Be “Professional Ready” to Bid At Auction (Or Make An Offer)
Auctions are lots of fun to watch and quite the spectator’s sport. Throughout the property’s marketing campaign, everything has been building up to this pivotal point. However, if you’re not a spectator and instead, you are the one who people will be watching, your mood can be very different. Nerves often kick in and pumping adrenaline can push you to make dangerously impulsive decisions, which is exactly what the auctioneer and real estate agent depend on.
There are many things you can do to calm turn nerves into confidence and give you more control. Many start weeks or months before auction day, but let’s start with the actual auction day.
Auction Day Strategy
When heading into an auction, set yourself up for success with a pre planned strategy. Do these simple, yet key things and you’ll have a better chance of leaving the auction a winner or of not overpaying:
Stick to your budget
This is the most crucial auction rule and one that you must abide by. Set your limit before entering an auction and don’t go over it no matter how much pressure you are feeling. This is one of the only rules that applies to all situations. Ignoring this rule can turn your dream property into a financial noose around your neck. This rule will also free you up to bid confidently until your last dollar. If you start whispering to your partner or friend or stalling, you may as well shout out to your competing bidders that you’re running out of money!
Arrive early to watch how interested other potential buyers are. Also, find a sneaky spot to watch how many people actually register to bid.
You may feel like this
but you must look like this
At an auction emotions = money.
No matter how good the auctioneer is or how invested you are in the property keep things in perspective. If you stretch your limit to the hilt or worse, exceed it, you could be living off noodles for years to come. In the short term, if your bank’s valuation falls short of the price you paid, you’ll be left to top up the gap in cash – if you have $15,000, $35,000 or even $100,000 lying around then that’s fine. If you don’t, then don’t over pay!
In the long term, it could take years for the market to catch up to the price you paid. If you unexpectedly find yourself in a position where you have to sell, you’ll be looking at a loss. If this time happens to coincide with one of life’s hurdles like death, debt or divorce, then your pain will be twofold.
People often ask me, “should I bid from the start of an auction or wait until the reserve has been met?”
There is no right or wrong answer here. It really depends who you’re up against, how strong your budget is and so much more.
I will say this, it’s true that if the reserve price (what the vendor will sell for) hasn’t been reached, then the property isn’t truly for sale however, if no one bids, how will the price nudge up to reach the reserve?
Showing your hand may push the price up but as long as you’re within your budget and you know you’re not overpaying, does that really matter?
What’s important is what happens at the end of the auction. So, as much as possible, put yourself in a position of power and control the proceedings. Talk to the auctioneer, even joke with him or her if you’re so inclined. Let your verbal and body languages show the crowd how confident you are and intimidate those other buyers!
Yes, it may mean there’s more attention on you but better that than no one seeing you as competition. If you’re bold enough:
- Keep banter going
- Look as if you’ve got all the time and money in the world - right until your last dollar
- Look as nonchalant as a teenager on a family excursion
- And lastly…
Never bid against yourself
This may seem like a silly rule, but it’s really important! If you are new to auctions, then your emotions may run high and the auctioneer will have no problem putting pressure on you. It is not uncommon for people to bid against themselves but if the bid sits with you, say nothing until someone else bids or the property is passed into the highest bidder – you! Keep your hands in your pockets and you may just find yourself negotiating after the auction and buying a property.
Pre Auction Day or Private Treaty Research
Like most things, with training and research, buying a property can be an empowering and amazing experience. But, if you make an offer or put your hand up at an auction, without doing your research, you could be creating a whole load of pain for your future.
To avoid this, when you find a property that you like and think you’re in with a good chance of buying it, stop to ask yourself, “what evidence do I really have to make myself feel that I’m in the running here?”
Stop and dig a bit deeper.
With the amount of money involved, give your property search the respect it deserves. Missing out could cost you a few thousand dollars in solicitor and report fees but worse, buying the wrong property, especially for too much, could cost you tens if not hundreds of thousands over the long term.
It takes years for a professional property buyer to know an areas demographic, properties and real estate agents – in fact it’s an ongoing learning. However, whether you’re new to the property market or have had your heart and sense of sanity broken with missed “dream properties” there are things you can do to pump up your buying power. Research, research and more research!
When you build strong foundations, the rest of your buying strategy should fall into place.
Do your research – look everywhere!
Have you done your area research? Your property research? Have you compared the property that you like to other recent sales?
If not, why not? Unless you know what’s happened in the past, how will you know what going to happen in the future?
This is no time to be relying on what the real estate agent tells you. It is their job to protect the vendor so you need to protect yourself.
Hit the streets
Get up early on a Saturday morning and go and see as many “open for inspections” as possible. Familiarise yourself with the properties but also, get to know the real estate agents – build relationships.
Next, follow those campaigns to the end. Go to the auctions or if it they sell by private sale, try to find out what they sold for and how much competition there was – were there two people or ten people trying to buy it?
Compare that price to the agent’s “quoted” price or their so-called “comparable” sales. If the property sold for higher than the agent had led you to believe, then that’s very likely to happen again and again and again.
As Dr Phil says, “the best indicator of future behaviour is past behaviours”.
Also, hop online to research recent comparable sales. Both domain.com.au and realestate.com.au have a tab that will take you to recently sold properties.
You can search by suburb, price range, bedrooms and lots of other criteria that you’re looking for.
With your newfound information, the next time a real estate agent quotes you a price on a property that you like, you’ll know to ignore them! Instead, run your own race and compare that property to recent sales. Be detailed and compare aspects, positions, deco, neighbouring properties and gradually, you’ll get nearer to the actual price that the vendor will sell for. While nothing compares to spending time doing your price research on the very big picture, property prices are commonly under quoted by 10-15% though 20% isn’t that unusual! So, if the agent is saying $1,000,000 do your sums on $1,100,000, $1,150,000 or even $1,200,000.
Now that you’ve finished your research, do you still think you can afford that property? If it’s “no”, then you can walk away before getting too emotionally attached and without spending a dollar. If it’s “yes”, then move onto the next stage of research.
Pre Auction (Or Offer) Checks
Before you get anywhere near putting in an offer, there are people whose professional advice and opinion you’ll need to get and most of the time, you’ll need to pay for them.
This isn’t too jarring on the first property you miss out on but by the second, third or even fourth, your property search becomes increasingly expensive.
BUT – no matter how far into your property search you are, you cannot skimp on $300 or even a couple of thousand and risk buying the wrong property. These reports and legals are chicken feed compared to the money you could lose on a building that’s about to fall down!
No matter how cute a property looks never, ever risk robbing your future self.
Get a building and pest inspection!
Gather up your power team and get professional
Building & Pest Report
For a Torrens Title house, a building and pest inspection is always needed and yes, even if it is new build. No matter what they say or what documents they show you, why would you trust the builder or developer?
For strata buildings and company title buildings, yes a strata report is always needed too.
Read through all the notes and see what money has recently been spent on the building – is the roof new or full of holes, has the exterior been painted or are the windows crumbling?
Get the contract thoroughly checked by a legal representative.
Do you need to get an architect, designer, engineer, plumber or any other tradies advice? If so, get them all done before you agree on the price, otherwise, negotiations will have to start all over again.
This one is free. Spend a few minutes on the phone to your local council or check their website to make sure there are no small (as in the house next door) or large (as in a huge tower block or a freeway) developments planned that will change the living conditions of the property.
Once they’re all done, it’s time to put your offer in.
Private Treaty Offer
If it’s a private sale, you’ll need to negotiate with the selling agent. Once you agree on a price, by all means confirm your offer verbally or by email but it won’t be yours until contracts have exchanged. If, another buyer puts a higher offer forward, before your contract has exchanged the agent, by law, has to take that to the vendor, their client.
Expediency often wins the prize so be ready and move quickly.