Auctions offer a degree of uncertainty, and perhaps their greatest draw is for investors who are looking for an unexpected bargain. This can make it difficult for first-time buyers. It can be difficult for first-time buyers to keep up with the rest of the market without spending too much.
Sellers who go to auction often do so for a good reason – their property has something unique about it making it easy for buyers to get caught up emotionally and bid above their ceiling price when there is enough competition. But bargains are also possible.
Even for the most seasoned investor, it can be difficult to purchase property at auction when there is so much interest. You might wonder if there is something more if you’ve ever lost an auction bid to purchase a popular property.
While successful strategies won’t guarantee winning bids everywhere, they can help you gain an edge over other buyers. Experts share their top tips on how to buy the right investment property in an aggressive marketplace.
1. Dress to impress
Experts say that appearance can play a major role in your ability to gain an early advantage.
At a past auction in Sydney’s historic The Rocks held by Auction Works, about 40 people attended the sale of three properties for mortgagee sales. All three properties were sold at the auction.
A happy couple and their young children were the bidders. A young, thin man wearing jeans and a beard, with nervous eyes and nervous eyes, was another bidder. A businessman wearing a suit and jotting down notes on a pad.
The last of these three seemed most professional and intimidating.
Frank Valentic, a buyer’s agent and director at Advantage Property Consulting, says dressing up can make people stop bidding.
2. Be noticed
If you’re sharp and presentable, people will notice you. Valentic recommends that everyone should see your face.
He suggests that you park your high-end car in front of the property if there is an auction. Stand right next to the car. This will produce the same effect as well-dressed. It will enable you to mentally prepare your opponent.
Valentic recommends that you sit in the front for a clear view and a better view of your competition. It might be worthwhile to stand at the back if you have many chairs in a large area.
Valentic suggests that you sit in front to see the competition.
It may be worth standing in the back of a space with many chairs if it is large.
Pino Tedesco is a former buyer’s agent and CEO at LVT Capital. He suggests that you submit your bids confidently.
He stated, “To novices I sound confident and it tells ’em that I may pursue it (with more bids).
This contrasts with the Sydney auction above, where some bidders said to the auctioneer, meekly, “that’s my last bid” or “no more.”
It is also a good idea that you clearly spell out the total amount of your offer. Don’t just write $520.
Tedesco states, “That causes others to say, ‘Wait, that’s a lot,'”
3. Don’t reveal too many cards to soon
Before you attend an auction, keep your bidding limit secret. Don’t reveal this information to any agent selling the property. This information is not only dangerous.
Tedesco suggests that you not reveal your cards before an auction. “As soon as the agent is aware, they can play the entire room, or any venue.”
But it’s a good idea for the agent to be contacted in advance. Valentic recommends that you ask the agent how many requests for section 32 or building permits have been made. If there’s been about six or seven, expect to be up against about half that number at the auction, he says.
Sometimes, bargaining with an auctioneer can result in high-priced bidding.
At the Sydney auction, a man offered $370,000 for a one bedroom apartment in Sydney’s CBD. After counting to 2, the auctioneer admitted that the reserve price had not been met.
After several unsuccessful attempts to obtain more bids, the agent offered to increase his bid to $380,000. An assistant asked the man to increase his bid to $380,000 after he accepted the agent’s offer. Another bidder called and offered $385,000. A third bidder called back and offered $385,000. The man responded by asking for a $386,000. Tedesco stated that while the property was ultimately won at the highest possible price, it is sometimes better to let an owner sell it. This will make it possible to negotiate with only one bidder.
Tedesco says, “I would have not placed another bid. It would be accepted.”
“Especially if it’s the last bidder. Then I negotiate one-on-1. So I am in more control.
If the property isn’t what the bidder desires, this strategy could prove to be risky. Negotiations don’t always come out fruitful.
Tedesco said, “Without hindsight, who knows what would have happened had it not?”
Valentic suggests that you can ask the auctioneer several times if the reserve price has not been reached. You cannot play for keeps if the reserve price is not reached.
Valentic states, “If the auctioneer asks you continuously if the reserve is not met and that your bidding will be stopped until property goes on the market,” this could make it difficult for the vendor to lower its reserve price. As soon as the property is put on the market, you’ll be playing for your own life until the next bid is made.
4. Time your bid
Many auctions have bidders lurking behind the scenes. They will however appear right before the auction ends to steal the property.
Yet such a strategy doesn’t always work. There is a risk that the auctioneer might close the sale too fast and make it impossible to get your last offer.
David Scholes, an auction platform SoldOnline, says it’s possible to bid in advance at an auction.
Scholes says that most people believe it’s wrong not to bid until the end.
It’s a big risk. If the auctioneer closes a sale before bidders have the opportunity to bid, the auctioneer can’t reopen it.
It doesn’t mean you will always be ahead, even if you are late.
Tedesco says that not everyone believes late bidding is good. One buyer agent has succeeded using this strategy, he says.
“She will not speak until she believes this is her last chance.”
You will always be the last person to bid, even if you are the winner. This gives you the right of negotiation after the auction.
You can take your time and allow for some breathing room.
He says that it is almost offensive for buyers to put in bids that are only half the value of the property. “It’s ridiculous. As an opening offer, I recommend taking 5%-10% off your final price.
5. Ask for help from a third-party
If you’re worried you’ll become too emotionally attached to a property, sometimes its best to send a representative in your place. You could, for example, send a trusted friend/family member. You could also hire a buyer’s agent.
You have two options: you can either get out of the way or avoid bidding too high.
Tedesco states, “As buyer’s agent I don’t get emotional.”
Auctions have a cost. When they decide how much help they want, it is important to consider this.
Valentic explains, “A buyer’s representative is someone who has a lot of experience in taking away emotion and stress from an auction.”
“They are an independent third party that ensures you don’t get carried away.”
Sometimes investors believe they can do it all themselves. Valentic advises investors to keep their heads down, do lots research, and have a cool mindset.
“Remain flexible. He said, “But don’t let emotions control your head.”
6. Learn more about the market
Different markets can bring about very different competition. The auction clearance rates can help you determine your competition.
Tedesco stated, “I would be very cautious buying at auctions offering clearance rates such as this.”
When negotiating with owners, be especially careful
Tedesco stated, “I have witnessed lot owners really go above their heads.” “That’s why we have the auction. These auctioneers want to get emotions involved.”
Because the properties are often unique it is easier to get attached.
Tedesco says that they can look great outside of an auction but that inside, people can become very silly.”
7. Arrange pre-approval
Before you go to auction, it is important that you get a preapproval letter for your loan. Many buyers fail to contact their lender once they have purchased the property. Then, they find out they haven’t been approved for the amount requested.
Pre-approval will make you feel more confident when it comes to auction day. If you have your finances in order, you will be able bid up to a certain limit. This will prevent you from spending too much on a property.
8. Understanding the auction process
It’s a great way for you to prepare for an auction. You can also attend as many as possible as a spectator. Watching other bidders can give you strategy tips and help you understand how an auction works.
It is crucial to understand auction terminology. What is a reserve bidding? Knowing more about property auctions will make you feel more at ease.
9. Talk to a lawyer
Before you make a bid at an auction, consult your solicitor. Your solicitor will be able discuss the contract of sale and all your legal obligations with you. They can help you contact the vendor if you need to amend the contract.
10. Pest and building inspections
It is important to get pest and building inspections before you submit a bid for any property. You can move to another property if you find problems or add the problem to your contract.
Keep your limits in check
Overspending on auctions is a common issue for home buyers. Home buyers often have a problem with overspending at auctions. If you have a tight budget, this could be a serious problem.
Organising pre-approval is one way to make sure you don’t go over your limit, but it’s also a good idea to have a trusted family member, friend or a buyers agent who knows your limit attend, so they can help you keep your emotions out of your decision.