5 min read | 16 Jun 2022
The secret to buying property at auction sits somewhere between sticking to your budget, getting a good night’s sleep, and being prepared for anything the vendor, agent and auctioneer throws your way. It doesn’t matter if you’ve never bought property at auction before, it’s all in the planning – including, if you’re really keen, a few dress rehearsals.
The process varies slightly from state to state, but in the main:
You’re led by an auctioneer as you bid against people just as in love with the property as you are. The highest bidder wins and exchanges contracts with the vendor (seller) on auction day. There’s no cooling-off period if you change your mind.
Offers are passed from you to the agent, to the seller, and back again. Settlement periods could be around 30, 60, or 90 days, and there is a cooling-off period if you change your mind.
You might have read about people buying at auction on a whim, but that’s the exception rather than the rule. The more prepared you can be beforehand, the more likely it is that you can stick to the plan (and even walk away with a bargain).
Know your borrowing power. Because you exchange contracts on auction day, you must have your deposit organised and feel sure that you can get a loan for the full purchase price required.
Research the property. Because you have no cooling off period at auction, it’s important to have all the info up front on the property’s pros and cons.
Talk to the neighbours. They could provide intel on why the vendor is selling, plus you can get a vibe on who’s who in the neighbourhood
Get a property report. This will fill you in on the property’s sales and rental history, neighbourhood details and values, and the property’s estimated value - you want to make sure that the agent isn’t under quoting or over quoting the property price. Download a free property report.
Order a pest and building inspection. These will cost you upwards of $300, but knowing what lies beneath can really help you decide either way
Test run a few auctions. Whether doing your own bidding or otherwise – family, mates, hired experts – go to as many of these things you can. Watch where the crowd stands. Some bidders prefer the front so they can clearly see the auctioneer (and vice versa), others prefer to hang back to keep an eye on the competition. Both have their merits.
Reserve price - The minimum price the seller is prepared to sell the property for. It’s a bit of a safety net for the seller.
Vendor bid - A bid placed by the property’s seller or owner, usually to get the auction started. Vendor bid rules are different in each state, so it’s best to do some reading for the state you're bidding in beforehand.
On the market - A salesy way to say that bids have gone above the reserve price
Passed in - When the reserve price isn’t met, and it’s not sold to the highest bidder. Usually the highest bidder gets first dibs at negotiating a sale with the seller.
Fall of the hammer – Signals the auction’s end, meaning no more bids can be made and the highest bidder wins
Write the maximum price you’re prepared to pay on a piece of paper and keep it close.
Put your game face on. Wear what makes you feel comfortable. Body language helps you show agents that you aren’t to be messed with and the competition that you mean business.
Pre-register to bid when you get there (that’s if you haven’t already). You might be given a paddle to bid with, or not.
The vendor may place the first bid, or someone else may kick things off.
(There’s no need for you to open the bidding, as you might be the only one doing so and be bidding against yourself. Leave it until the property is ‘on the market’ – see Jargon, above).
Read the room. Ignore the agents. Check your piece of paper.
Go at your own pace, rather than bidding at the increments the auctioneer asks for. A bigger bid can scare off the competition, though you may bid higher than you need to. (If the bidding slows down, and you’re the highest bidder, you many get exclusive negotiation rights if the property is passed in – see Jargon above.)
The fall of the hammer will commence – going once…going twice – and if you’re the highest bidder, it’s yours. Contracts will be exchanged.
Love the house and love a competition? You need to rein yourself in before you get carried away and buy the house for more than you’re comfortable with. Some people use agents for this very reason. Others take a trusted person who will pull them back from the brink before they go and spend much more than they planned for.
You must exchange contracts and pay deposit on the day, (unless you’ve agreed otherwise with the vendor before the auction). If you get cold feet or can’t afford the property, you could default on the contract. It’s serious business.
With potentially less competition at auction than a private sale, you may well land a bargain. It does takes some planning and a loan that won’t break the bank. Start with Athena’s personalised borrowing power calculator, for a quick quote.