To maximise the chances of winning an auction property, performing your due diligence is just as important - if not even more crucial - as the actual bidding itself.
Before heading out to the auction, investors should be armed with some auction strategies and be sure to have their due diligence checkboxes ticked.
- Attend as many auctions as possible
- Inspect as many properties in the area as possible
- Valuate and physically inspect the property
- Have your pest and building report
- Look at property data
- Have your finances pre-approved
- Go over the contract with a solicitor
- Find out who the auctioneer is
As the legislation various from state to state, it is also important for investors to know the auction laws in their state.
For example, in New South Wales, if the property falls under the reserve and is passed in, negotiations on the day before midnight will still be under auction conditions. However, in Queensland, investors are able to negotiate the property out of auction conditions, into a cool-off period.
Working backwards to establish a limit
Right Property Group’s buyer agent, Steve Waters says it is important that investors stick to their ‘absolute’ limit.
“Go in there with you absolute best food forward – [knowing] this is my limit and not a dollar more,” he advised. “That way, it’s very black and white.”
To avoid overspending, investors could also try working backwards to establish a limit, he suggests.
“You need to make sure that your pest and building reports have been carried out, and that any renovations – if you plan to do one – that you’ve costed it out. Have all your tradesmen and suppliers and your installers in there to give you quotes so that you can work out your total spend on the property.”
Don’t fall into a rhythm
Veronica Morgan, principal of Good Deeds Property Buyers and co-host at Location Location Location Australia, says while there is no single auction strategy, it is important not to fall into a rhythm.
“There are times when we bid strong and we only use $1000 bids,” she says.
“And other times, we’ll mix it up - $10,000, $5,000, $20,000, $2,000 so it keeps everyone guessing. The one thing I would say to be very careful of at an auction is getting into a rhythm because that’s what the auctioneer wants you to do - to get into a rhythm of bidding.
“If you’re in a rhythm, then you’re not thinking.”
Provided investors do their research and their due diligence, they could potentially be some good opportunities to be had.
“We encourage people not to be scared of auctions,” Ms Morgan says. “A lot of people try to avoid auctions based on fear, and to avoid that, you could really be costing yourself.
“A lot of people make pre-auction offers based on fear rather than really assessing the situation.”
If they held off, they could have paid less, she says.