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Understanding Auctions - Preparing to Bid

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understanding price guides for property auctions

Spring has sprung and with it is comes the traditional peak selling season for the property market. While a slight downturn in the market over the past few months might cause disappointment for sellers, for buyers it is a welcome relief after the property market reached what appears to have been its peak last year. 

A softer market may call for more auctions, as sellers drop expectations to meet the market. Traditionally property sales are fewer over the colder months, so market specialists are predicting sales over Spring will give a good indication of where the market will be headed over the next 12 months or more. Will prices drop further? There are still plenty of buyers around, so only time will tell.

Our previous blog post looked at how to decipher and understand auction price guides (you can find it here). Today we’ll investigate the actual auction process itself. Once you’ve found a place you want to bid on you’ll need to get yourself organised in plenty of time before auction day.  Here's how: 

  • Firstly you should already have pre-approval in place before even thinking about bidding. The staff at Endeavour Mutual Bank have a quick and easy pre-approval process to get you auction ready. Find out more here.
  • Some Vendors (sellers) will provide free of charge a building and pest inspection report for buyers. Often times though this is something you need to pay for and arrange yourself.
  • You should have also engaged a conveyancing lawyer before the auction to read over the contract of sale prior to auction as well as to look over the building and pest reports too.  
  • Provided your lawyer doesn’t identify any red flags in either the contract of sale or pest and building reports, and all or most of your own property wishlist boxes are ticked, it’s time to prepare for bidding come auction day.
  • Some parties like to make an offer prior to auction, but an offer will usually have to be at least a week or more before an auction date and north of the price guide to be taken seriously. Otherwise, wait until auction day to make your offer.
  • In order to bid at an auction you need to register. It’s a relatively easy process and only takes a couple of minutes prior to the auction taking place. You’ll need to arrive at least 15 to 20 minutes before the auction time to register and bring along proof of identification such as a license or passport. You’ll also need to provide your contact details. Once registration is complete you receive a card with a number recorded on it. This is what you use to hold up (high enough for the auctioneer to see) should you decide to bid.
  • If you can’t be present at an auction or if you’re concerned nerves might get in the way, it is possible to nominate someone on your behalf to bid for you. They will have to register on your behalf and you need to give them authorisation to do this by completing some paperwork prior to the auction.
  • Auctions can move quickly and if you’re emotionally invested in a property it can be easy to get carried away when bidding. Keep your cool as best you can and don’t bid over what you can afford.
  • The end price will be determined by the reserve price and by the popularity of the property and number of parties bidding. The reserve is the minimum price the Vendors are prepared to sell their property for and this figure is not disclosed to the public. In NSW auctioneers are allowed to make one bid on behalf of the vendor, but this can’t be disclosed by the auctioneer. It is different to the reserve price, and may be used to either start bidding or to increase the bids closer to what the Vendors will accept.
  • If a property doesn’t reach the reserve price it is ‘passed in’. Often times this will mean the highest bidder will be given the opportunity to negotiate with the vendor at the reserve price, but this isn’t always the case. If you are the highest bidder at auction and the reserve price is achieved it means you have legally purchased the property. The contract will need to be signed on the spot as will the agree deposit amount (usually 10% of the sale price).

To find out more about preparing yourself for purchasing property contact us or explore our easy to follow Home Buyers Guide for some more handy hints and tips.    

Alison Gallagher is a freelance writer, resourcefulness expert and entrepreneur. She has been featured in various publications including Stellar Magazine, Australian Health and Fitness Magazine, and Cleo Magazine. Alison is particularly passionate about sharing practical tips on how to live simply, sustainably and seasonally.