Knowledge is key when buying property and alarmingly most buyers are not educated on what they should do when buying a property via the auction process. A home owner report from Westpac which surveyed over 1000 new home buyers and the results showed that buyers are fearful of the auction approach with 57% saying they are too scared and 58% saying they are not confident in their auction abilities.
Instead of being afraid, buyers should get themselves educated so they can be confident in their property search. With Sydney’s auction clearance rates improving and it being the most popular way to sell property, chances are if you’re looking to buy, you will need to attend an auction.
There are multiple steps that you can take to be “auction ready”:
- Know your market. Have a good look into the marker by having the answers to these questions – What are similar properties in this area sold for? How many similar properties are for sale? Also, have a look at the area, is it changing or are there new developments that are improving in the area? This will help you determine how fierce the competition will be.
- Attend an auction. Attend a few auctions in advance so you can be familiar with the process.
- Do your research on the property you have an interest in, order pest and building inspection reports, and if the property is strata titled, organise an inspection of the strata records.
- Consult a solicitor or conveyancer BEFORE you bid at an auction, this will help you understand the legal implications of bidding at an auction and also gives you an insight into the property itself through the contract of sale and certificates from council. This can help you be aware of items like easements, covenants and ensure that the property has been approved by your local council.
- Speak with your mortgage broker BEFORE your bid at auction. Being the highest bidder/successful bidder at auction is final and legally bids you to the contract/purchase. Make sure that you have sufficient funds available or pre-approval in place, they can also help you create a budget, so you know when to bid and when to walk away! If you are the successful bidder, you will need to pay a 10% deposit (or another figure if previously agreed with the vendor).
- Have a plan or create a bidding strategy. A bid can be made at any amount, however a recent study by Gavl showed that out of 2500 auctions, the most common winning bid was an increase of $10,000 and that the average time an auction takes is 16 minutes. A plan will determine what kind of bidder you will be. Are you confident in your approach and participating early to try and intimidate other buyers? Are you sitting back and waiting for others to bid before coming in with a strong bid at the end? Or are you making quick bids throughout but keeping money aside to make a large bid at the end?
There is lots to know when buying a property at auction, but remember that knowledge is power, so don’t be afraid to ask for help or advice from your mortgage broker. They help people through this process every day!
This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation or needs before making any decisions based on this information.