I know that many property investors are a little intimidated by the thought of bidding for a property at auction.
I can understand why – auctions are an emotional and exciting event.
Even after bidding at hundreds and hundreds of auctions, I must admit I still get that surge of adrenaline every time I bid.
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Then of course there’s the lead up to the auction with all the unanswered questions: What does the vendor really want for his property? Is the agent under-quoting and enticing me to come along on the day? How much competition will there be?
Then there’s the heartbreak of falling in love with a property just to be outbid by someone with deeper pockets.
But if you avoid properties that are up for sale at auction, you’re going to miss out on a lot of good buying opportunities as usually the best properties are offered for sale by auction, particularly in Melbourne and Sydney.
Currently the team at Metropole buy many properties for the client at auction and I know I’ve bought two great properties at auction for myself over the last month.
But I must admit that over the last little while I’ve also been outbid at a few other auctions by people who are either smarter than me or dumber than me, and were prepared to pay considerably more than I was for certain properties.
The benefits of going to auction:
I believe if you’ve got a good property for sale the auction process is usually the best way to sell it and, at the same time, auctions are the most transparent way to buy property.
I like to know who else is interested in the property and what they’re prepared to pay. I like that I can see my competition and read their body language. I watch for the signs that they are close to their limit.
Of course I know many buyers don’t see auctions this way. They see them as highly stressful events and they’re worried that they may pay more than they intended to in the spur-of-the-moment excitement.
This only happens when you’re unprepared.
However if you’ve done your pre-auction due diligence, such as getting your finances in order, checking the contract and prices, and determining your maximum price, you can then just consider the auction the venue where you execute the decision you’ve already made.
Of course you could always make an offer prior to auction, but in today’s sellers’ market, you risk paying more than you need to.
Preparing to buy via auction:
You can make an offer prior to auction, but you risk paying more than you need to. Pre-sales usually occur when there is a lack of interest or when one buyer is offering a lot more money than the others.
You can also authorise someone else to bid on your behalf. Choose someone you trust who has some auction experience or hire a buyer’s agent. You need to organise this before the auction – state laws vary so ask the agent or ring your state’s Real Estate Institute to find out what paperwork is required.
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