Buying at Auction

The auction system is considered the fairest method of purchasing a property at the real market value It dates back to Roman times and has for centuries been used for the sale and purchase of property, goods and services. As a system of sale, it will never go out of date because it is both adaptable and convenient.

Before you attend your first auction as a buyer, we suggest you read this information. The more you know about the auction process, the better your chances of getting what you want at a fair price.

The benefits of buying at auction

No secret negotiations
At auction, it's clear who your competitors are and, because offers are made publicly, you always know the state of the play.

Time to form a plan of action
Auction days are set well in advance, giving potential buyers plenty of time to arrange inspections, finance and even the sale of an existing home.

You won't miss your chance
Unless a property for auction is advertised as being available for prior agreement, you can be confident that it will sell on auction day and not before. Auction ensures you get the opportunity to buy. If you have indicated your genuine interest in a property that is 'for sale prior' your consultant will ensure the vendor knows of your interest.

Essential preparation for buyers

Inspections
You can inspect a property up for auction either by appointment or an 'open for inspection' days. It's sensible to look more than once and to consider arranging an inspection by a builder or architect.

Finance
It is vital you arrange any necessary finance before auction day as sales by auction are always unconditional. Once you have decided to bid on a property, ask your financial institution to process your application so you have an indication of the amount of money they are prepared to lend you.

Price research
The reserve price of the property to be auctioned will not be disclosed to you. Therefore, to establish an idea of market value, you should discover the selling prices of any similar properties sold recently in the area. The real estate company running the auction will be able to help you in this respect. It could also be helpful to commission a valuer's report on the property you're interested in.

Check the legalities
Familiarise yourself with the terms and particulars of the Contract of Sale. Make sure you understand exactly what will go with the property when it is sold - all fittings, furniture and other items to be included should be clearly listed in the Contract of Sale.

Also check the Terms of Sale, such as the deposit and balance of payment details. At an auction, the Contract of Sale is unconditional, so if you're the successful bidder you must complete the sale or lose your deposit.

What to expect on Auction Day

Before
By now you should have inspected the property enough to be satisfied that it meets your needs. You will also have an indication of finance available to you through your bank or financial institution.

Check the scheduled time and place for the auction and plan to arrive early so you will have time to raise any queries with the auctioneer.

During
The auction will begin with the auctioneer reading the details of the property as written in the Contract of Sale.

The auctioneer will then ask for bids. To bid you have to attract the auctioneer's attention by putting up your hand, calling out your bid, nodding your head or making any other gesture that signifies a bid.

As the auction progresses, the auctioneer will usually ask for smaller bids. Be alert during this time as your next bid may secure the property.

Once bidding reaches the reserve price, the auctioneer will announce that it is 'on the market'. The property will be sold to the final bidder.

After the property is sold, or 'knocked down', to you as the successful bidder, you will be required to sign the Contract of Sale immediately and pay a deposit (usually 10% of the selling price). The Contract of Sale must also be signed by the vendor or auctioneer on behalf of the vendor.

If bidding does not reach the reserve price, the auctioneer will usually confer with the vendor and obtain further instructions. In some situations, the reserve price will be revised and bidding will begin again. Otherwise the highest bidder will have the first option to purchase at the reserve price. If the highest bidder decides not to purchase, the property is back on the market and any interested parties may negotiate with the property consultant concerned.

Tips for Buying At Auction - By Roger Sumich

• Do your home work:   building inspections, LIM checks, if the home needs remedial work, establish the likely cost and what the property would be worth after the work has been completed.
  
  
• Identify the length of time you would stay in the home if you are the successful bidder.  It is no problem to pay a little more if you are going to stay there for 10 years, as time will absorb the excess as the home rises in value.
  
  
• Know your preferred top price range
  
  
• Know your maximum price range. ( this is the critical point)
  
  
• Start bidding late in the Auction process, (usually when down to the last 2 bidders and one bidder is stronger that the other) or when the Auctioneer states that ‘the House in now on the market’. (This means that the property is now effectively sold). If the house is on the market and there are a number of active bidders, wait until there no more than 2 left at that stage bid  Hard - Loud and Fast.
  
  
• Your Bids must be LOUD – no touching the nose or lifting the finger.  Clearly call ‘Bid’ that is all.
  
  
• When you Bid, your eyes must be solely directed to the Auctioneer – do not look at the other bidders, to you they do not exist.
  
  
• Do not consult your partner/spouse once you have entered the bidding process. (discussions show that you are not sure of what you are doing)
  
  
• When you are out bid by another party (unless it is a Vendor’s bid or you have reached your Absolute Maximum bid) you must reply instantly without hesitation.  This places more pressure on the other party as they will be on the back foot with having to make ‘another decision’.
  
  
• Bid exactly the same until you reach your maximum bid – at this point exit the bidding by indicating to the Auctioneer that you are out.
  
  
• Do not re-enter the Auction after you have reached this stage as your strategy has been blown. 99% of the time you will not win coming back in after you have exited.

Note:
1.  That there could always be someone that will pay more than you – however being a hard - Loud and fast bidder can upset the other person’s strategy and you could win even though they actually may have more money than you.

2.  Vendors bid by the Auctioneer: If there is only you and the Auctioneer/Vendor bids, this is the only time when a delay in the Hard –Loud and Fast approach is used.  Take time and let the Auctioneer know that your last bid may well be the final bid.  No use paying over the market against yourself and the Auctioneer but again this depends on whether your homework on the ‘real value’ is accurate.