Remember, buying at auction is an unconditional sale so here’s how you should prepare:
Pre-auction due diligence:
- Have your purchasing entity organised (trust, SMSF etc) if you are not buying in your own name.
- Get a finance pre-approval so you know your budget and attend the auction ready to write a deposit cheque.
- Attend many auctions to experience the atmosphere and observe different bidding strategies. In particular, watch the auctioneer who’ll be selling the property you’re interested in to learn his particular techniques and the words he uses.
- Do your research by inspecting many properties and seeing what they sell for (not just the asking price.) Know the market. Know the value of the property in question. Armed with that power, you can identify a ‘walk-away’ price – the highest price you’re prepared to pay.
- Play your cards close to your chest. Real estate agents are very skilled at prying information out of potential purchasers, including the price they’re prepared to pay for a property. After all – it is their job! Sometimes you can end up revealing things to them that you never intended to and that might be detrimental to your negotiation power. By keeping your cards close to your chest and revealing very little about how much you might pay for a home, you maintain an advantage and ensure the agent cannot use your information to sway another potential buyer or to help the vendor set his reserve price.
- Show your solicitor the contract and organise any amendments to the contract he suggests.
- Consider getting an experienced buyer’s agent like the team at Metropole to bid on your behalf and level the playing field.
What to do on the day:
- Arrive early, survey the landscape, see who else is there. Do they look like serious bidders (i.e. they’re inspecting the contract, saying the right things etc.) or are they just onlookers?
- In today’s strong auction climate, use the psychological advantage of projecting confidence – make the other bidders think you have deep pockets and no limit.
- Open the bidding high, close to where the reserve will be (the property won’t sell below this) and make your bids fast and assertive. Procrastinating or agonising over your next bid is a sign of weakness.
- Call out your offer in full (in other words, say $550,000 instead of just the increments – $5000).
- If it’s going to pass in, make sure you are the highest bidder, as this allows first right to negotiate with the vendor.
- Be prepared to miss out. Stick to your ‘walk-away’ price. After all, you’ve done your homework and you know what this particular property is worth to you.
If you miss a property at auction, accept that it wasn’t meant to be and look forward to finding something better soon. While no one likes to consider themselves the ‘loser’ in any sort of negotiation campaign, it’s far better to walk away and live to fight another day than over-commit to a property you’ve become emotionally blinded by.
Michael Yardney is a director of Metropole Property Strategists, a company which creates wealth for its clients through independent, unbiased property advice and advocacy.
