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Buying your first home at an auction can be thrilling, but it’s hard not to get swept away in the atmosphere and bid above your budget. See our tips below to keep calm and maximise your chances of securing your property at the right price.
Property auctions move fast, and people who have not attended these events in the past often get lost in the shuffle. If the property you want will be going to auction, take the time to attend other property auctions name and observe how the process plays out.
It also pays to keep an eye on the quoted price of a few auctions even if that means speaking with a few real estate agents. You can see how this quoted price compares with the actual auction price and know what to expect at your own auction.
Organise a pest and building inspection report long before auction day. If the report identifies key faults, ask the selling agent if you can take your builder for an inspection of the property to get an idea of likely repair costs.
Do not bid on a property until your solicitor has given you the all-clear. Contracts for sale by auction are complex and without the benefit of a cooling off period, you’ll have to live with any nasty surprises about the property if you're the highest bidder.
Making a bid at auction without the certainty of loan finance is a very high risk strategy. It makes more sense to secure loan pre-approval as this will give you confidence as a bidder and set an all important limit on your bidding.
With loan pre-approval you should have a good idea about how much you can afford to pay for a property. But you should only pay what you think the property is worth based on similar homes in the area. Paying more could mean waiting years for your home to grow in value.
Tip: When you do know your budget, keep it secret. Letting the agent or the seller know your limit won’t do you any favours. This information can be used to ensure that the price goes as high as your limit, and provides no benefit to you.
Check if you need to register to bid. This is a requirement of some state governments, and where it applies you will be given a bidding number to use. You may also want to consider using a friend or buyers’ agent to bid for you.
If you’re the winning bidder on the day, you’ll be required to pay a deposit of 5-10% of the purchase price on the spot.
Before bidding starts, the auctioneer will give a full description of the property and then invite bidding to begin, usually from a nominated starting point.
Where possible, avoid bidding early - you may push the price up prematurely. It can pay to wait until bidding is drawing to a conclusion (and bids are being made in small increments) before raising your hand.
The best time to place your bid is after vendor bids have been placed.
If the auctioneer declares the property is "on the market", it means the vendor's reserve price (the minimum they will accept) has been reached and the property will be sold when the hammer falls. If bidding stalls prior to this, the property will be “passed in” and you have the option of entering further negotiations with the agent.
Finally, stick to the golden rule - no matter how intense the pressure, resist the urge to bid above your budget. It could mean facing difficulties funding your property once the excitement dies down.
Ensure you stick to the golden rule - no matter how intense the pressure, resist the urge to bid above your budget. It could mean facing difficulties funding your property once the excitement dies down.
As such, it is important for you to have a limit and stick to it, no matter the outcome.
The rules of the auction that are legally binding can vary from one state to the next, but here are some general laws that relate to most property auctions.
There are some terms of bidding at auction that are not formally written out. However, these implied regulations are followed by people who are experienced in bidding on properties at auction. Getting to know these rules will help you establish yourself in the property auction community.
Get in the zone before you go ...
Attend a few auctions to familiarise yourself with the atmosphere and processes so you're comfortable when it's time to bid.
Enlist the support of family and friends on auction day to keep you focused.
Even if you aren't successful in winning your property, remain optimistic – there are plenty more opportunities out there.
It helps to talk to a mortgage broker beforehand, because of their extensive knowledge of the home buying process.