With more and more Australian homes being sold by auction, there’s a growing chance the property you’ve had your eye on will go under the hammer.
Learn the jargon
If you’ve never had much to do with auctions, it’s worth familiarising yourself with the terminology used, so you understand what’s happening.
- Reserve: The minimum price the vendor will accept for the sale to go ahead.
- Vendor bid: A bid made by the vendor (home owner), ie what they are prepared to pay to keep the property. This is often used to either start the bidding or to keep bidding flowing if there’s been a bit of a lapse. It’s an indication to bidders that the reserve hasn’t been achieved. The auctioneer must announce a vendor bid when naming the price.
- Dummy bid: a bid made by someone who has no intention to purchase the property, made to push up the price. Dummy bids are illegal across Australia.
- Passed in: If the reserve hasn’t been met (or the vendor is not prepared to accept the highest below-reserve bid), the property is passed in and is effectively withdrawn from sale.
Before the auction
Auctions are unconditional sales. This means the successful bid is legally binding and you’ll be required to sign the contract and hand over the deposit once the auction is over.
There’s no backing out later if your finance falls through or termites have set up shop in the foundations.
Sort out your finances
Scrutinise the legalese
Ask the real estate agent who is selling the property for the contract of sale before the auction and have it checked out by a lawyer.
The contract will set out things like how much deposit you will need to pay and the settlement period.
Set your upper limit
It’s easy to get caught up with the excitement of auction day and end up spending more than you were expecting.
Knowing your upper limit will ensure you go into the auction knowing when it’s time to walk away.
Obviously, your finances will have a big role to play here, but it’s also important to check the market, and find out what similar properties in the area are valued at, to make sure you’re being realistic.
If you’re not confident determining the value of the home, consider using a registered independent valuer.
Open houses, or inspections by appointment, are available for properties going to auction, just as they are for private treaty sales. You may also be able to do a final walk through on auction day.
Give the property a thorough going over. If it’s suitable for your needs, arrange a building and pest inspection.
Some real estate agents may offer you a prepared building and pest report, but you’re within your rights to request an independent assessment.
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Don’t go in cold
If you’re new to auctions, it’s easy to get caught up in the excitement. Consider spending a couple of mornings at auctions in your area to get a feel for the proceedings, so you know what to expect.
It’s quite alright to attend an auction “just for a look” with no intention of bidding.
On auction day
Auction day rules vary slightly from state to state. If you have any concerns or questions, get clarity from the real estate agent or auctioneer ahead of time. Don’t leave it until the last minute.
Unless you live in Victoria, Western Australia or the Northern Territory, you’ll need to pre-register if you want to bid at the auction. This is as simple as providing your contact details to the real estate agency running the auction.
2. Pick up your paddle
To bid at auction you will most likely need a paddle, which is a small, sign which has a number on it, which you raise to indicate a bid to the auctioneer.
Even if you’ve pre-registered before the day, you’ll need to show your ID and collect a paddle.
Some auctions still use the old-fashioned hand-raising method, but paddles are increasingly the choice across Australia.
3. Make yourself known
There’s no harm in introducing yourself to the agent or auctioneer, as it shows you’re a serious bidder and someone to look out for.
4. Choose your spot
While it’s tempting to loiter at the back of the crowd, you want to pick a spot where you can be easily seen by the auctioneer and keep an eye on your competition.
5. Watch your body language – and everyone else’s
An auction is as much psychology as finance. You want to exude confidence and give the impression you can keep bidding all day.
Keep an eye out for defensive and nervous behaviour, like crossed arms and fidgeting, and subtle cues like not making eye contact or slight shakes of the head.
Watch for “chatter” and if a bidder is constantly seeking advice, or even debating with someone they’ve bought along with them, there’s a good chance they’ve reached their limit and weighing up “one last bid”.
6. Stick to your limit
It’s easy to get carried away at an auction and bid more than you can afford.
Some experts recommend writing down your upper limit on a piece of paper and taking it with you, so it’s very concrete, rather than having a vague price range in your mind you’re considering.
Prepare yourself in advance for the potential disappointment of missing out on the property, so you don’t get caught up in the moment.
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7. Consider an expert
If all this seems too daunting, you can ask a friend or relative to bid for you, or employ a buyer’s advocate, who is a professional buyer who won’t be tempted to deviate from the plan.
Words by Erin Delahunty
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