Auctions can be a great way of buying a home, but they’re not always the easiest route to go down. Getting caught up in the heat of the moment can make them stressful and challenging, even more so if you haven’t been to one before. As a result, if you want to get the best result and avoid any potential pitfalls, you need to know what you’re doing.
We’ve compiled a quick, easy-to-digest list of the main points you need to understand to ensure you’re ready for your first auction. Read on to find out more.
Research, Research, Research
Before attending the auction, you need to know the market you’re looking to buy in. To get a full understanding of what you’re entering into, look at the auction clearance rate or how many of the auctions in your area have been successful.
On top of this, you should also look into the immediate surroundings of the area you’re buying into. Speak with the real estate agent on-site about recent comparable sales and ask them to provide you with a list. This will help you to work out the property’s true value.
Know How Much You Have Free to Spend
If you’ve got the leading bid in an auction, it’s not just a moral obligation – you’re actually legally required to follow through with the purchase. As a result, if your bank or lender ends up declining your finance application, you could be in big trouble. At the very least, you’re likely to lose the deposit you’ve put down.
You can reduce that risk by getting pre-approval on any loans before you get to the auction. This is a strong indication from your chosen lender that you’ll be successful if you apply for finance, as long as nothing within your financial situation changes.
Conduct Thorough Due Diligence
If you win the property at auction, you’ll be required to follow through with the purchase – even if you work out later that it’s got severe pest problems or completely coated in asbestos. For this reason, it’s key that you carry out thorough due diligence before bidding on a property. You should consider the following:
- Conduct a building and pest inspection
- Get the site checked by a conveyancer
- Meth tests
- Electrical and plumbing reports
- Soil tests
By doing this, you’ll leave nothing to chance and have full knowledge in mind to either avoid the home like the plague, bid lower, or go at it with everything you’ve got.
Get Professional Help
Buying a property at auction can be tricky, so if you don’t feel confident in your abilities, enlist the help of a local professional. Talk about your finances with a mortgage broker, then set out a strategy with a real estate agent to make sure you buy a property that’s best suited to your needs – both now and in the future.
Set a Clear Strategy
Although it might seem like it’s over in seconds and is as simple as placing a couple of bids, there’s a lot more to auctions than putting your hand in the air a few times.
Firstly, you should set yourself a price limit. Make that number uneven, as auctions usually go up in rounds of $10,000, $5,000 or $1,000. For example, if you set your price limit to $403,000, that extra little bit could be the difference between a win and a loss.
You should also be confident with your bids and be a little aggressive. Dress professionally for the auction and if you’re willing to make a bid, raise your hand straight away. You should make large bids at the start of the auction too, as this could discourage your competition.
The information and links provided on this website are for general information only and should not be taken as constituting professional advice. This information does not take into account the financial situation or particular needs of individual readers. Before making any decisions about matters discussed on this website, you should consider whether it is suitable for you in light of your own circumstances, and seek appropriate advice.