Auction tips and tricks
Buying your first home is an exciting milestone, but the process can sometimes feel overwhelming—especially regarding auctions. Auctions can be intimidating, fast-paced, and emotionally charged. However, with the proper preparation and strategy, you can confidently walk into your first auction and potentially walk out with the keys to your dream home. Here are some tips and tricks for first-time homebuyers to help you succeed at a property auction.
1. Do Your Homework
Before diving into an auction, the key is to do thorough research. Get to know the neighbourhood you’re interested in and gain a solid understanding of the property market. Observing a few auctions will help you understand their dynamics and terminology. Additionally, it’s essential to investigate recent sale prices for similar properties in the area. Your home loan broker can rule property reports, providing insights into the area of interest. Armed with this knowledge, you can set realistic expectations for the property’s value and approach the auction with confidence!
2. Get Your Finances in Order
Before bidding, make sure to have your finances analysed and reviewed by a mortgage broker. This involves obtaining a pre-approved home loan. Auctions often require a deposit on the day, usually 10% of the winning bid, so ensure that these funds are easily accessible. Discuss your borrowing limits with your mortgage broker to avoid bidding more than you can afford. A mortgage broker will assist you in obtaining pre-approval to bid with confidence at auction.
3. Inspect the Property Thoroughly
It’s important to note that there is no cooling-off period for auction purchases. Therefore, it’s crucial to thoroughly inspect the property beforehand. Attend all open houses, arrange for a building and pest inspection, and review any available documentation provided by the auctioneer, including the contract of sale and, most importantly, Section 32. What If We Finance strongly recommends seeking a legal review as well.
4. Set Your Budget—and Stick to It
It’s important to control your emotions during an auction because the competitive atmosphere can make it easy to overspend. To avoid this, set a maximum bid before the auction starts and do your best to stick to it. If you don’t win, there will always be other opportunities, so don’t spend more than you can realistically afford.
5. Understand the Auction Rules
Getting to know the ins and outs of an auction before attending is key. This means understanding vendor bids (bid my by the auctioneer on behalf of the vendor) and the sale terms. It’s vital to go through the sales contract with your solicitor or conveyancer to steer clear of any surprises post-winning. I’m happy to help if you need any guidance through this exciting process!
6. Arrive Early to the auction
Arriving at least 30 minutes before the auction begins gives you time to settle, observe the crowd, and register to bid (which is usually required). It also allows you to speak with the auctioneer or real estate agents about any last-minute questions. This will help you get a feel for the competition and the number of potential bidders attending.
7. Start Strong and Stay Confident
Participating in an auction can be nerve-wracking, but it’s important to assert yourself. Some experts suggest starting with a strong initial bid to demonstrate your serious interest. If the bidding begins lower than anticipated, consider confidently initiating the bidding to establish the momentum. Remember, this is not the time to hesitate—project confidence and maintain composure under pressure.
8. Be Strategic with Your Bids
Bidding strategies vary, but there are a few tactics that may help you gain an edge:
- Bid in uneven increments: If others bid in round numbers, throwing in a slightly higher odd number (e.g., $515,000 instead of $510,000) can catch other bidders off guard.
- Bid quickly: This keeps the momentum going and might discourage others from bidding higher.
- Pause when the auction slows: When the bidding slows down, hold back for a moment and see if the auctioneer encourages other bidders before you jump in again.
9. Watch for Vendor Bids
A vendor bid is made on the seller’s behalf to keep the auction moving. Please pay attention to whether the auctioneer announces vendor bids, as this can indicate that the property hasn’t reached its reserve price (the minimum price the seller will accept). Don’t be discouraged by vendor bids, but understand how they can affect the auction’s flow.
10. Know When to Walk Away
Sometimes, the bidding goes beyond your budget or comfort level, and that’s okay. Knowing when to walk away is just as important as knowing when to bid. Sticking to your budget will prevent you from overcommitting financially. There will always be other opportunities, so feel free to win at all costs.
11. If You’re Successful, Be Ready to Act
If you’re the highest bidder and the property meets the reserve price, congratulations—you’ve just bought your first home! Be prepared to sign the contract immediately after the auction and pay the deposit. Once the hammer falls, there’s no backing out, so ensure you’re ready for the commitment.
Final Thoughts
Auctions might seem daunting for first-time home buyers, but with thorough research, a solid financial plan, and a clear bidding strategy, you can confidently approach your first auction. Remember, preparation is key—know the market, understand your budget, and be ready to walk away if necessary. By following these tips and tricks, you’ll be well-equipped to navigate the auction process and secure your first home. Good luck!
Spiro Kolokithas is an award-winning mortgage broker with over 20 years of experience in the finance industry. Known for his exceptional customer service, he was awarded Best Customer Service in Victoria by the MFAA and has earned over 206 five-star Google reviews. His expertise spans home loan finance, property investment, and assisting first-home buyers. With a deep understanding of the mortgage landscape, spiro is dedicated to helping clients secure the best possible financing solutions tailored to their needs, making homeownership and property investment accessible and stress-free. Contact Spiro Kolokithas and What If We Finance to find out more.
