Real estate listings are split into two main types of sale: auction and private treaty. Some buyers find the unpredictability of an auction a bit off-putting, but if you do your research you may find that there are many benefits to them.
Before discarding listings based on their sale type, read our tips for buying a house at auction and put yourself in a stronger position.
If you’re thinking about buying a house at auction, it’s good to be familiar with the process. Auctions have a lot of unique language and the whole process can feel disorientating at first.
Rather than turning up at your first auction with the intention of bidding, it’s smart to attend auctions of properties you’re not interested in. This is the best way to see how they work, how the auctioneer encourages bidding and what sort of tactics are used by buyers.
It’s easy to get swept up in the excitement of buying a home, but if you don’t have all your ducks lined up it may be a costly exercise.
Before you make any auction bids, make sure you have pre-approval from a lender. Not only does this help set a limit, but it also means you’re more likely to go through with the purchase without any hitches. If you don’t have finance waiting, you may miss out on the payment deadline and end up losing your deposit.
You’ll also need to make sure that you have your deposit ready and available to transfer after the auction. This may require a conversation with your bank to make sure your transfer limit is at an appropriate limit.
You should go into an auction knowing exactly what you want to (and can) pay for the property. The auctioneer’s job is to get as much as possible for a property and it’s easy to get caught up in the excitement.
Make sure to bid with your head and set firm limits. If you bid too much it can cause financial disaster — you may stretch yourself in the coming months or even have to pull out completely (and lose your deposit in the process).
Some people like to write down their maximum figure so they have a physical reminder not to go too high while others simply walk away once the bidding passes their number.
It’s always a good idea to visit a property yourself before you bid on it. It gives you a good idea of how you might live in the space and you’ll be able to spot any major changes you’ll want to make. It’s also recommended that you bring in some professional inspectors too.
In some cases, you might find that a friendly auction provides pest and building reports, but some bidders prefer to get their own done anyway.
If the vendor isn’t offering reports, it’s highly recommended that you arrange for someone to carry these out for you. Once you win, there’s no more negotiating if you find any problems. Finding out about structural damage or a termite infestation can quickly take the shine off what you thought was a bargain buy.
As the bidding progresses, the auctioneer will call suggested bids. These are normally in five or ten thousand dollar increments, but you don’t need to call out this number to put in a bid. It’s the auctioneer’s job to get as high a price as possible, so don’t feel pressured to bid a certain amount and stick to what you feel comfortable with.
If you feel like you’re coming to the end of the bidding with another party, sometimes bidding a thousand or two more than the current figure can be enough to get ahead.
There’s no single strategy that works better than another in auctions, but having a strategy can help remove emotional or impulsive bidding.
When you attend auctions you’ll see a few common strategies in play: the big, early bidder; the immediate responder and the patient, late-game bidder are all popular options. There are pros and cons to each and the confidence exuded can put off other bidders.
At the end of the day, the important thing is that you stick to your limit.
Some bidders like to hide away in a corner to avoid conversations with agents. The fear is that they’ll somehow give away their secrets and be swayed by a persuasive seller.
However, by making yourself known as a serious bidder you can often get useful intel from the onsite real estate agent. They can let you know things like how many bidders there are, if anyone has dropped out and more.
Even if you’ve bought at auction before, it’s important to know that not all auctions in Australia are equal. For example, buyers from Victoria and Western Australia may be surprised that you need to register with auctions in other parts of the country. To do this, you’ll need to give personal identification to the real estate agent or auctioneer team before you can make a bid.
Speak to the selling agent and ask if they’d consider a pre-auction bid. In some cases, a vendor may take the property off the market before the auction date if they receive a good bid. This allows you to secure a property with less competition at a price you’re happy with.
Not all sellers will entertain this idea — thinking they’ll make more if they go to auction — but the answer is always no if you don’t ask the question.
Unlike with private treaties, there are no cooling off periods for properties bought at auction. If you win on the day, then it’s yours — no ifs, buts or maybes.
Make sure you’ve done your due diligence, not only on the house but the surrounding area. Parents (or potential parents) should look into school zones but other factors like public transport, flood/bushfire risks and proximity to certain services should also come under consideration.
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Bill has over 26 years of experience working in the finance industry. He has worked across a number of different businesses including Home Loans, Personal Loans, Collections and Insurances. Bill's passion is to utilise his knowledge and experience in the industry to assist clients in meeting their financial goals.
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