How to best prepare for a home auction
Auctions can be full-on. They can be intimidating and unpredictable, and most of the time we opt to avoid them if we can.
There is a significant upside to attending auctions. They help give you a sense of how much certain properties go for, what others are willing to pay for them, and insight into locations set for future growth.
However, before you can win in an auction, you have to first understand the rules.
The rules of the auction
Each state has particular rules for auction practices. Here is a list of rules that are standard across all states in Australia:
- There’s no cooling-off period. If you place a bid on a property, and you win, it means you are legally bound to purchasing that property.
- If you don’t register your name and address before the bidding starts, your bid won’t be considered.
- The auctioneer sets the pace, aka: the amount the offers increase.
- Bear in mind that auctioneers aren’t obliged to tell you if the reserve price has been reached, so it won’t be clear if you’re ‘overbidding’.
- The seller of the property is allowed to have bids submitted on their behalf. However, the auctioneer must explicitly announce this before the auction commences.
- It is illegal to place a ‘dummy bid’. These are bids placed by a friend or relative in the crowd, whose intention is to boost the selling price, not to buy.
Do your research
Taking some time to do research significantly boosts your chances for a successful auction and getting a great deal on a home.
Speak with your conveyancing agent to get as much information on the property and the location as possible.
At Mortgage House, we offer free property reports that can help you better determine the value of the property.
Find out how you can get a free property report by getting in touch. We’ll talk through what kind of property you are looking for, and can help determine the best course of action when putting an offer in on a property.
Prepare as if you won the bid
Get your solicitor to look at the property contract in advance to flag anything that may be an issue. This will help you see the property’s history compared to other local properties in the same price range. The better prepared you are, the better, because once the hammer drops, that’s it.
Know your walk-away figure
Auctions provide an atmosphere of hype and competitiveness. They’re geared to help the seller generate more profit. There are countless stories where people walk into an auction, forget their budget, get carried away, win the property – then feel that sinking feeling in their stomach when they realise what they’ve done. You can avoid this pitfall by preparing well, but most importantly, knowing what your walk-away price is.
Bid with confidence
Now that you’re prepared, you can bid with confidence. You’ll know the limits of your budget and what the long-term value of the property is from your property report. If your budget is $800,000, and the bidding starts at $700,000; don’t be afraid to get involved in the ‘bidding war’. You can confidently scream out “I’ll give you $750,000.”
Just beware of the ‘auctioneer’s trap’; the techniques used to make you impulsively bid on the property by making you feel like you’re going to miss out.
Get more with Mortgage House
At Mortgage House, we’re no strangers to the homeowner’s journey. It’s a long (but rewarding) one.
But don’t worry, we can help with that.
If you’re thinking of investing in property, you can contact us for advice about the best options for you when it comes to your mortgage. The cost of your mortgage can drastically affect your financial planning, so it pays to speak to the experts about it.