Selling and buying homes at auction is as popular as ever in Australia, with auction volumes and clearance rates already at record levels. In one week of February 2017 alone, there were 3,232 property auctions held across the capital cities. But before you raise your paddle for your dream home, here’s some professional insights, practical advice and helpful tips to make sure you’re ‘auction fit’ for property success.
The popular way to sell and buy
In recent years, almost a third of homes changing hands in Melbourne, Sydney and Canberra were sold under the hammer. In the first week of March 2017, there were 1,478 auctions held in Victoria with a clearance rate of 80%, and NSW achieved the same high clearance rate with 1,032 auctions held. While agents and auctioneers tend to favour houses, the major capitals are also seeing a decent number of units selling at auction.
In markets where supply is limited and demand is high, vendors and their agents see an opportunity to get a better return on their sale. “It comes down to supply and demand’’, says Adrian Brookman, a property auctioneer with Sydney auction house Under the Hammer. Yet even markets where there’s concern about oversupply such as Queensland, still have strong clearance rates, with 56% of properties sold from 326 auctions held in the first week of March 2017.
“It’s an arm’s length transaction and it’s out in the open” says Brookman, “whereas with a private treaty sale that isn’t always that way”. Behind-closed-doors negotiation can lead to tactical errors such as being outbid because you were sceptical when the agent told you other parties were interested, he says.
How can I maximise my chance of success at auction?
While there’s no guarantee of success when buying at auction, to put yourself in the running you need to be prepared and do your homework.
“A buyer shouldn’t be serious about negotiating on a property until they have everything lined up,” says Brookman. He suggests buyers should go and look at a few auctions in the area to get a grasp on the demographic, and the kind of buyers you can expect to be bidding against.
It’s a good idea to turn up on auction day knowing what you’re bidding for, who you’re bidding against, and how much you’re willing to spend. A few simple rules can help lay the groundwork for success:
• Line up the necessary finance pre-approvals, and be ready to hand over a cheque for the deposit on the day.
• Do your research to find out what properties in the area are selling for, and how many properties are on the market. This will help give you an idea of how keen other buyers are likely to be.
• Understand the market and check the auction clearance rates.
• Decide on your spending limit and then plan a strategy that lets you reach your goal without going over that limit
• Make sure your solicitor has seen the contract
Combat ‘auction anxiety’ and bid with confidence
Despite their popularity with sellers, research suggests 51% of buyers get anxious at the prospect of buying at auction. There’s no doubt that uncertainty over price and the likelihood of success can be stressful, as is the heat of competition, which can make the occasion feel overwhelming.
Doing your homework and having some idea what to expect on the day is the best way to combat auction day nerves. Act and bid with confidence even if you don’t feel confident and keep in mind that others bidders are probably feeling just as anxious.
“It all comes down to making an educated decision so buyers need to make sure they do their research,” says Brookman.
What’s my auction day game plan?
Simply turning up and standing at the back while other bidders jostle for position may not be the recipe for success. A few simple tactics will also help you approach auction day like a pro:
• Dress to impress. It will make you feel confident and show other bidders you’re serious.
• Make a counter bid promptly when someone is bidding against you to give the impression that you’re not giving up easily.
• State the full amount with every bid, it will remind you to stay at your limit and maybe stop less confident bidders.
• Keep your bid limit secret.
• Avoid jumping in at the end with a high bid. If the owner passes in they could be less likely to negotiate with you afterwards if they haven’t seen you bidding
A few legal pointers about property auctions
In working out your game plan, it’s important to understand the rules and regulations around auctions. While individual states have their own legislation, there are a few rules that apply across every state:
• Auctions have no cooling-off period even if the property doesn’t pass inspections, so get them all done in advance
• Sales are unconditional and can’t be subject to finance or other conditions
• Dummy bids to raise the price are illegal
• The highest bidder has the first right to negotiate if the property doesn’t reach its reserve price
• If the seller makes a bid it must be announced to the other buyers
• Contracts are signed and a deposit paid immediately after the auction
Being prepared is key to your potential success. Your Aussie broker can help you become auction fit before you hit the property trail and help arm you for success with the pre-approved finance that will work hard for you.