Auctions are fraught for both buyers and sellers because at any time either one could be forced into making a speedy decision that could cost thousands of dollars.
Buyers in particular have little room for error. If you make the winning bid you are legally bound to exchange contracts and pay the deposit on the day. Plus there’s no cooling off period.
The best way to get what you want, at a price you can afford, is to be prepared: before and during the auction.
Before the auction
- Learn how the process works - go to as many auctions as you can.
- Go to some open houses of the trial auctions you plan to attend - get a feel for the difference between what an agent quotes as the expected price and the actual selling price.
- When you find a place you like, get a contract from the agent - have your legal rep check it and read it yourself.
- Get building and pest inspections done.
- Arrange finance - get pre-approval on your loan.
- Decide the maximum amount you will pay for the property.
At the auction
Depending on your state or territory, you may need to register to bid when you first arrive at the auction rooms, so take some ID as well as your cheque book.
During the auction
Hang back. Watch the other bidders and wait till the property is “on the market” before making a bid. “On the market” means the bids have reached the reserve price or that the seller (vendor) is prepared to sell at the current bid and the property will definitely be sold.
Bid firmly. You’ve decided on your budget, so be confident about each bid you make that is within your limit. You don’t have to agree to the auctioneer’s suggested bid, either. If the auctioneer asks for $5000, you can offer $1500 if you prefer.
Don’t go past your limit. If you don’t trust yourself to stick to your budget - take a hard headed friend for back up.
After the auction and First right of refusal
If you made the highest bid after the property was declared “on the market”, congratulations, you’ve bought yourself a property. The agent will take you somewhere quiet to finalise the paperwork. You’ll have to hand over the deposit at this point.
If the property did not reach the reserve price and is “passed in” you can negotiate. If you’re the highest bidder you have the first right of refusal of the vendor’s reserve price. If you’re not the highest bidder, talk to the agent and make your interest known.
For more information about auction rules and regulations, visit the fair trading or consumer affairs authority in your state or territory.
Continue to the steps for buying your chosen property.