When property markets are hot, it’s very common to see a lot of properties listed to sell via the auction process.
In the current market, we are seeing very strong auction clearance rates that are regularly above 80% in both Sydney and Melbourne, which is a clear sign of a seller’s market.
For the most part, selling at auction is the best way for a vendor to get the very best price possible. Auctions encourage competition and can also be extremely emotionally charged events, meaning there is a chance a property will sell for more than it was initially valued at.
If you’re a buyer at an auction, it can be a daunting process. However, there are a number of key steps you can take to make sure you can bid confidently and successfully.
Be Prepared
The first thing you should do, regardless of whether you intend to buy at auction, is to seek pre-approval through your mortgage broker. When you have a pre-approval in place, you will have a very clear idea of what your budget looks like and it will ensure that you don’t overextend yourself.
While you’re going through the pre-approval process, you’ll also likely be able to organise the correct structure in which to purchase the property.
Do Your Research
The biggest trap for buyers at auction is not understanding what the property is actually worth and relying on the sales agent’s price guide.
The goal of a sales agent is to get the maximum possible price for their client, the vendor. To do that, they will try and attract as many people to bid at the auction as possible.
While you cannot control the final price the house sells for, you can control how you go about your research.
The best way to understand what a property might sell for is to use comparable sales data. These days this information is available on a number of real estate portals, and you can easily search for sales that have occurred in the previous six months in a particular suburb.
Try and identify comparable properties in terms of the type of building, age and land component.
Many people leave an auction disappointed because they simply have incorrect expectations heading into the auction. While we often hear stories of properties selling for huge sums of money over and above the price guide figures, this can be very misleading.
If you’re confident in your numbers, you can also put in an offer prior to auction.
Be Ready at Auction
When the time comes for the auction, make sure you arrive early and assess the people that you will potentially be bidding against. Just because there is a large crowd, it doesn’t mean that all the people there will be buyers, as neighbours always like to see how the property market is performing in their area.
If you’ve done your research as suggested, you should be confident in bidding strongly and not going over your pre-determined limit. People make mistakes at an auction because they get emotional. You can remove some of the emotion by knowing your numbers.
Work with an Expert
If you are not confident in bidding and need some help, it’s possible to work with a buyer’s agent, specifically to bid for you at auction and even negotiate.
Buyers’ agents are professionals who purchase property for a living. Working with a professional can help remove any emotion and enable you to bid on a property without the undue stress of the day.
If you have a question or would like more information, please contact…
Steve
Mobile 0423 894 864
steve@bettermoneylenders.com.au
Brett
Mobile 0428 156 680
brett@bettermoneylenders.com.au
