Going, going, gone: tips for winning an auction
Property auctions are becoming a more popular method of purchasing homes. Here are some different tips and tricks to help you get through one and successfully bid for the house of your dreams.
The process of buying a home at auction isn’t as straightforward as other methods, however, it’s popular and if you’re in the market there are a few things you should know before you start bidding.
Probably the most obvious overall impression people have about auctions is that they can be stressful - it’s a bid or lose situation and when large sums of money are involved it can definitely get your heart pumping.
But it doesn’t have to be like this, so our first piece of advice is to do your research, go to a few auctions as an observer to see how they work and then work out a plan.
There are advantages to buying at auction such as knowing the true market price for properties you are considering. Bottom line is as a buyer you will probably have to consider the auction option to secure a property despite the fact that the number of properties up for auction will vary as the market goes up and down. The rule of thumb is if prices are increasing, so will the number of auctions, and vice versa.
Whatever the state of the market, auctions remain popular and here’s why.
Why are auctions so popular?
The New Zealand Herald reports that 80% of auctions in New Zealand result in desired sales. This method is recognised as an efficient way to purchase a home as it’s a straightforward process with fast turnaround.
It’s also popular for vendors as auctions aim to achieve the best price for their property. It’s a favoured approach for real estate agents for the same reason as they earn commission from the sale price of the house; the better the price the more commission there is.
With auctions being so popular it’s important to know what to expect as a buyer so you’re familiar with all the processes.
The best piece of advice is to spend some weekends attending auctions for different types of properties in the area where you are looking. Don’t just stick to properties that fit your bill but go to others, see what types of people attend and watch how it operates.
Preparation is key and when the time comes for you to enter an auction as a bidder, here are some things to keep in mind:
How to best approach an auction
If you’ve found a house you like that’s up for auction, here are the steps you’ll want to take before, during, and after the auction to secure it successfully.
Preparing for the date
- Do your research
Learn all you can about the property prior to auction day because you won’t have the opportunity to retract a bid after the final hammer. Consult with either a market expert or real estate agent to determine the house’s value, check the neighbourhood, and obtain a property inspection report. This will give you peace of mind when you’re bidding that you know the ins and outs of the home you’re interested in.
- Talk to the agent
Let the seller’s agent know that you are interested in the property so you can participate in the bidding. You will be given documents you’ll have to fill out, agree to, and sign. These often include details of the initial deposit the successful buyer must pay, the land information memorandum (LIM), and an agreement of the settlement date.
- Know pre-auction processes
If you have a pre-auction offer to make to the seller, let their agent know. If the seller accepts, the auction could be held at an earlier date, with the pre-auction offer as the first bid, or they could cancel the auction altogether and sign the purchase agreement with you. This is all done on a case-by-case basis.
On the date itself
- Be punctual
Take note of the venue and make sure you arrive a bit early to register and let the agent know you are present. Ask for a bidder’s number, should one be provided, and observe the people attending the auction.
- Have a supportive team
Bringing someone with you who can support you and keep you from going over your budget is helpful, if you’re a first-time bidder. The atmosphere during an auction can be competitive, so it’s good to have a supporter with you. Having a real estate agent assist you through the bidding process is helpful as well.
- Listen closely
The auctioneer will make several announcements before bidding starts, including terms of the sale, issues with the property if any, and how much the vendor bid is. It’s important to listen to these announcements in case there are conditions you can’t comply with before starting to bid.
- When the bid reaches the reserve price… and when it doesn’t
When the reserve price is met, the highest bidder has claim to the property. They sign the sale and purchase agreement and pay the purchase deposit.
However, if the reserve price is not met, then the seller may choose to lower the price and sell the house to the highest bidder.
Alternatively the auctioneer may also take the current highest bidder aside and negotiate for a higher bid. If the buyer agrees, then this becomes the new reserve price and the auction continues.
If the seller isn’t satisfied with the offers, then the auction could be rescheduled under different terms or the seller may choose to pursue another method of sale.
After the final hammer
- Winning an auction
If you’re the highest bidder, you’ll sign the sale and purchase agreement and pay the deposit once the auction ends.
Then you can celebrate! (another reason for bringing someone with you).
If the property is not sold, then you may make an appeal to the seller and their agent to settle for the price you’re paying. Depending on their personal policy, they may or may not agree to your offer.
Take these tips to auction
If you weren’t able to secure the property, use this experience as a stepping stone for the next auction you attend. With auctions being popular it’s very likely you will buy a property this way but help is always available from good real estate agents.
Looking for a home that fits you perfectly? We’ll find the property most suitable for you. Please get in touch with Taurus Home Loans today. We’d enjoy nothing more than to help you get the home you’ve always wanted.
Posted 26 Nov 2018