Your dream home has just come onto the market and with a certain amount of trepidation you realise that it is being sold by auction. You’ve never been to an auction before – never mind purchased a house at one – and you’re a little worried that you won’t know what to do.
Make sure you have finalised all important details before the auction date. Extensive preparation is essential to a happy auction experience.
Familiarise yourself with the auction process by visiting as many auctions as you can. Ask questions of the auctioneers and find out everything you need to know about bidding. Auctioneers use many tricks to encourage people to bid by creating excitement, being humorous and changing the pace of the auction. Try to become competent at recognising these and other tactics used.
Inspect the property before the auction date. Be objective and make sure you inspect other properties as well. Inspecting other properties means you can make an educated guess as to a fair purchase price. Work out how much you are willing to pay and do not exceed your maximum on auction day. If necessary, arrange an independent valuation.
Visit the real estate agent and ask questions. Also request a copy of the contract, including condition reports, and study it carefully.
Visit your lender and finalise any home loan arrangements. A deposit, often as much as 10% of the purchase price, will need to be paid on completion of the auction so ensure you have these funds available.
On auction day it’s important to remember that the auctioneer is employed by the seller to get as good a price as possible for their house. A good auctioneer will be able to encourage the crowd to enter the bidding early, maintain excitement among bidders and even force them to exceed their maximum amount.
Auctioneers are adept at recognising interested parties and will use this knowledge to set a reserve price at auction. Try to show as little interest as possible to encourage the seller to lower their reserve.
Don’t bid before you have to. Wait until the reserve price has been reached before entering bidding as a lack of interest can confuse some bidders and may force the seller to lower the reserve.
Work out your tactics and stick with them. Your visits to other auctions should give you an insight into bidding tactics, such as changing the increments of the bids away from the auctioneer’s chosen amounts. This can intimidate other bidders and shows confidence and a strategic plan.
A vendor bid is where the auctioneer will place a bid on behalf of the seller with a view to assisting the property reach its reserve price. Vendor bidding can only be done by the auctioneer or another legally permitted person and should be declared as part of this auction’s process before the auction begins.
How are auctions regulated?
Auctions are a recognised and widely used form of selling. Not just property but livestock, household goods and cars are auctioned, just to name a few. Each state and territory in Australia has their own set of regulations governing auctions, designed to protect both the vendor and vendee.
The Real Estate Institute in each state and territory sets down guidelines detailing their code of practice for the industry. By ensuring your chosen agent is a member of the Institute, you can guarantee a high standard and an auctioneer who will adhere to each and every regulation.
If you have any further questions, need some advice or would just like to have a chat about the auction process in general, Dave Williams has administered many auction campaigns over the years and would always be happy to hear from you. Give him a call anytime on 0488 88 4573.