Now that the holiday break has come to an end, many home buyers are picking up where they left off last year to find a property. If you are planning to purchase a property at auction, there are several steps you can take to give yourself the best chance of succeeding.
Now that the holiday break has come to an end, many home buyers are picking up where they left off last year to find a property.
If you are planning to purchase a property at auction, there are several steps you can take to give yourself the best chance of succeeding.
There are several reasons why you need to organise a formal pre-approval for a home loan before auction day. Firstly, it will enable you to bid confidently knowing that you are already conditionally approved. Secondly, you will know the maximum amount that you are able to bid to. Thirdly, the winning bid at an auction is a binding contract, so if you win the auction without having a pre-approval and then find out afterwards that you cannot be approved for the bid amount, you could be in trouble.
Understand the rules
Make an effort to attend as many auctions as you can as this will help you get a better understanding of the rules and the auction process. For example, do you know what a reserve bid is? Do you know how it decided and that it can change at any point during the auction with written instructions from the vendor? A property auction may seem simple, but there are many important procedures you may not be aware of. Watching auctions can also help you decipher what bidding strategies are most effective.
Properties that are sold at auction are also based on a reserve price, which the real estate agent cannot reveal, however, by attending multiple auctions; you can start to get an idea of what different types of properties in different areas are selling for.
Get legal advice
Before deciding to purchase a property at an auction, it is important that you speak with your solicitor. They will be able to review the contract of sale and advise you of your legal obligations. Also, if there are any amendments you want to make to the contract, this will need to be agreed upon between both parties before the auction day and this can be done by your solicitor.
Due to the final nature of an auction and the legal obligations that are imposed, you may decide to make a pre-auction offer so that you can enjoy the normal property negotiation process without the stress of an auction. This requires you to get in early as the vendor will probably not consider your offer too close to the auction date. Also if the property is passed in at auction then get in quickly with negotiations with the vendor.
Complete pest and building inspections
Pest and building inspections will help you uncover any issues with the property that may not be immediately apparent. Due to the cost of these you will probably only get this done on a property you are pretty sure that you want to purchase.
Dress to impress
First impressions count at an auction. Bidders often size up their competition to see how serious they are. If you turn up in professional attire and are confident, you may give the impression that you have no limit and might even intimidate the other bidders.
Know your limits
Many bidders have let their emotions affect their decision making process, which often results in exceeding their bidding limit. This can cause problems if you are unable to afford the amount you bid. There are several strategies you can implement to help you stick to your limit. Firstly, organise a pre-approval before auction day. This way, you will know exactly how much you are able to afford. Secondly, have a family member or friend bid for you or be with you on the day. They can help you keep your emotions out of the decision making process. Thirdly, don’t bid too soon. If you start bidding straight away, you may become too emotionally involved. Use the time at the beginning of the auction to decipher who are the serious bidders and then work out a strategy that would be most effective.