the contracts are exchanged immediately. The home is yours, hooray! If you have an offer accepted on a private treaty sale, it usually takes up to 3 weeks before contracts exchange. In this period, if another buyer makes an offer the agent legally has to pass this onto their vendors. If the offer is higher than yours, there is a high chance the vendor will accept it. This can’t happen if you buy under auction conditions!
Ok, onto the juicy details you’re all here to read. Below are my top tips to help you buy your dream home at auction.
Preparation phase – Pre-auction due diligence
- Contact your broker to ensure you’re able to buy under auction conditions.
- Show your solicitor the contract and organise any amendments to the contract they suggest.
- Attend auctions to get a feel for different bidding and auctioneering strategies. In particular, attend auctions from the agency you’re hoping to buy from.
- Attend multiple open homes at the property you’re hoping to buy. You’ll start to notice familiar faces; multiple inspections are a good indicator that a buyer is interested.
- Do your own research and set yourself a budget. Especially in a really competitive market, it is really important to know what your walk-away price is for each individual home. Have an accountability buddy with you on the day to help you stick to it!
- If you choose to put forward a pre-auction offer it needs to be really attractive. A vendor will usually only accept a pre-auction offer if it’s too good to refuse. In the current market, it is likely a vendor will choose to go to auction. However, an agent must present any pre-auction offers to a vendor, so it could be worth putting something forward. It at least opens up the conversation and gives you a better idea of the vendors expectations.
- If you want to keep your cards close to your chest, send the agent an email stating you are interested in the property and would like to be kept in the loop should the vendor decide to sell prior to auction.
- Organise a private viewing of the home and conduct a pre-exchange inspection. Your solicitor will be able to provide you with a checklist for the inspection.
- I really feel for buyers in this market. Properties are moving really quickly and, in most cases, are selling well beyond expectation. If you are feeling overwhelmed with the process of buying at auction, ask the agent to have one of their colleagues bid on your behalf. You can place bids over the phone all from the comfort of your own lounge room or local coffee shop.
- Ensure you have your photo ID and way to pay your deposit with you.
- Arrive early and register. Once you’ve registered you can spend some time walking through the home, scouting out the competition and finding a spot where you feel comfortable to stand during the auction.
- Consider who you bring along with you. An accountability buddy to help remind you of your walk-away price is a good idea but keep your support crew to a minimum. Having multiple people attend the auction can become overwhelming when you’re trying to negotiate and receiving lots of opinions!
- Place the first bid! There are two options here:
– Place the first bid close to where you think the reserve will be set. Placing a strong first bid confidentially could give you a psychological advantage. The other bidders may think you have deep pockets and no limits.
– Start the bidding on the lower end of expectation. As soon as you place a bid you will feel a surge of adrenaline. By starting the bidding low, you will have a few opportunities to increase your bid. Each time you do, your heart rate will calm down and you’ll find it easier to think clearly about your next steps at the pointy end of the auction.
- If you feel the auction is moving too fast, place strategic bids to slow it down. If the auctioneer calls for an increase of $5,000, offer $5,750. If you do this a couple of times the auctioneer (unless he is a mathematician) will start to slow the auction down as he calculates where the bidding is up to.
- If the property is going to be passed in, ensure you are the highest bidder as this gives you exclusive rights to negotiate.
- Keep your cards close to your chest if the auctioneer/agent starts negotiating with you directly. Remember, it’s our job to find out what you’re able to spend on a home!
- “On the market”. Once the auctioneer discloses that the property is on the market, every bid thereafter is a bid to buy the home!
Hooray! You’ve bought at auction
- Take a sold photo (highly recommend the Toyota jump pose) and put it all over your socials!
- Email your broker advising them that you’re now #adulting as you have just bought at auction.
- Call your insurance company and tell them you’ve bought at auction. You will need to take out insurance on the property from the date of the auction. The vendors also keep their insurance. This protects everybody!
- Go out for a fancy dinner to celebrate. This step is important because it’s probably the last fancy dinner you’ll have as you’ve now just landed yourself a mortgage!
- Request a pre-settlement inspection the day before settlement. This allows you to ensure the home is still in the same condition as the day you bought it at auction.
If you’re not successful
- Have an ugly cry in the car, we’ve all been there!
- Go out for dinner and look at the properties available for inspection the following Saturday. Make a list of the homes you would like to view.
- Try not to focus on all the homes you have missed out on. See them as learning opportunities and stepping stones to your dream home – I promise you it’s still out there!
I hope these tips have been some help to you. If you have any questions or would like to discuss the process of buying in more depth, give me a call! I’d love to help you.
Ash Costello is a residential real estate sales agent with boutique agency, home.byholly, which focuses on selling houses throughout the established Canberra suburbs. Contact Ash on 0402 718 359.