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understanding price guides for property auctions

One of the most popular ways to sell property in popular areas, often yielding excellent results for Vendors, auctions can be a bit of a headache and even heartache for buyers. After weeks or even months of inspections, analysing suburbs (and even testing out the local cafes) having your dreams shattered on auction day by someone with more money is an outcome almost every buyer will face at least once. 

But auctions are here to stay, so if you’re looking at making a property purchase in the near future, it’s good to understand the ins and outs of this sales method. Over the next few weeks we’ll be exploring some of the various factors to consider when buying at auction in a bid (pun intended) to shed the light on the whole auction process.  Today we’ll discuss price guides. 

What is a Price Guide? 

A price guide is exactly what it says it is, an estimation of price, based on recent sales of comparable properties. Sometimes it’s a set figure or a guide which gives a price range of about 10% (for example $600,000-$650,000). It’s very handy to have access to price guides when doing your initial searches, particularly when trawling through the hundreds of properties on websites such as domain.com.au or realestate.com.au to see what you can likely afford. However when you start to filter through and isolate the handful of properties you want to inspect and investigate further then it can be handy to do your own research to determine a property’s realistic sale price.

Price guides can be (sometimes intentionally) way off causing disappointment to potential buyers not to mention wasted expenses such as getting building and pest inspections done and employing a lawyer to look over the contract. A practise known as ‘underquoting’ has been known to occur within the industry where real estate agents deliberately quote lower than the estimated property price in a bid to gain more interest. More buyers means more competition, and in theory a higher end price. A busy open house will also help with consumer confidence during quiet sale periods.

Of course don’t always assume you are being underquoted, but do be prepared for the property to go for a price toward the higher end or above the guide. To avoid disappointment on auction day there are a few things you can do.

It's easy to feel downhearted if you are outbid on what you thought was the perfect place.  Chances are it wasn't the right property for you and it's still out there waiting for you.  

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.