How to Prepare for your first Auction

Auctions can be a great way to buy a home, however they can be very intimidating, especially if it’s your first time. To help you get the results you want, we’ve put together a quick guide to prepare you for your first auction.

By Rea Tejwani

05-09-2018 |

DO PLENTY OF RESEARCH

Before you even think about attending an auction, you should fully understand the market and area that you’re buying in. To help understand the current market, make sure to research the auction clearance rate or proportion of successful auctions in your area. Also, you are able to ask your real estate agent to provide you with a list of recent comparable sales to help you determine the properties true value. In addition, it is important to research to market and environment around your property as there are a key number of factors that can affect a property’s long-term value.

HAVE YOUR MONEY READY TO GO

The second the hammer falls, you’re legally required to go through with the purchase if you have the leading bid. Thus, if the bank declines your application for finance after you win, you could be in serious trouble, and will most likely lose your deposit. Minimise that risk by having your finance pre-approved before the auction. Pre-approval is an indication from your bank that you will be successful if you apply for finance up to a certain amount, conditional on nothing changing, and on the property you buy. Make sure you don’t ever bid over the amount you’ve been pre-approved for and know your limits.

DO YOUR DUE DILIGENCE

If you win at auction you’ll still be required to purchase the property even if you later find that it’s infested with bugs or covered with asbestos. - Conduct a building and pest inspection - Have a conveyancer check the sale and purchase agreement - If the home is old, or you have other concerns, consider carrying out these additional checks: - Electrical report and plumbing report - Soil tests With this knowledge in mind, you can either avoid the property altogether, reduce your bid, or continue as you were confident that you know exactly what you’re buying.

GET THE HELP YOU NEED

Buying a property can not only be intimidating but also, stressful and difficult if you do it alone, so make your life easier by getting the help you need from local professionals. That entails speaking to a mortgage broker to help sort your finances, and having a real estate agent help, such as Shagufta or Dennis help you develop a strategy to find and purchase the right home. If you have a good relationship with a real estate agent, they may be willing to accompany you for advice and support, or alternatively you can bring along a family member or friend with more experience at auctions.

DECIDE ON A STRATEGY

There’s more to auctions then raising your hand a few times and moving to your new home – you need a strategy. First you should set a price limit – and pledge to not exceed that number regardless of what happens. That number should be uneven because bidding usually goes up in multiples of $10,000, $5,000 or $1,000. If you set your limit at $503,000, for example, that extra $3,000 could win you the auction. You should also try to bid confidently, aggressively and speak affirmatively . Make sure to wear professional clothes to the auction, and raise your hand straight away if you’re making a bid. At the start of the process, consider making large bids to push the price up quickly – this may scare your competitors off. Make sure you keep in mind your financial and personal limits during this process. With the right real estate agent, and a sensible strategy – you could be living in your dream home before you know it.

GET A FEEL FOR AUCTIONS

It is wise to observe other auctions in the area before going in to bid on a property. Doing so will not only allow you to get a feel for how auctions are conducted; it will also help you to get exposure to different auctioneers, one of whom may be the auctioneer on the day that you decide to bid.