After months of virtual bidding wars, in-person auctions are finally back in the nation’s largest property markets, Sydney and Melbourne, and buyer demand has never been stronger.
Markets around the country are experiencing strong selling conditions as demand outstrips supply. According to PropTrack, demand based on views per listing and email enquiry of properties for sale on realestate.com.au hit a record high in September.
It’s making for a very competitive spring selling season, with many hopeful buyers left disappointed as properties soar well above the reserve.
Melbourne auctioneer and director at Fletchers Tim Heavyside told Smartline the extended lockdowns have done little to dampen buyer enthusiasm.
“There’s a lot of pent-up demand – buyers have been starved a bit,” Mr Heavyside said.
“They’ve been stuck at home, not being able to physically look at properties but they’ve been doing their research and they’re ready to go.”
We asked what prospective buyers should do to prepare for an auction during a hot property market.
Here are five top tips:
Get your finances in order
It’s essential to get your finances ready to borrow well before auction day.
Make sure you’ve paid any outstanding bills, paid off credit cards, completed your latest tax return and worked out what you can afford.
Check in with your mortgage adviser to discuss the steps in applying for a loan. Having a loan pre-approval in place prior to auction is highly advisable as there’s no cooling-off period. A pre-approval also gives you more certainty about your upper limit when bidding.
If you are the winning bidder, you must sign and exchange contracts and pay the deposit (usually 10% of the purchase price) on auction day and the balance on the settlement date.
Attend other auctions
Bidding at auction can be intimidating and stressful, particularly if it’s your first time.
Attending other auctions beforehand will not only help you get used to the process but also give you an insight into the level of interest and activity on similar properties.
Mr Heavyside said attending auctions with the same auctioneer as the property you intend to bid on can also be a useful strategy.
“You want to get used to their voice, their little sayings and their style,” Mr Heavyside said.
Ray White chief auctioneer for Queensland Gavin Croft told Smartline buyer preparation is key.
“Knowledge is power. The more you do something, the better equipped you are to do it better next time,” Mr Croft said.
Do your due diligence
Conducting your due diligence is especially important for a property going to auction, because if you have the winning bid the offer is unconditional, and you’ll be bound by the terms of the contract.
Before auction day, have the sale of contract reviewed by a solicitor or conveyancer and ensure any pre-auction variations to the contract, such as settlement period or deposit size, are agreed to by the vendor before auction day. If any variations are agreed to, ensure you get this in writing through their solicitor.
Buyers should also get a building and pest inspection, and if you’re buying a unit or townhouse, organise a strata search.
Make sure you know what the property is worth and what other properties in the area have been selling for.
Talk to the agent
Don’t be afraid to ask as many questions as you can in the lead up to the auction, Mr Heavyside said.
“Ask about the reserve, what other buyers are saying, and what the seller’s circumstances are,” he said.
“They may not tell you but it’s always worth asking.
“And be friendly. I tend to be more open with buyers who have a positive energy.”
Mr Heavyside said more buyers were making pre-auction offers in the current market to avoid the uncertainty of going to auction.
“I’m seeing successful pre-auction offers around 20% of the time, up from around 10%,” he said.
“Definitely ask the agent if the vendor is accepting offers and to keep you informed if there are any on the table.”
Have an auction strategy
Mr Croft said planning is the key to success at auction. Buyers should decide what their absolute upper limit will be and plan their auction strategy.
He said in a hot market, a good strategy could be putting in a strong opening bid, just below the reserve.
“This sends a real message of confidence and control and can put other bidders off,” Mr Croft said.
“Some buyers give up early if they don’t think they’ll get it.”
Mr Heavyside said projecting confidence is an important strategy, even if you’re not necessarily feeling it.
“Act as if the property will be yours. Keep making strong bids, responding quickly to counter bids in respectable increments so no one can tell if you’re approaching your limit,” Mr Heavyside said.
If you’re uncomfortable with the bidding process, you can always engage someone to bid on your behalf, such as a buyer’s agent.
Just remember, purchasing a home is a huge financial decision and you are in control of your bids. You may be able to control the pace of the auction by taking a moment between bids, especially if there are only a couple of interested buyers.
DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.