Auctions are still the hot topic in Melbourne and are still the preferred way to sell homes in the suburbs around our great state. Many people who attend auctions feel intimidated and scared, feel that the competition is too fierce. As buyers, they don’t feel like they have any power or control over proceedings. But I am here to tell you that as a buyer, you do have some powers at your disposal. Here are my 5 secrets for you, as a buyer, to feel more in the game at auctions.
1. Do Your Homework
There is always talk about Real Estate Agents under quoting the prices of houses just to get a lot of interest at auctions. However, Realestate.com.au will now show you what homes are for sale, and have sold, in an area, and how much they sold for. That’s right, you can get a mean price for the area, and have a good ball park figure for what the house should sell for.
2. Avoid a fight
Getting into a bidding war at an auction is a sure-fire way to escalate the price, and suddenly find yourself in deep water. When the first bid is called, and it is a low bid, you will see hope in the eyes of all these potential buyers, and the fight will be on.
However, if you have done your homework and know what the expected price is, throw your first bid to that price. You will see the hope in many potential buyer’s eyes drain away. You will thin the herd, and be in a much stronger position to buy.
6 months ago we had a 50’s – 60’s style house up for auction. It was a real bulldozer job. There were quite a few people there with an interest to buy, hope in their eyes. The first bidder came in with a $1 Million bid. No one else bid. They were all defeated by that one bid. It was over the reserve price, so we had to take it.
3. The 10% Deposit is not the Law
You do NOT have to have a 10% deposit in order to buy a home at auction. In the weeks leading up to the auction, speak with the real estate agent, ask the question- would you take a 5% deposit on this house? You will learn so much information.
• If the agent says no, that the vendor wants 10%, then you know that there is a lot of interest in the property, and he is not interested in your charity.
• If he says YES, the tip here is that there is not that much interest, and the agent is desperate to have you at the auction and to bid on the property.
4. Don’t hesitate when Bidding.
At the pointy end of the auction, if you’re taking 2 minutes or more to make a bid, it shows your hand to the remaining bidders. It shows you’re nervous, that you’ve reached your limit, and are scared to commit more bids.
If, after 2 minutes someone makes a bid of $500, and then the other person bidding them against goes BANG $1000! You know he is the one with the power. You know that more likely than not, he will break the spirit of the two-minute bidder.
Always try and show a position of strength. Know your limits, and if they are passed, back off and let the hungrier bidders win the auction.
5. If the Auction is Passed In, You Still Have Options
As a buyer, if the auction is passed in, go have a word with the real estate agents. You have the option of putting in conditions which favour you, if it will help sell the home. Ask the question.
We had a house pass in quite recently and one of the bidders approached us willing to buy, with 7 conditions he wanted included in the contract of sale. After some consultation we offered $10k per condition added. He agreed, and the house went from $366k to $405k, and was sold.
An auction is like building a campfire. You need paper, twigs and kindling to get it burning, and building, and then you add the bigger logs to keep the fire burning. If, as a buyer, you come in in with a big first bid, then it is like putting the log on the fire right away. It kills all the spark and often the fire won’t start, you won’t have any competition in the bidding.