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Preparing for an Auction: Tips for Buyers

Preparing for an auction

If you’re house hunting, whether as a first home buyer or someone who has bought and sold before, you may find yourself having to navigate an auction to secure your ideal property. 

For most people, attending an auction is a nerve-wracking and stressful experience. Fast-paced and competitive, it is easy to become overwhelmed, often missing bidding opportunities or arguably worse, panic bidding over and above your budget. 

To avoid these common pitfalls, it is wise to prepare yourself in advance by educating yourself about what to expect, how to bid and key things to watch out for. 

In this guide, we’ll cover all this and more so you can feel prepared as a buyer at auction. 

What Is A Real Estate Auction?

Real estate is typically sold via one of two methods, these being a private treaty where individual offers are made by buyers and negotiated privately or in an auction. 

A real estate auction is defined as:

‘A public event at which individuals bid for ownership of a property. The property is sold to the highest bidder if the price has reached or exceeded the property’s “reserve” (minimum price) as set by the vendor (seller).’

How To Find Out A Reserve Price At Auction

A reserve price is set by the vendor and their agent in advance of an auction and is not disclosed to bidders. 

On the day of the auction, the auctioneer will only announce that the reserve price has been met once a bid has been made that meets or exceeds it. 

As the reserve price is considered confidential information, you cannot usually find this out ahead of time. The best you can do is to ask the selling agent for a guide price as a basic indication of what to expect. 

Types Of Auctions

Standard Auction

At a standard or traditional auction, registered bidders battle it out against one another, led by an auctioneer, with each party making increasingly higher bids. 

These auctions can be held online or on-site and are complete once bidding has hit the reserve price and no additional bids are made. If sold, a deposit must be paid and contracts exchanged immediately. 

Should bidding not reach the vendor-set reserve price, the property will be passed in. So what happens if a property is passed in? 

At this point, the highest bidders may choose to enter into private negotiations with the vendor. 

Alternatively, the vendor may opt to withdraw the property from sale or revert to a private treaty sale instead. 

Silent Auction

Less common, but still used to sell property on occasion, a silent auction takes a markedly different approach to a standard auction. 

So how does a silent auction work and is it legal? 

Yes, a silent auction is legal so long as it has been declared publicly and follows some key regulatory criteria. 

At a silent auction, there is no auctioneer and often no reserve price set. All offers are submitted privately through the selling agent over a defined period at the close of which these are presented to the seller for consideration. 

The seller can then accept the best offer, continue negotiating with the highest bidder or decline all offers and continue to seek new buyers. 

How To Bid At Auction 

Bidding at an auction is easier than you may think. It typically involves: 

  • Registering with the selling agent on the day and acquiring your bidding number
  • Once bidding begins, you can join and make offers by raising your hand or paddle if one has been provided. 
  • You’ll need to follow the directions of the auctioneer regarding accepted increments and be prepared to adhere to these
  • You can drop out of the auction at any time by making no further bids
  • If the hammer comes down with your offer as the highest one and the reserve price has been met, you’re the winner and you’ll be directed by the agent as to what to do next. 

Tips For How To Win At An Auction

  1. Don’t be intimidated, know your limits and don’t get caught up in the hype.
  2. Listen closely, the auctioneer will be giving instructions and you don’t want to miss a bid, accidentally bid against yourself or offer a lower bid than the previous one. 
  3. Remain polite and keep your emotions in check, remember, the auctioneer is working the crowd as part of his job and other bidders want to get you off kilter. No matter what, keep calm and professional as unruly bidders can be removed from an auction. 
  4. Bid confidently and quickly. This can unnerve other buyers and narrow down the competition early on. 
  5. Keep your intentions private and do not discuss your budget or bidding strategy with anyone, including the selling agent.
  6. Read the room. Notice other bidders looking low, crossing their arms or putting their bidding cards away? This may be a sign that they have reached their limit and the end is in sight. 

Bidding at auction

How To Pay A Deposit At Auction

Immediately following your successful bidding at an auction, you’ll need to be prepared to pay a non-refundable deposit, usually around 10% of the sale price. 

This can be paid in a few ways including bank cheques, personal cheques or a bank transfer. 

On occasion, a mix of these will be required, particularly since determining 10% is not possible until the sale price is confirmed. Most sellers accept this as flexibility regarding the deposit payment can help to finalise everything with ease. 

What Happens If The Balance Of My Finance Falls Through?

As most auction contracts are unconditional, a buyer is legally bound to complete the purchase no matter what occurs after the hammer falls. 

This means that should your finances fall through and your mortgage is not approved, you will at a minimum lose your deposit. You may also find yourself being sued by the vendor if they end up then selling at a loss. 

For this reason, you should always prepare for an auction by having firm pre-approval from your lender. While not a guarantee, this is a good sign you will avoid this outcome. 

Additional Watchpoints:

  • Have your solicitor or conveyancer review the contract of sale before the auction day
  • Organise a pest and building inspection in advance
  • Research recent sale prices in the area to better understand what to expect and what constitutes a fair value
  • Attend other auctions as a non-bidder to familiarise yourself with the process
  • Arrive early on auction day to do a final inspection of the property 

Stress-free home ownership with Stop Renting Perth

Avoid Auction Stress With Stop Renting Perth 

Prefer to avoid auctions altogether? Why not build your dream home with the help of Stop Renting Perth instead? 

With no auction stress or preparation to manage, our house and land packages represent the ideal pathway into property ownership. 

With a range of competitive finance options and the potential to take advantage of various government grants and schemes, we help you to own your own home sooner. 

From start to finish, we manage every step, providing conveyancing, access to qualified financial advice, preparing all paperwork, managing any applications and more. 

Offering over 70 home designs to choose from and with land available in suburbs all over Perth, you get a home built to your exact specifications and with none of the stress or worry that comes with buying at auction. 

Escape the cycle of renting sooner and enjoy a streamlined, stress-free journey to buying your own home, book your free consultation call with Stop Renting Perth today.

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We’re here to help, so let’s get started! it’s time to stop renting and start taking steps towards home ownership.