The auction scene is buzzing with activity. Lower interest rates, post-election stability, and eased lending restrictions have fueled a surge in auctions. If you’re aiming to win at an auction, here are eight practical strategies to give you the edge.
1) Ask the Right Questions
Before auction day, gather key information from the agent:
- Pest and Building Reports: How many have been issued? This indicates how many serious buyers have taken steps to assess the property.
- Contracts Issued: Knowing the number of contracts issued helps gauge the competition. More contracts mean more interested buyers.
This helps gauge the level of interest, giving you a clearer picture beyond just the number of attendees at open houses.
2) Make a Pre-Auction Offer
If you’re keen on a property, consider making a strong offer before auction day. In Sydney’s Eastern Suburbs, up to 35% of auction properties are sold prior to the auction. This approach can sometimes help you avoid the competitive auction environment altogether.
3) Have a Game Plan
Arrive at the auction with a well-thought-out plan:
- Research: Look into recent sales and comparable listings in the area to understand the market value.
- Auctioneer’s Style: Watch previous auctions conducted by the same auctioneer to get a sense of their style and pace.
- Budget: Set a firm budget and stick to it. Decide your maximum bid before the auction starts and resist the urge to go beyond it. Bid with your head, not your emotions.
4) Start Strong with a Knock-Out Bid
When the auctioneer calls for an opening bid, consider making a strong initial bid:
- Psychological Advantage: A high opening bid can eliminate some of your competition early, establishing you as a serious contender.
- Setting the Pace: By starting strong, you can set the auction’s pace and potentially intimidate other bidders.
5) Keep a Poker Face and Stay Confident
Emotions can be a disadvantage during an auction:
- Neutral Expression: Maintain a neutral expression to avoid giving away your level of interest.
- Confidence: Project confidence in your bids. This can make it harder for other bidders and the auctioneer to read you and gauge your intentions.
6) Use Your Agent
If English isn’t your first language or if you need support, let your agent assist:
- Bidding Assistance: Your agent can help you keep track of bids and manage the auction dynamics effectively.
- Emotional Control: Having an agent handle the bidding can help you stay calm and focused on your strategy.
7) Challenge the Auctioneer
Disrupt the auctioneer’s flow with uneven bids:
- Increment Variations: Instead of raising by a standard increment (e.g., $25,000), bid an uneven amount (e.g., $27,500). This forces the auctioneer to adjust and can slow down the pace.
- Control: This tactic can give you more control over the auction’s tempo and may unsettle other bidders.
8) Secure the Right to Negotiate
If the property doesn’t meet the reserve price, don’t lose hope:
- Highest Bidder Advantage: As the highest bidder, you often get the first right to negotiate after the auction and put in an offer after the auction when a property is passed in. This can be a significant advantage in a competitive market like Sydney.
- Post-Auction Negotiation: Be prepared to negotiate quickly and effectively once the auction concludes.
Understanding Auction Terms
Navigating an auction can be easier if you’re familiar with the common terms used. Here are some key auction terms to understand:
- Reserve Price: The minimum price the seller is willing to accept. If the bidding doesn’t reach this price, the property may not be sold.
- Bidder’s Guide: A guide provided by the auctioneer that outlines the rules and regulations of the auction.
- Vendor Bid: A bid made by the auctioneer on behalf of the seller to help reach the reserve price.
- Passed In: When a property doesn’t reach the reserve price and is not sold during the auction. The highest bidder may get the first opportunity to negotiate.
Pre-Auction Checklist
Being well-prepared before the auction day is crucial. Here’s a checklist to help you get ready:
- Finance Pre-Approval: Ensure your financing is pre-approved so you know your budget and can bid with confidence.
- Building and Pest Inspections: Get a professional inspection to avoid any surprises regarding the property’s condition.
- Legal Advice on the Contract: Have a solicitor review the contract of sale to understand any special conditions or terms.
- Understand Deposit Requirements: Know how much deposit is required if you win and arrange the funds accordingly.
Post-Auction Steps
Winning at auction is just the beginning. Here’s what you need to do after securing the highest bid:
- Sign the Contract: Immediately after winning, you’ll need to sign the contract of sale.
- Pay the Deposit: Arrange to pay the deposit, which is typically 10% of the purchase price.
- Arrange Insurance: Ensure the property is insured from the day of purchase.
- Complete the Settlement Process: Work with your solicitor and lender to finalize the settlement, which usually occurs within 30-90 days.
Auction Day Do’s and Don’ts
| Do’s | Don’ts |
|---|---|
| Research the property thoroughly | Overbid in the heat of the moment |
| Arrive early to register | Show too much emotion |
| Set a clear budget | Rely on verbal agreements |
| Stay calm and confident | Neglect pre-auction offers |
Frequently Asked Questions on Auction Strategies
What is the best strategy to win at auction?
The most effective strategy for winning an auction involves thorough preparation. Research the item’s history, assess its market value, and set a budget. It’s also crucial to observe the auction’s progress and adjust your bidding strategy based on the behavior of other bidders.
How do you win an auction?
To win an auction, place your highest bid towards the end of the auction to prevent early bid wars. If there’s a reserve price, make sure your bid meets this minimum early on to stay in the running. Also, consider bidding an unusual amount to outbid others by a small margin.
How do you win an auction competition?
Winning an auction competition requires research to understand the value of the item, setting a strict budget, and timing your bids strategically, usually late in the auction to avoid driving the price up prematurely. Confident and competitive bidding can also deter other bidders.
What is the dominant strategy of auction?
In a second-price sealed-bid auction, the dominant strategy is to bid an amount equal to your true valuation of the item. This strategy ensures that you do not overpay if you win; you only pay what the second-highest bidder was willing to pay.
