An auction is an effective way to sell a property as it is an environment, that effectively manufactures tension and emotion and can lead people to overpay for a property.
From the perspective of a vender, this is a good thing. For potential buyers, this isn’t what we want. In a perfect world, we wouldn’t buy properties at auction.
However, if you’re looking to buy property in locations that are heavily in demand, such as the Eastern Suburbs of Sydney, then you’ll know that auctions are a common way that properties are sold and are therefore sometimes unavoidable.
Importantly, you can still win at auction. You just have to understand the right way to go about it so you get the best possible result you can.
Know the True Value of a Property
Most first time buyers at auction fall into the trap of either paying too much or getting completely blown out of the water during the bidding process.
Either way, they come out far worse than they went in. There is a way that you can avoid this and it starts by understanding the true value of a property.
The best way to gauge just how much a property is actually worth is by doing your own comparable sales analysis. You can use the online real estate platforms to see similar types of properties in the same area that have sold in the last six months.
It’s vital that you don’t pay any attention to what the sales agent tells you when it comes to a price guide. Sales agents have a tendency to ‘underestimate’ a property’s value. They do this to encourage more bidders which has the net result of increasing the price. It is also illegal to underquote and can leave potential buyers disheartened at the entire process. This is very common during very hot markets.
Ultimately, it is up to you to get a clear idea of what a property is worth and then work out if that is in keeping with your budget. When the time comes to bid at action stick to your numbers and don’t get caught up the emotion of the auction process.
You can always walk away and there are always other properties.
Bidding at Auction
Once you’ve got a clear understanding of what a property might sell for, the next part of the process is the bidding strategy.
If you can afford a certain property, then it is still important that you stick to your numbers (the fair value you want to pay) and walk away if the auction is a little too hot.
If you likely can’t afford the property and need to get it at a discount, then you need to adjust your bidding strategy according.
Even though you might not have the money if the price blows out, you want others to think the opposite. You want to act like you have no budget and will buy the property, no matter the cost.
This is especially true at the start of the auction, which is when you should come out strongest. While you’re under budget, counterbid any offer that you see instantly. Stay confident and make it seem like that property is yours.
This is a psychological game that you’ll play with all counterbidders.
Before any emotion sets in, make sure to use this strategy. And when you do get emotional, clear your head and remember not to break the budget by a cent.
Buying at auction can be a very successful process. You just need to do your numbers and have an effective strategy going in.
At the end of the day, the person who is prepared to pay the most will win the auction. Your goal is not to win the auction, it’s to buy the property at the right price.