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8 Top Tips to Buy a Home at Auction
March 23, 2015
It’s easy to make a mistake purchasing a home at auction. Here are 8 top tips to make auction results work for you.
Buying a home at auction can be especially daunting, so follow these top tips to prepare for the big day.
- There’s no such thing as too much research
When it comes to property auctions it’s essential to be prepared. Know the market value inside out for the property type and location you are interested in to avoid overpaying for any one property. There is always a reserve price attached to each property, so don’t be overly excited if the starting price seems too good to be true. Research the previous 6 months’ auction results in your area to give a good idea of the market.
- Attend lots of Auctions
Going to auctions can be tedious, but it’s essential to attend as many as possible to get a feel for the process. Knowing what’s going to happen will give you confidence, which is often a deal breaker when the bidding begins. Take note of any winning strategies from bidders, and what starting price was in relation to the winning bid.
- Inspect before bidding
Once the gavel slams down on a successful bid there’s no going back, so make sure any inspections are completed before the auction. In addition, try to view the property several times before bidding and chat to the agent as much as possible to gain any insights.
Don’t try to save hundreds of dollars by risking thousands – Have a conveyancer inspect the contract before bidding and know exactly what is included in the sale. There isn’t a ‘cooling off period’ when purchasing at auction, so you have to be sure.
- Money Matters
The money must all be in place before placing a bid as around 10% of the purchase price is immediately payable. By placing the winning bid you are entering into a binding contract, so make sure all your finances are in place before raising a hand.
It’s common for the starting bid to be around 20% less than the final selling price to lure in as many buyers as possible. Calculate which properties you can afford by thoroughly researching the market rather than looking at starting prices.
- Register early, then wait
Don’t forget you identification documents if you intend to bid or you may miss out on the property (unless in VIC). Try to arrive a little early so there’s no rush to register, and then take a good spot in the room so you can keep an eye on the action. Don’t bid until the property reaches its reserve price, until this point it’s not for sale and you risk showing your hand too early.
- Keep calm and carry on
If there’s a chance you might get carried away and bid more than you can afford, or be too nervous to bid at all, consider having someone attend the auction on your behalf. This could be a family member, trusted friend, or purchasing agent – just make sure they know your bidding limit.
- Stick to the budget, but keep it quiet
Make sure you have a strict limit (especially if you’re on a tight budget) before attending the auction. Auctions are designed to draw you in, so be careful. Never reveal your top price as auctioneers are paid a percentage of the sale price, so it’s in their interest for the property to sell at the highest price.