Buying at auction can be daunting, especially if you’ve never done it before. There's an art to bidding at auction which can help with the process.
- Research the market as much as possible. Try to ascertain what the property’s worth, set the limit that you are prepared (and can afford) to pay and stick to it.
- Once you've set your limit, never bid above this price. You might have your heart set on a property but there's no point getting in over your head.
- Attend as many auctions as possible. This will help you get a feel for the process and boost your confidence.
- Arrive early on the day of the auction if it’s on site and make a final inspection of the property.
- Check the contract of sale, vendor's statement and auction rules, which should all be on display for at least 30 minutes before the auction commences.
- If you have any questions about the auction rules, don't hesitate to ask the agent in attendance.
- Negotiate terms before the auction. In property transactions, including auctions, everything is negotiable although you won’t always get what you want. You may want to alter the terms of settlement, the amount of deposit or the chattels that are included. If you want to change any of the conditions in the contract of sale, you must request this before the auction, not after the bidding has finished.
- You may want to ask for amended terms just to gauge the level of interest in the property and how much competition you'll have on the day. If you ask for longer settlement or a smaller deposit and the vendor refuses, it could mean that they're confident that there's strong interest in their property and the agents expect multiple bidders. On the other hand, if they accept your requests, it suggests there may not be as much interest as they would like.
- If the property is passed in below the reserve, the owner through the agent or auctioneer will first negotiate with the highest bidder for the purchase of the property.
- If you have participated in the bidding or have been sitting back watching how it is progressing, and the auctioneer announces the property is going to be passed in, it is a good strategy at this point to make sure you are the highest bidder to secure the option to negotiate with the vendor.
- Once the property's passed in, it is too late. The auctioneer can't reopen the auction to accommodate a late bid and override the right someone else has secured ahead of you.
- How long do you have to negotiate with the owner? This may well depend on whether you are prepared to accept the owner's price. If you are not prepared to meet the owner's asking price, the owner may end negotiations with you immediately and start negotiating with another interested party.
- If you are not confident about bidding at auction you should consider using a buyer's agent to assist you.
- Auction sales are binding – there is no cooling off period. If you are the highest bidder, you must be ready to pay the 10% deposit (with a bank cheque or deposit bond) and you are then legally bound to buy the property. If you default you risk losing the deposit.