The theatre of Auction
Buying in Sydney means having to go to auction on any number of properties for our clients. It’s a popular sales method in many suburbs and continues to yield solid results for those vendors who have a high-demand property in a low-supply area.
Interestingly, however, and in my experience with purchasers, not many buyers like auctions. Besides the obvious downside of having to bid in an open environment (with all eyes intently on your every move) there’s also the unknown of price. How far will the price be pushed? What are the other buyers thinking? What’s their motivation? How accurate is the price guide? What happens if the property gets passed in to me? So many questions and valid concerns and, in an highly emotionally-charged environment, it’s not surprising that buyers sometimes prefer to buy via private treaty instead. We certainly gage each and every property for clients and come up with what we believe is the preferred purchasing method. Now if we can only get vendors to always agree 🙂
Unfortunately, though, some vendors simply will not sell any other way (or their agents are advising them accordingly) and so you may find yourself front and forefront holding a bidding card one day. If that is the case, here’s my top tips for giving yourself the best chance of success. Though they may not stop a buyer with a bigger cheque than yours from buying on the day, they may be enough to instil you with more confidence, perhaps throw off a competitor or even net you a lower price. Good luck!
- Bid confidently and loudly– calling out the whole number. Don’t be put off by the competition throwing up their card agreeing to those $50K bids the auctioneer is “suggesting” It’s your money so spend it in increments you’re happy with
- Stand to the side of the crowd and auctioneer if possible. This provides you with the best vantage point to see all of your competition and they can see you (and your confidence!)
- Write your limit down prior and stick to it. I’ve seen so many bidders reach their limit and then look at their partner/frantically whisper/change their body language tellingly. Make sure that your limit includes a little “hurt money” and any amount over this is either definitely over your budget (or upper appraisal limit) or is making you feel ill just thinking about it.
- Don’t make your final limit a round number. In other words, if you’re thinking $900K maximum add another 3,7 or 9 to this. Over the life of the loan, it’s unlikely to make much difference and may just score you the property. Obviously the final amount stretched will be dependent on your funds but don’t end on a 0 or 5.
- Make sure you have first bidding rights should the property not sell. Even if you are the only bidder at an amount less than what the auctioneer will accept (and keep in mind they have the right to reject bids if they are below the reserve or not in the vendor’s interests) the selling agent should extend the right to you to first negotiate should the property get passed in.
- Be prepared and role-play for a “passed in” event. Again, so many buyers concentrate on bidding techniques and then fall apart if the property gets passed in- suddenly they find themselves across the table from 3-4 selling agents applying immense pressure. If you think this could happen, then role-play the scenario with your partner/friend beforehand and be prepared, with research, to justify your lower price position.
- Be realistic. Ultimately do your research on price (sometimes taking the price guide with a grain of salt) and understand the market you’re buying in. If your price is nowhere near realistic you may just end up spending thousands of dollars on wasted campaigns and never end up buying a property.
Whilst bidding at auction can be scary for some buyers, treat it like the theatre that it is and prepare accordingly. You may just be surprised at how well you perform!