Attend Auctions Armed With Understanding, So You Don’t Overextend Yourself
There are so many reasons to sell a property on auction, and auctions are a great way to buy property.
For the buyer attending an auction for the first time, it’s good to understand common auction lingo and how the auction process works.
Having a good idea of what to expect can help you keep your emotions in check throughout the bidding process and make sure you don’t overextend yourself, because you got caught up in the excitement, buzz, and cast of people.
So, how does an auction work? Let’s take you inside of an auction, so you know what to expect.
How the Auction Process Really Works
Just like anything else, auctions have rules, but the auctioneers use different approaches to encourage as many bidders to take part as possible.
The terms “rises” or “bidding advances” are used in the auction process. These terms refer to the amount by which bids increase. The auctioneer can set how much each bid increases by and you can bid underneath of that, but your bid may or may not be accepted.
Once the auction opens, the auctioneer will start taking bids.
If an auctioneer says something like they’re “going inside” or “seeking advice,” this is likely because the bidding is drying up. The auctioneer is likely going inside to discuss the progress with the seller and to get some instruction.
At this time, the auctioneer may make a vendor bid.
What is a vendor bid? The vendor bid has to be declared by the auctioneer and indicates that the vendor or seller is not yet happy with the price reached at that point in the auction.
The auctioneer will then continue seeking bids until they get to the seller’s reserve price (the price the seller agreed to sell at).
If bidding doesn’t reach that level, the property will most likely be “passed in.” At this point, the highest bidder has the option to negotiate the selling price with the seller.
If the bidding gets close to the reserve price, the auctioneer will make sure the seller wants to sell at the highest bid.
If the seller says yes, the auctioneer will announce that the property is “on the market” This means bidding will continue and the property will be sold to whoever bids the highest.
How to Make a Winning Bid
If you’re a newbie to auctions, you may be a little nervous once the bidding commences. Here are some tips to ensure you make a winning bid:
- Act confident and bid confidently
- Ask the auctioneer appropriate questions, such as when the property is on the market or who made a bid
- Set your bidding limit beforehand and stick to it
The Differences Between Buying by Private Sale and at Auction
If you purchase a property on auction, you do not get a cooling off period which is standard in a private sale contract. What this means for you is that if you want to have a building or pest inspection done on an auctioned property, you need to make sure to have it done prior to the auction.
A building and pest inspection is definitely something you should have whether you’re buying an old or new property.
In a private sale, you can make your offer subject to a building or pest inspection. You also have 3 business days from the time you sign the contract, called a “cooling off” period, in which you can change your mind, unless, of course, it is within three days before a public auction or after.
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