Home buyer tips: how to prepare for a property auction
Auctions have become more popular in the Perth market over recent years and they have diversified to take on a number of forms, such as on-site, in-room and online auctions. While many buyers would prefer to negotiate directly with a seller, avoiding the “competitive bidding” of auction conditions, there are times when auction participation is the only way to secure your chosen home.
With this in mind, here are some tips from our buyer’s agency team on how to prepare for auction and bid confidently on the day.
Do your homework
When you buy at auction, you are almost always buying on “as is, unconditional” terms. So, it’s essential that you do your homework into the property before you bid. This research will vary depending on the location, style of property and what you intend to do post-settlement (e.g. moving in or rebuilding/developing).
Your pre-bidding research could include:
- Title details, including any easements and encumbrances
- Building/Pest and other professional inspections
- Doing a thorough buyer inspection to check that all appliances, locks and fixtures are in good working order
- Building or development requirements/costs
- Local area information such as school zones, flight paths or developments happening nearby
Assess the market price
A key question on the mind of any buyer is “What should I pay?” This is an important question to ask and particularly challenging one to answer in a moving market. Buyers are not always aware that they can seek an independent opinion of the property’s market value, rather than relying on “buyer guides” provided by the selling agent.
Arriving at auction with a clear market value in mind, alongside your own purchasing budget, allows you to set a walk-away price and avoid over-bidding for the property in the heat of the moment.
Other buyers have the opposite problem – they show up to a property ready to buy, only to find that competitive bidding pushes the final price well beyond their budget.
Pre-auction due diligence can be an expensive and time-consuming process if you are outbid at a few properties, so it’s important to assess the likely sales price on auction day. Selling agents often publish lower than realistic price guides to encourage high attendance at the auction and to boost the perception of competition. This can be disheartening for buyers who continually miss out on properties that they perceive to be in their price bracket.
As buyer’s agents, we assess the market value and likely selling price of each property before auction day. For buyers on a set budget, sometimes the best advice we can offer is to sit out the auction and explore lower priced purchasing options elsewhere.
Check the fine print
Reading the fine print is never fun, but it’s essential for buyers to be aware of the terms of the auction, especially given the variety of auction formats now available to sellers. Some auction contracts allow for a subject to finance approval, while others are cash only. Online auctions allow buyers to submit their terms for seller approval prior to bidding (although most buyer-friendly contract clauses will not be accepted by sellers in this scenario).
If the seller is a bank or other institution, the contract will often contain confusing references to conditions in the “Joint Forms & General Conditions”. These can be tempting to overlook, however they could alter items which are usually standard practice in real estate transactions, such as the adjustment of rates or the warranty on building approvals, which in turn warrant extra due diligence prior to bidding.
Prepare a bidding strategy
Once you’re confident you’re happy to proceed, it’s important to consider your maximum price and your strategy for competing with other bidders on the day. While you should respect auction etiquette, there are opportunities to avoid the competitive pressure exerted by the auctioneer, who of course is hired to push the final bid as high as possible. Bidding in uneven increments, making counter-bids quickly or holding your bidding until later in the auction are all tactics that can help change the momentum of the auction and strengthen your bids.
Hire a negotiator
Auctions can be quite daunting, especially if it is your first time actively bidding. If the process seems overwhelming, a buyer’s agent could be the only auction strategy you need.
With experience negotiating across the Perth market in a variety of sale and auction formats, our team can conduct the due diligence and bid on your behalf. Or, if the property fine print presents a deal-breaker or the price is out of your budget, our team can suggest some alternative search parameters or comb the market for the right property for you.
To talk tactics or find out more about our range of buyers agency services, get in touch with our team here.