Well, I’m excited to say that we have purchased a new property just last week…again! If you’ve been following along on the website here, on our podcasts or even our facebook page, then you’d know that the last few weeks have been hectic for me as I’ve been inspecting properties, have made several offers, had one offer accepted, got some building inspections and then withdrew from the sale! Wow, it’s really been quite a ride!
So last Friday, we attended an auction, actually, it was multiple auctions as they were auctioning 6 properties at the one location, one after another. The properties were in a regional city in Victoria and were all Department of Housing properties. I’ve only ever bid at auction once before and it was a very long time ago and I didn’t get that property, so needless to say, my auction experience was quite limited. Now that I have the grand total of one auction purchase under my belt, I thought I’d share with you my 5 tips for buying at auction!
1. Do your research before you get there.
This relates to both research on the property as well as research on auction rules in your location. There are a couple of things to remember when you buy at auction. Usually you’ll be signing an unconditional contract (I won’t be convering adding special conditions to an auction contract here). That means no finance clause, no building inspection clause, no pest inspection clause and so on. These are all musts when buying privately that are often ‘off the table’ in an auction circumstance. In the state of Victoria, your usual three day cooling off period is also not applicable when buying at auction.
So what does this mean?
It means you need to be pretty confident of your finance situation, preferably having obtained a pre-approval from a lender. You also need to have conducted any pre-purchase inspections that you wish to conduct prior to the auction. This can be tricky, as you don’t know if you will be the winning bidder at auction and so the money you fork out for these inspections may be wasted if you are not.
Unfortunately, that’s just a decision you’ll have to make.
Now the other part of the research equation is that you need to make sure that you have an understanding of the rules of an auction, it’s conduct and have an idea of your strategy. Of course you can just ‘rock up’ and have a go, but it helps to know how things work and what your ‘game plan’ is before you get there!
The day before the auction that we went to I spent a little time on the web reading about auction rules in Victoria and auction strategy in general. There was actually a very interesting read about auction rules that I came across that helped me to understand things a little better. Some of it was quite surprising, such as, no one can make you sign the contract at the end of the auction. Of course, I’m not a lawyer, so I’d recommend you seek professional advice on that sort of thing!
Reading up about strategy was also very helpful and meant that I went into the auction knowing what I planned to do.
2. Know your ceiling price before you get there.
Have you ever bought anything on ebay? Auctions are quite exciting and it can be easy to get caught up in a bidding war. That is why it is important that you’ve had a good think about your ceiling price before you get there. We had inspected this property some weeks prior to the auction and had an idea of what we wanted to pay, but we spent several hours the night before going over the deal to determine our maximum buy price. An important thing to remember here is that it’s not just about what you can afford, it’s whether the price that you pay is right for this particular deal.
Paying too much for a property can make what could have been a good deal into a poor choice.
3. Calm and confident
When you are at the auction, it helps to be calm, clear and confident, which is funny, because if you’re like me and feeling nervous and excited then calm and confident can be a hard ask! Lucky for me – and hopefully for you too – I am one of those people who can appear calm and confident on the outside, whilst my heart is racing a mile a minute inside!
4. Don’t bid till it’s on the market.
What vendors and real estate agents really want is for buyers to get excited and emotional about the ‘game’ of the auction. Even the language of auction sets things up so that it seems like a game. I always remind myself that I am buying the property, I don’t ‘win’ the auction. There’s nothing better for the real estate agent than to have multiple people competing and pushing up the price of the property. So what’s the solution there? Easy. Don’t bid!
At least, don’t bid till the property is actually ‘on the market’ – meaning that the property will be sold at the fall of the hammer!
I think the only exception I have for this is that if the property is looking like being passed in then you may want to bid so that the property is passed in with first rights of negotiation going to the bidder who held the highest bid.
The strategy I went in with was that I was not going to bid until the property was on the market and only when I thought it would be sold (i.e. Going once, going twice, going three times…are you all done….?) would I enter the auction and then, of course, only if the property was still under my ceiling price. I tried my best to look like the seasoned auction professional, standing there, iPad in hand, jotting down random notes here and there throughout the first five auctions – as though I was doing something important (!!?). When it came to the auction I was there for I tried to appear somewhat disinterested early on in the auction (though of course, I was listening and watching everything like a hawk!).
It was very handy that there were six auctions in a row on the day as this gave me a chance to see how the auctioneer ran the auction, which gave me more confidence when it was our turn. The auctioneer’s assistance announced loudly ‘on the market’ when each property had reached it’s reserve – which was indeed very helpful as sometimes at auctions you can be unsure whether the house is on the market or not.
I stuck with my strategy and ended up coming in quite late in the game, but with three confident and immediate bids warding off the competitors – all still under my ceiling – the auctioneer yelled ‘sold’ and it was ours!
5. The deal of the century comes along every week
I wanted to include this tip, because it’s easy to get your hopes up and feel disappointed if you don’t ‘win’ the auction (purchase the property!). There will be another deal, so don’t worry, the deal of the century comes along every week!
Have you bought at auction? Tell us your experiences and tips, we’d love to hear them!