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Going Once, Going Twice…

The tips and tricks you need to know to buy and sell at auction

The thought of attending —or worse, participating in— an auction can be enough to send your head into a spin. Auctions can be incredibly emotional and stressful, so if you find yourself heading to auction it’s important to know how to approach an auction and make it work for you.

The residential auction market has been steadily climbing. Despite the constant threat of lockdowns and Covid-19-induced economic uncertainty, the number of vendors taking their properties to auction is high, with a combined clearance rate across the capital cities at 71.7%. If you’re in the property game, you need to understand the ins and outs of auctions.

Image Source: Domain

Pros and cons of selling at auction

Understanding why a certain property is being sold at auction in the first place gives you a clearer perspective come game day. Many sellers opt for an auction sale because of the flexibility to decide the terms and conditions of the sale. The seller can determine the reserve minimum price to be met, and in the event that the property doesn’t sell, they have the potential to continue negotiations after auction day. An auction contract is unconditional, it won’t be affected by finance approval, and it offers the opportunity for bidding wars to generate a higher sale.

However, auctions can be unpredictable; they don’t always end in a sale and the house is sometimes ‘passed in’. The success of the auction is dependent on how many bidders register and how high they choose to go — which is completely out of the vendors hands. The auction itself has fees in addition to normal marketing and agent fees, and there’s no guarantee the property will sell for any more than it would by private sale.

Should you submit an offer prior to sale?

Across Australia’s capital cities, almost one-third of all properties scheduled for auction are sold before their auction date. This might make you wonder: should you be putting in an offer before a property goes to auction? There are good arguments to be made for each, but Bobby Haeri, DIYBA founder, is hesitant about submitting an early offer. With available properties currently so scarce, potential buyers are going in with more assertive offers. Agents have the opportunity to give other buyers a chance to submit a higher offer prior to auction, which can lead to a private bidding war. Public auctions are beneficial to buyers because of their transparency — you only need to bid incrementally and can avoid paying more than you needed to.

Arrive with a strategy on auction day

When it comes to the actual bidding on the day, Bobby has a strategy: “I usually allow people to fight it out at the beginning. When they are going up by $5,000 or when the auctioneer has finished his second call and clarified that the property has met reserve, I then get involved in the bidding process”.

Bid like a pro

  • Avoid the ‘win at all costs’ mindset. Understand the value of the property (and its value to you) and set clear boundaries so that you don’t exceed your maximum price.
  • Have a bidding strategy in place. Consider recent comparable sales, different bidding styles, and even the individual auctioneer — show the world that you know what you’re doing and that you intend to buy.
  • Be decisive and persistent. If you find yourself in a bidding war, don’t back down. Control your pace, avoid hesitation and counterbid consistently.
  • Keep your eye on the box seat. If the property passes in, make sure you’re the highest bidder. This puts you in the best position to deal exclusively with the vendor at their reserve price.

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