With a cool head and a firm plan first-time buyers can make sure they don’t get swept away in the excitement of an auction.
Auctions can be daunting for novices, but they can also be an effective way to snag an investment at a fair price.
Once you have identified a property worth bidding on, it’s important to remember the sales contract is unconditional. Reviewing the contract, along with any building and pest inspections, needs to be conducted before the auction, and buyers must obtain the seller’s agreement to any contract variations in writing ahead of the auction day because it can’t be changed afterwards.
When you’ve found a property you’d like to buy, you need to set a price limit before you arrive at the auction – and if you are concerned your heart might overrule your head, you may want to consider giving authorisation to a friend or agent to bid on your behalf. Various states and territories have different rules when it comes to registering to bid at auctions, so it is important to ask the real estate agent about the process in your state, if you intend to bid.
First-time auction bidders need to be aware of the threat of underquoting. This is a tactic whereby some agents post an unrealistically low price in their advertisements to lure more buyers to the auction – don’t get swept up in adrenalin-charged bidding.
First Time-Buyers need a clear strategy for buying at auction
One common tactic first-time buyers can use is to bid aggressively up to your ceiling to intimidate other bidders. For example, you could try to start the bidding within $20,000 or $30,000 of the perceived fair value to cut down on the length of the auction.
Make sure you also keep an eye out for unethical practices at auctions. Dummy bidding has become less common, with Fair Trading authorities cracking down over the past few years, but some agents may still plant people in the crowd. These fake bidders drive up the price with no intention of purchasing the property.
Auctions can be intimidating environments for first-time buyers. However, if you plan ahead and set boundaries you should have nothing to fear on auction day.