9 tips for frustrated buyers on how to win at auction
Auctions are no longer the crowded marketplaces they once were, but you’ll still need a guide.
What you’ll learn:
- If you’re an unconditional buyer you’re in a very strong position to buy at auction.
- Unconditional buyers are also welcome to register and attend auctions.
- What to expect if you’re the only bidder in the room.
- How to communicate with the vendor agent if you’re a conditional buyer.
Gone are the days of multiple-bids in the auction room but it remains a popular method of sale as vendors seek certainty in the market. For buyers it can be disconcerting to turn up and find there are very few bidders on your chosen property. Is there something wrong with the home or is it just the market, you might ask yourself. And it can be quite a public experience if it’s just you and the auctioneer trading bids, so we have some tips for how to get comfortable in this situation.
Advice from top auctioneers, John Bowring and Aaron Davis
- Be up front and identify yourself as an unconditional buyer: Tell the agent if you’re an unconditional buyer, recommends Ray White national auctioneer, John Bowring. There may be conditional buyers prepared to pay more, but vendors in the current market are going to be a lot more tempted by an unconditional offer. “People want the surety that they can move on with their lives. The power of the unconditional offer is high,” he says. An unconditional offer with a long settlement request, is perceived as risky unless you can offer a 20% deposit, adds the auctioneer.
- Make the most of an auction with little competition: Oddly, people transact better when there’s someone bidding with them, but a lot of buyers are opting out of auctions at the moment because there’s no one else there. Some will choose not to bid at auction, and then there might be multiple conditional offers after the auction has been passed in, and you miss out. John’s advice is, if you have your chance at auction, take it then.
- What happens if the reserve price isn’t reached? If the auction is passed in, it’s worth asking what the reserve price was if the vendors will allow the auctioneer to share this. John may ask his vendors to be straight up with buyers on the reserve price. As the buyer, you may not like this number, but it starts a conversation.
- Why vendors are still wanting to do auctions: Auction is still a great method of sale, says the Ray White auctioneer. The vendor gets price feedback and the auction still creates a sense of urgency for buyers which a “by negotiation” price just doesn’t have. Valuers are finding it hard to put values on properties at the moment and the feedback during the auction marketing period can be relayed to the seller, giving them good information for setting their auction reserve price.
- Show your hand: According to Harcourts auctioneer Aaron Davis, even if you’re a conditional buyer, before the auction starts, show your hand to the vendor’s agent. Let them know your interest. His argument is, if you haven’t shown your hand, and the auction is passed in, the agent will ring everyone who’s shown interest rather than coming direct to you. If the agent knows you have a price in mind, and it’s close to the asking price, you could circumvent the competition, says Aaron.
- Don’t play games. If everyone who’s bidding has pre-approval for a $1 million home, look confident. If the bidding is at $860,000 or $870,000, don’t put your bid in at $890,000, go to $900,000, and show you mean business, says Aaron.
Ray White Remuera auction room.
Top advice from savvy real estate agents
- Don’t set your limit at a round number: Barfoot & Thompson agent Ryan Harding’s tip, that’s useful in any market, is to pick an odd number as your limit. Rather than a $1.1 million limit make it $1.15 million and do a stress test on this with a friend to see how that feels. If you can bid aggressively up to that number, you’re sending the message: “I’m here to get it, I’m not slowing down for you or the next person.”
- Do everything you can to be unconditional: In the current buyers’ market, some house hunters are going to auctions with the intention of negotiating after the auction is passed in, not bothering to do their due diligence prior. If you can get your finances in order, do your due diligence and be the only one in the room, says Ryan. It’s best to buy at auction rather than sitting back and making an offer afterwards, he recommends. It will save you money. A house which sells at auction for $1.4 million may well sell for over $1.5 million in negotiations afterwards. A vendor will look very hard at a cash unconditional offer.
- Some things don’t change: As with any auction, beforehand, you’ll need to figure out what you’re prepared to pay, and what you’d do if pushed, says Ray White royal Oak’s James Burry. What would you love to pay and what would you pay if you had to compete, what’s your game plan? It’s about taking part and being prepared, says James.
- Auctions are transparent and you get a definite answer: In a housing market where valuers are scratching their heads, auctions are wonderfully transparent for buyers, says Harcourts Grey Lynn General Manager Lauren Davies. If you know your budget, you know what the house is worth to you in price, this is your opportunity in the moment to have a conversation with the vendor through the auction. It’s a case of, will they accept your bid or won’t they? And you’ll get a quick answer.
- Cash is king but conditional buyers can participate: Unconditional buyers get the first conversation with the vendor – you can only bid in an auction if you’re an unconditional buyer – but well-prepared conditional buyers can still be part of the process if the property is passed in. Look organised about your due diligence. If your offer is conditional on a builder’s report, have your building inspector lined up so it can be done in good time, says Lauren.
- If you’re the only bidder in the room: Remember you’re there to win, not get a bargain. You’re not there to play games but to have access to a transparent vendor, says Lauren. As the bidding opens and the auctioneer bids against you, you reply with your number. You’re not here to squeeze the vendor out of $50,000 (which won’t mean anything in five or 10 years). Have the conversation, you’re not here to stall, there’s nothing to be gained. If the auction is passed in, then you have to go behind closed doors and be up against conditional buyers. When you’re on the floor you still have the power, you’re telling the vendor, that’s my number, no conditions. You only control one thing, your number and your budget and what this house means to you.
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