Investing means having to go to auction on any number of properties, but why do so many buyers feel uneasy in this scenario?
Blogger: Jacque Parker, director, House Search Australia
Auctions are a popular sales method in many suburbs, and continue to yield solid results for vendors with high-demand properties in low-supply areas.
However, in my experience, not many buyers like auctions. Besides the obvious downside of having to bid in an open environment (with all eyes on your every move) there’s also the unknown price. How far will the price be pushed? What are the other buyers thinking? What’s their motivation? How accurate is the price guide? What happens if the property gets passed in to me? So many questions and valid concerns and, in an emotionally charged environment, it’s not surprising that buyers sometimes prefer to buy via private treaty instead. We certainly gauge each and every property for clients and come up with what we believe is the preferred purchasing method. Now, if we can only get vendors to always agree.
Unfortunately, though, some vendors simply will not sell any other way (or their agents advise them accordingly) and so you may find yourself front and centre one day, holding a bidding card. If this is the case, here are my top tips for giving yourself the best chance of success. Though they may not stop a buyer with a bigger cheque than yours from buying on the day, they may be enough to give you more confidence, perhaps throw off a competitor or even net you a lower price. Good luck!
• Bid confidently and loudly, calling out the whole number. Don’t be put off by the competition throwing up their cards and agreeing to those $50,000 bids the auctioneer is ‘suggesting’. It’s your money, so spend it in increments you’re happy with.
• Stand to the side of the crowd and auctioneer if possible. This provides you with the best vantage point to see all of your competition and allows them to see you (and your confidence).
• Write your limit down beforehand and stick to it. I’ve seen so many bidders reach their limit and then look at their partner/frantically whisper/change their body language tellingly. Make sure your limit includes a little ‘hurt money’, and that any amount over this is either definitely over your budget (or upper appraisal limit) or makes you feel ill just thinking about it.
• Don’t make your final limit a round number. In other words, if you’re thinking $900,000 maximum, add another $3, $7 or $9 to this. Over the life of the loan, it’s unlikely to make much difference, and it may just score you the property. Obviously, the final amount stretched will depend on your funds, but don’t end on a zero or a five.
• Make sure you have first bidding rights should the property not sell. Even if you are the only bidder with an amount less than what the auctioneer will accept (and keep in mind they have the right to reject bids if they are below the reserve or not in the vendor’s interests) the selling agent should extend the first offer to negotiate to you if the property is passed in.
• Be prepared and role-play for a ‘passed in’ event. Again, so many buyers concentrate on bidding techniques and then fall apart if the property gets passed in – suddenly they find themselves across the table from three or four selling agents applying immense pressure. If you think this could happen, then role-play the scenario with your partner/friend beforehand and be prepared, with research, to justify your lower price position.
• Be realistic. Do your research on price (sometimes taking the price guide with a grain of salt) and understand the market you’re buying in. If your price is nowhere near realistic, you may spend thousands of dollars on wasted campaigns and never end up buying a property.
While bidding at auction can be scary for some buyers, treat it like the theatre that it is and prepare accordingly. You may just be surprised at how well you perform!