6 best kept secrets to succeed at property auctions

Property management

A property auction works in much the same way as any other type of auction. Somebody puts a property up for sale and several people bid for it. The person who makes the highest bid wins the property.

In other parts of the world, property auctions tend to involve the sale of foreclosed properties or properties that have tax liens. However, they’re much more common in Australia. Regular sellers use them too and thousands of properties go up for auction every week.

They do have some differences to buying through more traditional channels though. For one, negotiation isn’t as much of a factor. You can’t place a bid and then try to talk it down after it’s accepted. You’re also expected to close the sale much quicker than you would when buying through an estate agent. Often, you have to hand over your deposit and sign the contracts on the day of the auction.

Still, there are plenty of benefits to buying property at an auction.

Why you should buy property at an auction

tips for buying at a house auction

Property auctions can be stressful, but they also offer plenty of opportunities to investors for a number of reasons.

For one, there’s a possibility that you’ll be able to buy a property for less than its market value, depending on the competition you face from other buyers on the day.

One of the main benefits of buying at auctions is that you can clearly see your competition. This means there are no ‘smoke and mirrors’ or mystery people also interested in purchasing the property. It’s a transparent process that gives both buyer and seller a true indication of the property’s market value on that day.

Your best opportunities often come with properties that have no reserve prices. A reserve price is a minimum price that the seller sets for the property. If they don’t set one, the bidding often starts far below the true value of the home. If you don’t have a competitive pool of bidders, this could allow you to save tens of thousands of dollars on the purchase.

Finally, there’s the wide variety on offer at most auctions. You’ll have the opportunity to bid on multiple properties during the course of the day. Compare that to traditional methods and you can see that auctions are a massive time saver.

The potential downsides

Of course, there are some potential downsides to buying property at an auction.

A large bidding pool can quickly drive the price up for a property. This is a particular risk for more desirable properties. Getting caught up in the heat of the moment can lead to you bid more than you intended to.

Now that you know more about property auctions, it’s time to look at how you can succeed at them. Here are seven tips that will help.

Tip #1 – Organise your finances

As mentioned, going into a property auction without having your finances in order can lead to trouble.

It’s best to get pre-approval on a home loan before you enter the auction house. While pre-approval doesn’t guarantee you the loan, it’s a sign of confidence from your lender. Barring anything untoward coming up in its final checks, you’ll usually get the amount offered upon full approval.

With your pre-approval in hand, you can feel much more confident in the auction. For one, you have a clear idea of what your budget is. Pre-approval essentially gives you a maximum amount that you can bid. You know that you don’t have enough to go past the pre-approval sum, which helps you to create a strategy.

Pre-approval also improves seller confidence. It shows that you can get the process completed quickly once you’ve won the bidding.

Beyond your loan, it’s also important to bring your deposit. Typically, most auction houses ask for a 10% deposit on any property that you win. However, some sellers may specify a different figure. Whatever the case may be, you need to have it ready if you win an auction.

Having your finances in order ensures the whole process goes smoothly.

how to prepare for a property auction

Tip #2 – Do your research

You need to carry out the basics like you would with any other property purchase. Get both building and pest inspections. These reveal any issues that would make an otherwise attractive property undesirable.

It’s also worth finding out if the property has a strata title attached to it. This is often the case with apartment units. Check strata records to ensure there’s nothing untoward that might concern you.

If possible, arrange a visit to the property by yourself. Take some time to talk about the property with the seller’s agent – when you have a private inspection you don’t get rushed and can ask more questions. You’re looking to find out some key information, such as the seller’s motivations. If you know the seller wants to get rid of the property quickly, you may be able to get away with bidding less. You could even make an offer before the auction starts based on the information you gather.

The point is, you want as much information to hand as possible before you start placing bids. This ensures you don’t get sucked in by a property that looks like a bargain, only for it to end up giving you lots of problems.

Tip #3 – Keep your emotions in check

This is one of the biggest issues that investors face at property auctions. It’s so easy to get caught up in the competitive aspect. As soon as someone starts bidding against you, there’s an urge to top their bid.

That’s exactly what the seller wants.

Buyers competing against each other drives the price up. You’re in an emotionally charged atmosphere. Sometimes it can seem like winning the auction is more important than your investment strategy.

That means you need to keep your emotions in check.

Enter every auction with a solid maximum bid in mind. The strategy you use is up to you. You could get a bid in early and try to set the tone of the auction, or you could wait until the end and try to jump in.

Whatever the case may be, you can’t let your emotions govern your actions. Know your maximum buying price and stick to it. If you exceed your limits, you might face problems with your finances later on.

tips for bidding at a house auction

Tip #4 – Dress to impress

You’re looking to make an impression from the moment that you step into the auction house. Your aim is to come across as professional as possible. Even if it’s your first auction, you want others to think that you know what you’re doing.

Opt for office wear over casual clothes. Hopefully, less experienced bidders will see this and want to avoid coming up against you. You can use your clothes to exert your authority and put potential bidders off.

Your body language also plays a part in your success. Carry yourself confidently and try not to offer any indication about your mindset when you bid.

Some recommend standing with your arms behind your back during the bidding process. This both puffs out your chest and prevents your shoulders from slumping. That posture exudes confidence and makes others more hesitant to go against you.

Tip #5 – Attend other auctions

This is a particularly important tip for first-time auction-goers. Walking in with no idea what you’re going to face will damage your confidence. The fear of the unknown may override any attempt that you make to come across as a seasoned professional.

That’s why it’s best to attend other auctions to get a feel for how the whole process works. Attend as an observer, rather than an active participant. Pay attention to how people place bids and keep your eyes on the winners. Try to figure out what they did differently.

Attending auctions beforehand also gives you an idea of the general processes. This can help you to manage your time more effectively when you attend an auction that you intend to buy at. Even better, find out who the auctioneer is and attend some of their auctions so you know how they operate.

Tip #6 – Don’t be afraid to walk away

This can be the most difficult thing for auction novices.

You don’t have to leave the auction with a new property. Sometimes, walking away is the best course of action.

This is where emotion comes into play again. There’s this idea that you’ve “lost” if you don’t buy a property at the auction. The truth is that you’ve set sensible limits and haven’t found what you’re looking for. Just remember that there are always more auctions to attend. Don’t convince yourself to buy just because you don’t want to leave empty-handed.

The final word

Combining these tips increases your chances of success at an auction. Carry yourself with confidence and do all of the relevant research beforehand. Don’t let your emotions govern your actions and make sure you have your finances in check.

Finally, don’t assume that success always means making a purchase. Sometimes, it’s best to walk away if you don’t find something that suits your needs.

Of course, you also need to establish what you want before you head to auction. In particular, you need to figure out the best locations before you buy any property.

That’s where Your Property Success can help.

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