What not to do at auction
If you are a resident of Sydney or Melbourne, Australia’s two largest cities and home to the nation’s most competitive real estate, chances are when you come to buy your next home you’ll find yourself attending a few auctions. While auctions aren’t hugely popular in some of the less vigorous property markets around the country, they’re uncommonly popular in the NSW and Victorian state capitals.
In fact, according to CoreLogic RP Data, more than 30 per cent of all house sales in the year to September 2015 happened at auction in Sydney and Melbourne, with the only other city even close to those numbers being Canberra. Unit sales at auction were also strong, with 21 per cent in Sydney and 28 per cent in Melbourne.
With that much auction activity in the two big cities, you can expect to be in competition with some seasoned bidders – individuals, real estate professionals or buyer’s agents – should you decide to enter the private house sales market. You are going to need all the assistance you can get, and while many people will be quick to offer you advice about what you should do, it’s also important to keep in mind some things you definitely should not do.
After all, employing the wrong strategy at an auction can be disastrous for your chances of making a successful bid. With that in mind, let’s take a look at some things you should not do on auction day.
Employing the wrong strategy at an auction can be disastrous for your chances of making a successful bid.
1. Don’t go in unprepared
Buying a new home or investment property is a big commitment, and in markets with high median prices such as Sydney and Melbourne, the process can carry a price tag of hundreds of thousands, even millions, of dollars. Obviously, with such a huge decision you will want to do your homework.
There are many ways in which you can prepare for an auction, but to understand what you are in for it can be helpful to attend a few before you have even found a property you’re interested in. You might have an idea in your head of how a property auction will go, but until you’ve seen it for yourself, you run the risk of being caught unawares once your turn comes around.
Once you know what to expect on the day, you can start your research on any properties that seem like they could meet your needs. That means more homework, but again, this is a big commitment. Anything you can find out about these potential new homes can affect how you bid on auction day, so be thorough. Your research methods might include:
- Organising a pre-purchase report
- Undertaking a sales comparison in the area
- Studying reports from respected industry organisations
- Speaking to real estate experts, such as a buyer’s agent
2. Don’t “wing it”
We really can’t stress enough how important it is that you are fully prepared before auction day. Getting to the point where you have found a property you like, carried out the necessary due diligence and are ready to dive into the buying process is an achievement in itself, but the hard work is just beginning.
Here’s the thing: Despite what we just said, you should never just dive into the auction process. Instead, your bidding should be akin to a gentle, calculated entry, one you have trained yourself for and can replicate again and again, should you need to.
Acting on instinct when it comes time to put your money on the line is a recipe for disaster. As any competent advisor or buyer’s agent will tell you, formulating a budget and sticking to it should be the centrepiece of your home buying strategy, to avoid getting caught up in the moment and over-spending.
Asking questions before or during the auction proceedings can help with your confidence once the time to bid comes.
3. Don’t stop making inquiries
If a seller has progressed to the point where they’re holding an auction, obviously that means everything has been settled and the house is essentially ready to change hands. However, that doesn’t mean you can’t continue to ask questions about the property, and find out some last minute information that might change your feeling about the place.
Further to this, asking questions before or during the auction proceedings can actually help with your confidence once the time to bid comes. Independent Australian mortgage website Your Mortgage even suggests that asking questions can direct attention towards you, which could be enough to increase your legitimacy in the eyes of your competition, and unnerve inexperienced bidders. It might seem a little unpleasant, but anything that can give you a leg-up on other prospective buyers can help.
That said, however, if you’re going to ask questions in view of the seller, auctioneer and other bidders, you want to make sure they are inquiries that will be helpful to your cause. For example, some people may suggest asking whether the property is listed on the market yet can be a good tactic to interrupt the auction and throw people off.
Speaking to Domain, Damien Cooley, of Cooley Auctioneers, disagrees:
“I think this is a weak strategy. The owner tends to remember who asked, and feels it’s a crack at them, and sees that buyer as being difficult. And if the property is passed in, they might not want to negotiate with that buyer,” Cooley says.
4. Don’t be a shrinking violet
Once the auction has finally opened and bidding is ready to begin, the time is right to harvest the fruits of all your careful preparation. You should bid with confidence, and not be deterred by your competition. You are not going to be the only one who has come to the auction well-prepared, but that doesn’t mean you should feel intimidated.
Make your bids clearly and assertively, and don’t be afraid to follow up a competing bid quickly – as long as it stays within your agreed budget. As long as you are sure you can remain cool under pressure and stick with your limits, you might even like to mix things up with your bids.
You should bid with confidence, and not be deterred by your competition.
Come out of the gate with a strong opening bid, hold your counter-bids until the last second, or even try to throw in a fabled “knockout bid”. Basically anything you can do to keep your competition on their toes can make a difference, and as long as you can act with decisiveness and a cool head, your chances will only improve.
5. Don’t be afraid to reach out for help
As you can no doubt tell, buying a house at auction can be a complicated affair. The good news is, you don’t have to do it alone. If you’re at all concerned about your ability to be an effective bidder, speak to a buyer’s agent at Cohen Handler about how they can help you.
Our buyer’s agents offer a full suite of services to help you achieve your property buying goals, and guiding you to a successful auction strategy is a key part of those services. Whether you want to hand over the whole bidding responsibility to an experienced, impartial professional, or just want some general auction advice, make an appointment with a buyer’s agent today.