Top 5 Tips To Buy At An Auction

03.04.24 | Michael Brown | News

While private sales are common in many locations, auctions are also a popular method of buying and selling real estate throughout Australia. Auctions are high-stakes affairs, whether they are held at a central location or outside the property itself, with vendors staring through the Venetian blinds in tense panic. Emotions can override financial constraints when the property of your dreams is directly in front of you.

Here are five insider tips from Mortgage Broker Sydney for placing a bid at an auction, and hopefully winning!

1. Decide on a limit and don’t go over.

Once you’ve inspected a property you’re interested in buying, research past sales of comparable properties in the neighbourhood (we can help), be aware of your budget, and establish a spending cap for yourself.

If you receive pre-approval, consider if you can afford to spend up to that amount. Since many lenders offer high limits, you want to be sure you can afford the repayments. Never bid more than you have set.

Think ahead. In the heat of the auction, are you likely to push your limit by an extra $5 or $10,000 if you think you might win? Consider this before the auction, and adjust your limit then.

2. Place your maximum bid.

While this isn’t always possible, try to control the bidding rhythm so that YOU are the person that bids YOUR limit. Imagine setting an $830,000 limit, someone else bidding that exact amount, and the property sells to them! You can often control this by offering bids lower or higher than the auctioneer is asking for. Say you bid $815k. Another party bids $820k. Consider leaping straight to $830,000.

If there is another bid, the property is not for you. 

3. Be observant and proactive.

If you intend to place a bid at an auction, stand out from the crowd and make a clear, loud bid. It communicates your seriousness to the auctioneer and other bidders.

Anyone may ask the auctioneer if the property is “one the market” at any point during the auction. This indicates that the vendor’s reserve price has been met, and the property will sell, instead of being “passed in.” 

If the reserve is met, the auctioneer will eventually announce that the property will sell, however they might not do so right away. But they are required to tell you if you ask.

4. If the property is passed in to you, be ready.

If a property doesn’t meet the vendor’s reserve price, it is passed in. The person with the highest bid will be asked to negotiate with the vendor to see if you can reach an agreed price.

Typically, you will bargain with the real estate agents. It’s critical to keep in mind that the agent is NOT on your side at this point. Their goal is to sell the property for the best possible price.

This is where it’s easy to feel overwhelmed. There is a lot of pressure there. But keep in mind that you are in control and can leave at any time. For agents, getting no result at all is the only thing worse than not receiving a big fee.

As a gesture of goodwill, you can choose to give a little bit more (as long as you don’t spend above your limit). The vendor frequently needs to make a sale. Be ready to accept their reasonable offer if they make one.

5. Get someone else to bid

You can have someone else bid on your behalf if the idea of placing a bid terrifies you. Professional bidders, known as Buyer’s Advocates, can assist you in locating properties that meet your needs. 

Naturally, you can ask a friend or member of your family to bid on your behalf. One of the best ways to de-stress on auction day is to let them know your limit, stand on the other side of the crowd, and watch it all unfold.

Talk to us 

If you intend to place a bid at an auction, get in touch with Mortgage Broker Sydney as soon as possible. We offer free help getting you pre-approval on a suitable loan, guidance on past sales in the neighbourhood, a property assessment, and other auction-winning strategies.