Tips for buying a property at auction

Thinking about buying a property at auction? To help set you up for success before, during and after the auction, auctioneer Michael Richardson from Fletchers real estate agency has some house auction tips.

Before the auction

Find out how much you could borrow

To be able to bid at auction, you need conditional finance approval from your Home Finance Manager or Broker first. This is because you won’t be able to include any special conditions (like a finance clause) on the auction contract.

From this, you can work out your ‘like-to-pay price’ and your ‘have-to-pay price’.

Research the property

Look at recent, comparable sales in the area to work out how much the property’s worth.

If you’re serious about the property, you might also want to arrange an inspection to see if there are any major building, electrical or pest faults. Although an inspection can cost several hundred dollars, it could save you from buying a property that needs major repairs.

Chat to the real estate agent

This is the time to ask any questions about the property and understand your obligations if you’re the highest bidder. You can also try to negotiate any specific settlement terms, if you want a longer settlement period or you have a smaller deposit.

During the auction

Stick to your plan and be confident

The most important part of bidding at an auction is having a plan, so you can stop bidding once you’ve reached your limit. This will help eliminate buyer’s remorse.

You should display a level of confidence to put off competition by positioning yourself front and centre, and be loud and clear in your bids.

Be prepared for all scenarios

Make sure to have a bidding strategy ready and that you’ve considered the three different scenarios.

If no one bids on the property
It’s then worth asking the real estate agent what the seller’s planning to do next. You might be able to negotiate a price without another auction.

If the bidding is lower than the reserve price
If it’s a fast-paced auction, hold back until the bidding has reached the reserve price (this is the minimum price a seller will accept). If the bidding is slow, still aim to be the highest bidder (provided it’s within your budget), because if the auction ends and the property doesn’t reach the reserve price, the highest bidder will have exclusive rights to negotiate with the seller.

If the bidding is above the reserve price
When the property has passed the seller’s reserve price, the person with the highest bid will win. If it’s a steady auction and the reserve price has been reached, increase your bids to try and knock out your competition by bidding in larger increments to scare them off.

After the auction

If you’re the highest bidder

You’ll typically need to sign the contract and provide the deposit – generally via cheque or electronic transfer. After that, there will be a few things that will happen:

  • You’ll need to finalise your finance, so it’s best to chat with your Home Finance Manager or Broker straight after the auction
  • Your conveyancer or solicitor will complete the necessary legal checks and confirm the date for settlement
  • You will attend a final inspection before settlement to make sure the property’s condition is per the sales contract.

Buying your first home with Michael Richardson: Connect Event highlights.

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Things you should know

The information contained in this article is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this article without first obtaining specific professional advice. Also to the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL / Australian credit licence 234945, its related bodies corporate, employees and contractors accept no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this article.