Picture this—one day, you’re looking at what could be your dream real estate in Melbourne. You try to find a selling price, but to no avail. Instead, you see the property as being listed up for auction–so what is a property auction, and how does it work?
Recommending reading: Auction Rules in VIC 2023
What Is a Property Auction?
An auction is a public sale in which the highest bidder gets the goods or property. People often organise auctions to sell off foreclosed homes and estates when time is of the essence. Some benefits of buying property through an auction include:
- Fast transaction—the entire auction process from start to finish can take as little as thirty days.
- Efficiency—there’s no need to go through a real estate agent, which can save time and money.
- Simplicity—the bidding process is usually simple and easy to understand.
When you’re preparing to bid at an auction, there are a few things you should keep in mind:
Pre-Bidding Due Diligence
- Get a pre-approval. To avoid being caught off guard, it’s always a good idea to get a pre-approval from your bank before attending an auction. By doing so, you give yourself the ability to plan your bidding strategy and limit.
- Do your research. Make sure to research both the property itself and the auction process. It’s important to be aware of the prices of similar properties and consider Melbourne property market predictions to protect yourself from paying too much. You also need to understand how much work the property may need, so research details that could affect the final price, such as the cost of bathroom renovations in Sydney.
- Set a budget. It’s essential to have a budget in mind before you start bidding to prevent you from overspending.
The Bidding Process
Now that we’ve gone over preparation for an auction, let’s take a look at the bidding process itself. The bidding process at an auction is typically very simple. Here’s how it works:
- The auctioneer will start the bidding at a predetermined price.
- The bidding will open up to the floor, and people can make their offers.
- The auctioneer will continue increasing the price until there are no more bids.
- Once the bidding has ended, the highest bidder is contractually obligated to purchase the property for the final price.
What Happens After the Auction?
So, you’ve won the auction and are now the proud owner of a property. But what happens next? Here’s a quick overview of the post-auction process:
- The deposit—once the auction is over, you’ll be required to pay a deposit (usually 10% of the purchase price) to secure the property.
- The cooling-off period—in Victoria, there is no cooling-off period. Once you have successfully bid for a property, you may not withdraw your offer.
- The settlement—the final step is to settle on the property. This is when there is no more remaining purchase price balance and you officially become the new owner.
Tips for Winning at an Auction
If you’re looking to win at an auction, you can do a few things to increase your chances:
Be Prepared
As we mentioned, researching and having a budget before bidding is essential. If you’re ready, the better your chances are of winning.
Start High
If you’re the first bidder, it’s usually a good idea to start the bidding high. This can help discourage other people from bidding and increase your chances of winning.
Be Confident
It’s important to appear confident when bidding to show the other bidders that you’re serious about winning and possibly deter them from bidding against you.
Conclusion
Auctions can be a great way to buy property, and by following the tips in this article, you’ll be well on your way to becoming a successful auction bidder. Good luck!
