8 tips for buying at auction
Investors and homebuyers need to create and stick to a pre-planned strategy if they’re to avoid overpaying at auction this year.
With the number of auctions taking place in Perth tipped to rise in 2014, you need to be aware of how to use auctions to your advantage.
If you have done your research and don’t get drawn into the hype of what can be a pressure-cooker type environment, auctions can be better value than a private treaty sale because you know what other buyers are offering and can offer just enough more to secure the property.
In a private treaty, the real estate agent can extract a great deal more money because there’s no way of knowing for sure what other buyers are offering.
Tips for Buying at Auction
- In-depth research is critical to find comparable sales evidence and assess what the property is worth and what else is available in the market. Buyers often overpay because they haven’t actually established the value of the property.
- Decide on a maximum purchase price – and stick to it when the auction day arrives. If you don’t think you can do that, consider hiring a professional to bid on your behalf, or bring a rational, trusted friend.
- Adopt a bidding strategy in advance including knowing how soon you want start bidding and how fast you will place other bids in response to other potential buyers. Make sure you have set a hard limit and stick to it as other bidders compete to force prices higher.
- Don’t be pressured by the sales agent to up your bid unless it’s in response to another bidder’s move. Smart operators will bid gradually and pay just a little more than their competitors to secure a property, but only if it’s within their budget, not over market value and not in response to pressure from the sales agent.
- Don’t let all your legwork in advance go to waste and be too afraid to bid or to go up to your ceiling price. The key to ‘winning’ at auction is to set boundaries, be disciplined and undertake in-depth research; if you know you’re not going to overpay, be confident with your bids.
- Go to other auctions ahead of time to familiarise yourself with the environment. It’s an ideal way to get used to the atmosphere and you can also role play auction scenarios in advance to help you stay calm on the day.
- Do not be ‘attached’ to buying the property. You will have more success by digging in your heels, sticking to your maximum price and refusing to overpay.
- Understand buying at auction is an unconditional contract so carry out all checks ahead of time. You need to check the house and contract of sale thoroughly, carry out building and pest inspections, and obtain the seller’s agreement to any contract variations in writing ahead of the auction day as it can’t be changed afterwards. If you need to assess a lease or tenant or look at issues such as zoning or encumbrances, that all needs to be done and dusted before you bid too.
For further information about how to be auction savvy, read the March 2014 issue of Smart Property Investor Magazine or visit our Media Page.
If you have an interest in building your wealth through property, then call us on (08) 9381-7450, or request a FREE Starter Pack.
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