A guide to preparing for your first auction
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) we’ve put together a quick guide to preparing for your very first auction.
Do plenty of research
Ask the real estate agent to provide you with a list of recent comparable sales in the area.
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 immediate area you’re considering. Ask the real estate agent to provide you with a list of recent comparable sales in the area to help you determine the property’s true value.
Have your money ready to go
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.
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 the sale and purchase agreement
If the home is old, or you have other concerns, consider carrying out these additional checks:
- Meth test
- Electrical report and plumbing report
- Soil tests
Thoroughly checking a property before attending an auction will help uncover all the little secrets that the home holds. With this knowledge in mind, you can either avoid the property altogether, reduce your bid, or continue as you were confident that you know exactly what you’re buying.
Bring along a family member or friend with more experience at auctions.
Get the hep you need
Buying a property can be stressful and difficult if you do it alone, so make your life easier by getting the help you need from local professionals. That means speaking to a mortgage broker to sort your finance, and having a real estate agent help you develop a strategy to find and purchase the right home.
If you’re worried about the auction itself, you don’t have to brave that alone either. 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 a family member or friend with more experience at auctions.
Decide on a strategy
There’s more to auctions then raising your hand a few times and moving to your new home – you need a strategy.
First you should set a price limit – and pledge to not exceed that number 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, that extra $3,000 could win you the auction.
You should also try to bid confidently and aggressively. Wear professional clothes to the auction, and raise your hand straight away if you’re making a bid. At the start of the process, consider making large bids to push the price up quickly – 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.