Five tips to win at auction, and how to know when to walk away
Auctions can be confronting situations, particularly for the inexperienced buyer, and the first rule that must be remembered is that “winning” at auction doesn’t necessarily mean walking away with the property.
If the home starts getting bids that you cannot afford, or that are more than the property is worth, then the best way to ‘win’ is to walk away. Often easier said than done.
This week, Property Observer took part in #loanchat – a Twitter conversation where people are encouraged to chime in and ask questions – with the topic being about auctions.
Here are the top tips
1 Practice and visit auctions ahead of time
If you can, it’s worth going to a number of auctions ahead of the time that you wish to place a bid. This will not only give you an understanding of what prices properties are going for, and the interest levels, but you will also find yourself more comfortable and familiar with the auction process
Auctions are an experience you don’t want to be dropped into cold. Try to visit as many as you can to get a feel of the language.
If you can’t head to any auctions ahead of time, then try to watch some videos of auctions online so that you know what to expect, and see some online guides.
For instance, this video on bidding tips:
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2 Have a game plan, including a budget, figured out beforehand
Do not go into an auction unsure about how much you’re willing to spend – know your upper limit and stick to it. However, you may find yourself needing to be flexible by $1,000 or $2,000 to make sure you don’t miss your ‘dream home’ by a few thousand.
Don’t give away how close you are to your limit – many buyer’s agents say they easily get the upper hand as it’s obvious when inexperienced purchasers are reaching their limit. Keep any notes with your limit on out of sight.
3 Get an ‘auction buddy’ if you’re unsure
If you don’t trust yourself at auction, or could do with the support, then it’s recommended to consider an ‘auction buddy’ – someone who can come with you, keep you accountable and ensure that you’re not acting emotionally.
Make sure that you choose someone who isn’t emotionally invested in the purchase and who will play your ‘devil’s advocate’ when you want to pay more than you initially decided to.
4 Know exactly what it is your buying (and check out that contract ahead of time)
Do not go into an auction without being clear on your borrowing capacity, your expectations for the property and knowledge of what the asset is like. Ensure you’ve ‘popped the hood’ and undertaken a building and pest inspection, as well as had a solicitor look through the contract so you know what you’ll be signing.
Remember to negotiate any changes ahead of auction time.
5 Get as much information as possible
While getting plenty of information is crucial, ensure the advice that you seek out is independent and well-researched.
Too often, investors take advice from the real estate agent, who is acting in the vendor's interest. Prospective buyers should always be looking for impartial advice in every part of the buying process, including auctions. See out your own comparable properties, undertake your own research, and be sure to match it against what you are being told.
Similarly, double check any claims about rental yields achievable.
You'll also want to be figuring out the vendor's motivations - try and find out as much about the current owner as possible. This may just help to secure you the upper hand.
If you want to see a full wrap-up of loan chat then have a look here.
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How to avoid becoming an auction pushover buyer (10 tips)
John McGrath's seven tips for buying before auction