Tips for Preparing to buy your home at auction
Buying a home at auction can be a very nerve wracking experience for most people. It’s not every day you stand in front of a crowd of onlookers while you fight it out for your dream home.
Emotions are high.
The system isn’t always in your favour.
There are other, more experienced buyers in the crowd you are competing against.
Buyer agents, otherwise known as buyer advocates usually always win the auction.
You have no control over what others might do.
The auctioneer has a really big bag of tricks
AND the sales agency has at least six team members there pressuring buyers to pay more, increase their bids or apply pressure so you can’t think straight.
Let’s be brutally honest, very few people actually like buying a home at auction.
Here is what you need to know and do so that you feel as confident as possible when you bid at auction for your home.
1. Know the value of the property
Knowing the real value of the home is the best thing you can do to increase your chance of purchasing a property at auction.
Many buyers miss out on buying a home at auction because they haven’t accurately calculated the true value of the property. They arrive at auction with a much smaller budget than they anticipated needing and go home disappointed and needing to start the search again on Monday.
When you accurately assess the value of a property you will be in the best position to win the auction. If you don;t win and come very close at least you know you got your pricing right, you were just unlucky on the day.
2. Test your auction bidding limit
If it’s a home that you really want you need to think carefully about how much you are willing to pay for the property. It may be more than you think the property is really worth, and providing the property will still stand up to a valuation (because there is no finance clause when you buy a property under auction conditions).
You need it to value at the same price you paid for it otherwise you will have a valuation shortfall you need to find, then it is okay to stretch a little, providing you have thought about the potential risks and have a risk management plan in place.
A few questions we ask our clients are:
“At what price would you be happy to walk away and let another buyer have it”
“If it went for X price would you regret not buying it the next day” (keep going up in $5,000 increments until you hit the amount that you know you would not regret losing the property over)
3. know how many similar properties are available
Knowing how rare, scarce or readily available a specific property type is in your chosen suburb will help you to know how aggressive you need to be with your budget to secure the property.
The more readily available similar properties are, the less you should budget for the property
4. How many other buyers will be bidding at the auction
Knowing how many other buyers will be at auction bidding for your property is a key consideration when preparing to buy a home at auction.
The more competition the property has, the more likely the property is going to reach a higher selling price.
Conversely, less buyers can sometimes mean a lower purchase price. But not always. This one is a tricky one to navigate and requires a professional and skilled assessment to ensure your next move is the right move.
4. Have your deposit ready to go
Ensure you have easy access to your deposit and know how you will pay it to the agent if you are the winning bidder at auction.
You may need to contact your bank to find out how you can access such a large sum of money. All banks have different limits they will allow you to transfer at one time. Some banks will allow you to set a one off larger limit.
5. Don’t stand together at the auction
If you are a couple you need to be very careful about how you behave at the auction.
As a buyers agent who is skilled at reading the body language of other bidders, I can tell you that couples give away a lot of information about the strength of their finances. The auctioneer and support staff can read your body language too.
Typically the partner who is not doing the bidding will give away a lot of tells. The best thing to do is move the non bidding partner away from the bidder so you can avoid showing your cards to more experienced bidders.
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