Preparing for your first auction

BE PREPARED: It always pays to have done your research on a property and have a strategy ready ahead of any auction. Photo: Ray White
BE PREPARED: It always pays to have done your research on a property and have a strategy ready ahead of any auction. Photo: Ray White

Auctions can be a fantastic way to buy a home, however they can also be challenging and stressful, particularly if it's your first time. To help you get the result you want, and to avoid disasters, here is a quick guide to preparing for your very first auction.

Do plenty of research

Before you even think about attending an auction, you should fully understand the market and area that you're buying in. To get a grip on the market, look at the auction clearance rate, or proportion of successful auctions in your area.

You should also look closer at the location you're considering. Ask the real estate agent to provide a list of recent comparable sales in the area to help you determine the property's true value.

Have your finance ready

As soon as the hammer slams down, you're legally required to go through with the purchase if you have the leading bid. That means, if the bank declines your application for finance after you win, you could be in serious trouble, and you will most likely lose your deposit.

Minimise that risk by having your finance pre-approved before the auction. Pre-approval is an indication from your bank that you will be successful if you apply for finance up to a certain amount, conditional on nothing changing, and on the property you buy.

This will allow you to bid with confidence - just make sure you don't ever bid over the amount you've been pre-approved for.

Do your due diligence

If you win at auction you'll still be required to purchase the property even if you later find that it's infested with borer or laden with asbestos. Make sure you know exactly what you're buying by completing the following checks:

  • Conduct a building and pest inspection
  • Have a conveyancer check contracts
  • Consider carrying out additional checks such as soil tests. and electrical and plumbing reports

Thoroughly checking a property before attending an auction will help uncover all the little secrets that the home holds. With this knowledge, you can either avoid the property altogether, reduce your bid, or continue as you were confident that you know exactly what you're buying.

Get the help you need

Buying a property can be stressful and difficult if you do it alone, so make your life easier by getting help from local professionals. Speak to a mortgage broker to sort your finance, and have a real estate agent help you develop a strategy to find and purchase the right home.

If you're worried about the auction, you don't have to brave that alone. If you have a good relationship with a real estate agent, they may be willing to accompany you for advice and support, or alternatively you can bring along family or friends with more experience at auctions.

Decide on a strategy

There's more to auctions than hand raising, you need a strategy. Set a price limit and promise not exceed that, regardless of what happens. That number should be uneven because bidding usually goes up in multiples of $10,000, $5,000 or $1,000. If you set your limit at $503,000, for example, the extra $3,000 could win the auction.

Try to bid confidently and aggressively. Wear professional clothes to the auction, and raise your hand straight away if you're making a bid. Initially, consider making large bids to push the price up quickly as this may scare your competitors off.

If you decide to buy at auction, don't leave your success to chance. With the best local help you can find, and a sensible strategy, you could be living in your dream home before you know it.

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