Auctions: they’re like a circus, but with higher stakes and fewer microwaved hotdogs. When you’re a first-time buyer, the whole situation can be pretty overwhelming. But there are auction tips you can follow. From where you stand and the clothes you wear to how you lift your hand, everyone’s got their secret trick to landing the winning bid.
So, we asked the experts for theirs. They have two clear rules: success at auction is about doing your research and sticking to your limit.
ME’s General Manager of Home Lending, Andrew Bartolo, says bidders need to understand the psychology of the auction. It’s a pressure-cooker environment. Everyone wants the keys to the property, but internally you’re having a competition just to be the winner, too.
It’s easy to get caught up in the emotional side – and that’s not always where we make our best decisions.
1. Take your pre-auction vitamins.
Anton is a property investor who recently bought a one-bedder in a heritage-listed building. Going along as a spectator got him ready for the real thing.
“A few months into approaching my deposit goal, I attended a few auctions as an observer. I kept an eye on everyone that bid: what were they wearing? Were they being supported by friends and family? Were they on the phone bidding on someone else’s behalf?”
Watching the action unfold helped Anton decipher what separated the winners from the not-winners. He noted whether they came to the bidding early, where they positioned themselves, and how they made their bids. And probably their game-day coffee order – you just never know.
2. Do your homework.
Anton backed up his practice runs with research. The reality is, with so many tools available, including ME’s House Mate program, there’s no excuse not to do your own.
“I used online apps to track the current asking price/range. I would record this in the notes section of the listing. By doing so, I was able to track the final selling price against this figure.” After four years of following the ups and downs, Anton had a solid idea of where sale prices were landing compared to their list prices (and a chock-a-block Notes app).
Andrew is on board with using research to bamboozle other bidders. “Good research can also help you employ the shock tactic of making a h2 bid early on – like, say, offering $300,000 when the bidding is at $275,000. This strategy can help you eliminate a large number of bidders at an early stage.” We’re pretty sure he just means eliminate from the auction , but research is a powerful weapon.
3. Stay cool.
Think of your research as a kind of psychological training ground. The more information you have, the easier it will be to stay calm on the day – and that can be the difference between being the highest bidder and just a sad non-owner going home to look for snacks.
“Your body language is important at auction,” says Andrew. “Use a firm, clear voice when you make bids. And bear in mind, you can dictate the size of your bid. If the auctioneer says he will take bids in increments of $1,000, calling a bid for $5,000 can show you are a serious buyer. Alternatively, bid in small increments to slow bidding down.”
Anton used these bidding tips to great success. “If you come across h2 it may de-rail others’ confidence. It is, after-all, a competition and if you want to win you have to be the best on court. After my opening bid, I left the volleying to the other competitors, observed their pace and incremental bids. I knew that if I came in late with very quick, sharp, confident returns I would ace the final bid. And so I did.”
Keeping the heat out of it isn’t always easy, but it can help avoid overpaying – and regretting it later. “Be smart and use your head not your emotions,” Anton says. “There are plenty more bears in the woods.”
4. Know what to expect – and what you’re buying.
Buying a house at auction is complex. Planning ahead will help you stick to your budget and make the right moves on the day.
Auctions come with a whole bunch of paperwork. Real estate agents will supply it on request, and reading it means you’ll know exactly what you’re buying and how.
“It’s important to read the contract of sale and the Body Corp AGM minutes,” Anton says. “This gave me information on the state of repair of the building or what might be planned for the future. I checked out the area and planning permits that had been submitted. Will these future plans inhibit my views or leave me with regret?”
It’s always a good idea to have a pest and building inspection done before auction day, to avoid any nasty surprises once the ink dries. Then, grab extra info like council rates, water rates and body corporate fees to make sure you know what you’re up for. And a good sanity check can’t hurt either. “I took a friend with me to get a second opinion to see if there were any blatantly obvious concerns that I might have overlooked,” Anton says.
5. Be clear about how much it all costs.
What about price? Settling on a limit is a combination of what you’re willing to pay, what the market says the place is worth, and how much finance you can secure. Be super clear on that figure before you head out, and make sure it includes all the extra home buying costs you might not have thought of. Bidding at auction without a firm price ceiling is a recipe for Janet-Jackson-wardrobe-malfunction-levels of disaster.
“The golden rule at auction sales is not to bid beyond your purchase budget,” Andrew says. “It’s something you could regret for some time. Having a conditional loan approval in place is a great way to know exactly what you can afford to bid, and that makes it a vital tool.”
Our home loan calculator can help you crunch the numbers, or, if you’re Anton, you might take the nerdery even further.
“I looked at the price I was willing to pay per square metre based on the averages of comparable properties. I would then use the higher confidence rule to determine the limit of what I was willing to spend, e.g.: @$7,500 p/m2 makes a 60m2 property worth $450k – this would be the top price that would inform my ‘Happy-Price’.”
6. Bring in the professionals.
Even if you’re an actual real estate agent or auditioning for Love It or List It, it’s not your job to be amazing at auctions. It’s okay if they’re too daunting, or if you don’t feel confident making the winning bid.
There are people who can do it for you. If you’ve been doing your homework, you’ve probably already seen them at other auctions, talking to wannabe buyers on the phone. These buyers’ advocates can zap the emotion from your auction experience, so you can think with your head.
7. Don’t be afraid to walk away.
It can be hard to imagine right now, but this isn’t the only place you’ll want to buy. Just as you’ve moved on from your first car or your first good haircut, you will love again. If you miss out this time, breathe deeply, take a weekend off if you need to, and keep going.
Anton keeps it all in perspective: “For me it’s only ‘the one’ when the hammer goes down in favour of you. All the properties I have looked at I believe have the potential to be the one.”
Buying at auction seems intimidating – and it can be. Give yourself the best possible chance by doing the research, having a plan of attack, and getting your financing sorted ahead of time. Then all that’s left to do is pay your deposit and choose a fun welcome mat.
This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.