Every homebuyer wants to know how to win at auction. While these home auctions involve quite a bit of drama, they often lead to quick sales that benefit both sellers and buyers.
This drama however can be nerve-wracking for buyers. Before the bidding contest, make sure you’re prepared by learning how auctions work and what you need to know before bidding.
In Australia, auctions follow local laws and regulations that differ by state. By doing your research, knowing your budget, and having your finances in order, you can get an edge over other bidders.
Bidding strategies are also essential. Knowing when to bid, how much to bid, and when to stop bidding can make all the difference. In our guide, we will cover all these tips and more to help you win at auction.
So, let’s take you through each one of these steps so you can maximise your chances of a good outcome.
Understanding Property Auctions
Property Auction Basics
An auction is a public sale where a property is sold to the highest bidder. It is a competitive bidding process where the auctioneer takes bids from potential buyers.
The highest bidder wins the chance to purchase the property. If you’re considering buying property in Australia, it’s crucial to understand the dynamics of an Australian real estate auction.
In an auction, bidders need to register and get a bidder number. This number is used to identify the bidder during the auction. Bidders are also required to provide a deposit, which is usually a percentage of the expected purchase price.
The Auction Process in 7 Steps
- Registration: Bidders must register with the auctioneer and receive a bidder’s number to be eligible to bid.
- Auction Commences: The auctioneer starts the auction, outlining the terms of the auction and any relevant details about the property.
- Bidding Process:
- Bidders raise their bidder’s number to place a bid.
- The auctioneer calls out the bid amounts as they are made.
- Reserve Price:
- The seller has set a minimum price (reserve price) for the property.
- If bidding reaches the reserve price, the property is declared ‘on the market’ and will be sold to the highest bidder.
- Passed In:
- If the highest bid does not reach the reserve price, the property is ‘passed in’ or ‘withdrawn from auction’.
- The highest bidder may then have the opportunity to negotiate privately with the seller.
- Concluding the Auction:
- Once the reserve price is met or exceeded, the auctioneer will call for final bids.
- The auction concludes with the ‘fall of the hammer’, indicating no further bids will be accepted.
- Sale Completion:
- The highest bidder at the conclusion of the auction is required to sign the contract of sale and pay the deposit, typically 5-10% of the purchase price.
3 Ways to Prepare for Auction
Before attending an auction, it is essential to prepare thoroughly to increase the chances of success. Here are the key steps to take when preparing for an auction:
1. Research the Local Market
Research the local market to understand the value of the property they are interested in. This research should include the sale prices of similar properties in the area, the demand for properties in the area, and any upcoming developments that may affect the value of the property.
2. Get Pre-Approval
Buyers should get pre-approval from a lender to understand their borrowing capacity. This information will help buyers determine their budget and avoid bidding beyond their limits. Pre-approval also demonstrates to sellers that the buyer is a serious contender.
Speak to a mortgage broker like Soho Home Loans to find out more about pre-approval and your financing options.
3. Conduct Due Diligence
Do some due diligence to understand the property’s condition, any potential issues, and any associated costs. This due diligence may include:
- Inspecting the property: inspect the property to ensure it is in good condition and meets your requirements.
- Reviewing the contract of sale: review the contract of sale to understand the terms and conditions of the sale, including any special conditions.
- Consulting with a legal professional: consult with a legal professional to make sure you understand all the legal aspects involved.
- Consulting with a building inspector: additionally, you can consult with a building inspector to identify any potential issues with the property.
Expert Bidding Strategies
Observe Body Language and Display Confidence
Body language and confidence are essential when it comes to winning an auction. The way a bidder stands, speaks, and interacts with the auctioneer can make a big difference in the outcome.
Bidders who stand tall, make eye contact, and speak clearly show confidence and control. On the other hand, those who slouch, avoid eye contact, and mumble lack confidence and appear indecisive.
Prepare a Bidding Strategy
We encourage you to think about a bidding strategy before attending the auction. For instance, you might want to decide beforehand on their maximum bid amount before the auction starts and stick to it.
It is also essential to bid confidently and quickly to keep the momentum going. Try to avoid getting caught up in the auction game and bid against yourself. Instead, let others bid and only jump in when necessary.
What Are Bidding Increments?
You should know the bidding increments for the auction you are attending and use them to your advantage. For example, if the bidding increment is $10,000, a bidder could bid $10,000 more than the current bid to stay in the game.
Generally, the increment will be around 10% of the previous bid. You should also be aware of the auctioneer’s tactics, such as slowing down the bidding to entice higher bids.
Overall, winning at auction requires a combination of preparation, strategy, and confidence. Bidders should research the auction process, understand the property’s value, and have a clear bidding strategy in place.
By using confident body language and understanding bidding increments, bidders can increase their chances of success.
Winning at auction involves more than just showing up and making bids. You need a solid strategy. If you’re new to auctions, you might want to check out our guide on how to bid at an auction to get started.
Property Auction Tips Before You Go
Buying at Auction
Buying a property at auction can be a great way to secure a home or investment property. However, the competitive nature of auctions means that it’s important to be well-prepared and have a clear strategy in place. Here are some tips to help you succeed:
- Do your research: Before attending the auction, research the property thoroughly and gather as much information as possible. This includes the property’s history, comparable sales in the area, and any potential issues or defects. This will help you to determine the property’s true value and avoid overpaying.
- Set a budget: It’s important to have a clear budget in mind before attending the auction. This will help you to avoid getting caught up in the excitement and bidding beyond your means. Stick to your budget and don’t be afraid to walk away if the bidding goes too high.
- Attend other auctions: Attending other auctions can be a great way to gain experience and observe bidding strategies. This will help you to feel more comfortable and confident when it comes time to bid on your desired property.
How to Win Without Overpaying
One of the biggest risks when buying at auction is overpaying for the property. Here are some tips to help you avoid this:
- Determine the property’s true value: As mentioned above, it’s important to research the property thoroughly to determine its true value. This will help you to set a realistic budget and avoid overpaying.
- Set a maximum bid: Before attending the auction, decide on a maximum bid that you are comfortable with. Stick to this bid and don’t exceed it, even if the bidding becomes competitive.
- Don’t get emotional: It’s easy to get caught up in the excitement and emotion of an auction. However, this can lead to overbidding and paying more than the property is worth. Stay calm and rational, and don’t let your emotions dictate your bidding.
By following these tips, buyers can increase their chances of success at property auctions and avoid overpaying for their desired property.
Post-Auction Considerations
Once the auction is over, the buyer needs to take care of a few things to ensure a smooth and successful transaction. Here are some post-auction considerations to keep in mind:
Payment
The buyer needs to pay the deposit immediately after winning the auction. This is usually 10% of the purchase price and is required to secure the property. The deposit is non-refundable, so the buyer needs to ensure they have the funds available before bidding.
Settlement
The settlement period is the time between the auction and the transfer of ownership. The buyer needs to ensure they have their finances in order and are ready to settle on the agreed date. They should also engage a conveyancer or solicitor to handle the legal aspects of the transaction.
Building and Pest Inspection
If the buyer has not already done so, they should arrange a building and pest inspection after winning the auction. This will ensure there are no hidden issues with the property that could be costly to fix later on.
Insurance
The buyer should arrange insurance for the property as soon as possible after winning the auction. This will protect them in case of any damage or loss that may occur between the auction and settlement.
Cooling-Off Period
In some states, there is a cooling-off period after winning an auction. During this time, the buyer can withdraw from the contract without penalty. However, they will forfeit a percentage of the deposit. The cooling-off period varies between states, so the buyer needs to check the rules in their jurisdiction.
Negotiation
If the buyer is unable to settle on the agreed date, they should negotiate with the seller for an extension. It is important to maintain good communication with the seller to ensure a smooth and successful transaction.
In conclusion, winning an auction is just the first step in buying a property through auction. The buyer needs to take care of several post-auction considerations to ensure a successful transaction. By following the above tips, the buyer can avoid any potential pitfalls and enjoy their new property.
Frequently Asked Questions
What are some effective strategies for bidding at an auction?
One effective strategy is to wait until the bidding has slowed down before placing a bid. This allows the bidder to assess the competition and determine the current value of the item being auctioned. Another strategy is to bid confidently and quickly, which can intimidate other bidders and discourage them from continuing to bid.
What are some tips for winning an auction on eBay?
To win an auction on eBay, it is important to set a maximum bid and stick to it. Bidders should also bid at the last minute to avoid being outbid by other bidders who may be monitoring the auction. Additionally, it is important to read the item description carefully to ensure that the item being auctioned is in good condition and meets the buyer’s needs.
How can I improve my bidding skills at a house auction?
To improve bidding skills at a house auction, it is important to research the property beforehand to determine its value and potential resale value. Bidders should also attend other auctions to gain experience and practice bidding. Additionally, it is important to set a budget and stick to it, even if other bidders are driving up the price.
What are the best ways to slow down an auction?
One way to slow down an auction is to ask questions about the item being auctioned or to request additional information. Another way is to make low bids or to bid slowly, which can discourage other bidders from continuing to bid.
What should I do to increase my chances of winning an auction?
To increase the chances of winning an auction, it is important to research the item being auctioned and determine its value. Bidders should also set a maximum bid and stick to it, even if other bidders are driving up the price. Additionally, it may be helpful to attend other auctions to gain experience and practice bidding.
What are some common auction increments and how do they work?
Common auction increments include $1, $5, $10, $25, $50, and $100. These increments are used to increase the bid amount by a set amount each time a bid is placed. For example, if the current bid is $100 and the next increment is $10, the next bid would be $110.
