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. Here are some tips on how to keep calm and maximise your chances of securing your property at the right price.
Steps to take before the auction
Do your research
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.
Undertake pre-purchase inspections
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.
Ask your solicitor to check the contract
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.
Arrange loan pre-approval
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.
Know your limit and stick to it
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.
Register to bid
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.
Get your cheque book ready
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.