Tips for buying at auction in spring
This spring will require a different approach from buyers hoping to purchase at auction.
Low stock levels coupled with rising buyer confidence is ramping up competition under the hammer.
Real estate experts say buyers will need to face this competition head on and be confident in doing so.
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Nelson Alexander Ivanhoe agent James Labiris said it would be much harder for buyers to predict selling prices this spring.
“People have been starved of good property so now there is competition and confidence, it is all about supply and demand,” Mr Labiris said.
“We are starting to see properties sell for really good figures and coming into the spring market we hope that momentum continues.”
Mr Labiris recently sold 12 Marshall St, Ivanhoe for $2.205 million, which was about $400,000 above reserve.
“It was a really special 1970s house that was like a time warp,” he said.
“There are a lot of buyers out there looking for good pieces of real estate like this one.”
Wakelin Property Advisory director Jarrod McCabe said he expected listing numbers to rise during spring but not enough to meet buyer demand.
“It has the feeling of being a sellers’ market,” Mr McCabe said.
“In some areas there is a lot of competition.”
Here are some expert tips on how to buy at auction this spring.
There’s no such thing as too much preparation for buyers planning to bid at auction, according to Mr McCabe.
“It is important to get everything organised before auction day,” he said.
“Get the contract reviewed by a solicitor or conveyancer, get a building inspection done and make sure you have finance organised.”
It was also important to talk to the agent about the deposit and how it needed to be paid.
“All agencies are different, some are happy to take a $10,000 deposit with the balance to be paid on Monday and some want the full 10 per cent on the day,” he said.
Settlement was another thing to talk to the agent about ahead of auction day so the length of settlement could be negotiated.
“If you are buying before selling an existing property you might want a long settlement or you might need it sooner,” he said.
“If it is vacant the vendors are most likely looking for a short settlement. Most of the time 30 days is the shortest or earlier by mutual agreement.”
Mr McCabe said every real estate agency was different, so it was important to ask lots of questions.
He said there was also the possibility a property could be sold before auction.
“Get a clear understanding from the agent how that process will work and understand what the rules of engagement are,” he said.
“Don’t go full capacity if you know you might get to put a second offer in.”
Arrive at the auction with plenty of time to spare and with your budget set.
“If it is more than one person purchasing, make sure everyone is in agreement, you don’t want to be having those discussions in front of everyone at auction,” Mr McCabe warned.
He recommended deciding beforehand who in your party was going to bid.
“Often first-home buyers have friends and family come along but it is probably a good idea to stand away from them,” he said.
“You want to concentrate on the auction and not be distracted. Once the emotion and adrenaline gets going you need to be focused.”
Mr Labiris said having your own strategy and not being distracted by what other bidders might do was key.
“As a buyer, the only thing to worry about is your own strategy,” he said.
“Work out what the interest has been like, what the property is worth to you and then turn up at auction.”
Mr Labiris said confidence was always the best way to play at auction.
“Showing confidence bodes really well,” he said.
“When an auctioneer puts in a vendor bid, they’re not willing to sell it at that, so feel confident to put your hand up. It might give you the first right to negotiate if it passes in.”
Mr McCabe said buyers should head to an auction “with a general idea of what might happen and be prepared to respond to what is happening”.
He said your positioning during the auction would also help.
“You want to be able to clearly see the auctioneer but also see the crowd and who you are competing against,” he said.
“You need to bid confidently but don’t do a machine gun approach, mix it up.
“Understand that the agent will dictate the bids and understand the type of people you are bidding against.”
He also suggested not leaving bidding to the last second.
“There have been cases where the hammer has come down and then a bid comes in, they can’t accept it,” he said.
Make sure you hold the highest bid if a property passes in so that you have first right of negotiation.
“If the property is in your budget make sure it is passed into you as you will lose any opportunity otherwise,” Mr McCabe said.
But he recommended resisting an agent’s attempt to move post-auction negotiations inside. Staying outside allowed you to see who else agents were talking to and if anyone was trying to overhear your conversation.
FIRST TIME LUCKY
Exciting and frustrating is how buyer Toby Le Lacheur describes his experience bidding for his new home.
“There were times we felt like we had the house but then the auctioneer would give other bidders time to think about it and they would come back,” Mr Le Lacheur said.
“It was exciting and frustrating.”
Mr Le Lacheur and his wife won the keys to 21 Nicholls St, Macleod for $907,000.
“There were a couple of other houses we were looking at but they didn’t cut the mustard, this was the house we wanted,” he said.
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He said they went to the auction with an idea of what the home was worth and with a small buffer in their budget.
“We incorporated a bit of a buffer into our realistic price, and we had to use it in the end as it went a little bit over our limit,” he said.
His top tips for others looking to buy at auction were to do their homework and get a realistic price, not just what the price guide said, and to have some flexibility in their budget.