Auction tips for buyers
Research shows that most people feel intimidated by the prospect of buying a property at auction.
Buying a house at an auction is equal parts exciting and nerve-wracking. The prospect of owning a home after a single day of bidding is definitely enticing. But beware, auctions move quickly and as soon as that hammer strikes it’s all over. With money and your potential home on the line, it’s important to come to these auctions armed with research and knowledge.
If you want to buy a home at auction but are unsure where to start, we’ve outlined some tips and tricks below to help make your day at the auction a success.
Secure home finance approval and deposit
First and foremost, you need to get your finances in order and apply for a loan as soon as possible. Having a pre-approved loan or conditional approval can help as it shows that a lender has agreed in principle to provide you with a mortgage. A pre-approved loan can also help you decide on what kind of property you can afford as it shows how much a lender is willing to lend you.
At auctions, once your bid for the property gets accepted, you need to follow through with the purchase within a limited timeframe. This means your financing must be secured before anything else. If you get a winning bid but don’t have the means to pay for the property, you could lose your deposit and face serious legal consequences.
If you win at auction, you’ll also need to pay your deposit straight away. Usually, this will be around 5% to 10% of the property value. Coming to the auction prepared is incredibly important so you don’t end up losing out on your dream home.
Research potential properties carefully
When assessing the value of the property, you need to consider the location, features, age and condition of the building, and land size. A house that’s in a more desirable location will likely be more expensive compared to a similar property in a less sought-after suburb. Similarly, features and the overall condition of the property will affect its value.
To work out the likely sale price at auction, it’s best to look at property reports and suburb reports. At loans.com.au, you can access property and suburb reports online and for free; they include estimated property values, median prices, market comparisons, property mapping, and other valuable information.
Have a building and pest inspection
Unlike private sales, auctions don’t provide bidders with a cool-off period or terms for a conditional sale. The winning bid is final so it’s up to the buyer to do their due diligence about the property beforehand which includes doing a full home inspection.
This step is best done when you have you have a short list of properties ready. Since this will be an out-of-pocket expense, it’s wise to inspect the property first. You don’t want to spend a fortune having different properties inspected when you’re only going to be bidding on one. If the building and pest inspection report comes out clean, you can go to the auction without any doubts about the house’s condition.
Avoid bidding until the property reaches its reserve price
The reserve price is the minimum price the seller wants for the property. If bids haven’t reached the minimum price, the seller may withdraw it from the auction altogether.
It would be a good idea to wait until the bid reaches that minimum, so you don’t bid too soon. If the auctioneer hasn't said anything, don't be shy about asking mid-way through the auction if the property is formally on the market. Until then, it's best to wait it out and not feel pressured by the auctioneer or other bidders.
Don’t get too excited
Bidding at auctions can be a thrill but don’t get too carried away when you’re calling out your bids. Remember, you’re dealing with a serious property purchase so take every bid you make seriously. Even if you have your eyes set on the property, be careful not to bid too high early on. The last thing you want to do is overpay on a property.
A good strategy at the auction would be to slow down the momentum of the bids. You can do this by staying within the limits of your auction budget. If the auctioneer calls out for $5,000 higher, you can offer $1,000 or $2,500 so that it doesn’t get too out of control.
If you know you can’t handle the emotions and the stress of property auctions, you can have a buyer’s agent, friend, or family member who you can trust to do the bidding for you. You can advise them of your game plan and tell them your price limit.
Know when to walk away
The smartest strategy at auctions is knowing when enough is enough. If a property is going way beyond your budget or the price that you’ve researched, it’s best to just walk away and move on to the next property on your shortlist.
It may be tempting to keep bidding higher, but you need to know your limits. Spending above your means can only hurt you in the long run. At auctions, always keep a level head and think of the bigger picture.
Gearing up for a house auction?
Apply online for a home loan today! Get quick pre-approval (within 24 hours) so you can start your house hunt sooner. At loans.com.au, we offer competitive rates and useful loan features giving you added flexibility and convenience, as well as incredible savings. For more information, call 13 10 90.
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About the article
As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.
