One of the first tips I can give is that you should not go to an auction with the mindset that you’re going to steal the property. Whenever you see an auction sign with the words ‘mortgagee in possession’ (which I think you’ll see more of) or, deceased estate, there’s a tendency to believe that the property needs to be sold and therefore a bargain can be had. So many buyers have turned up at an auction hoping to steal a property and the opening bid comes in higher than the buyer’s highest price and they’re knocked out before they even start!
You should always go to an auction fully prepared, ready to sign on the dotted line and prepared to pay no more than what you can afford or have been qualified to purchase at. This is a big rookie mistake.
I do remember some of the real estate agents clever and not-so-clever headlines over the years. My favourite was ‘deceased estate owner said sell’! The agent must have been standing by the bedside at the time! Then the not-so-clever one ‘diseased estate’! In any case, the best tips I can give you start here with the real estate agent and the auctioneer, when it comes time to getting the best opportunity to buy a property.
The information gathered well before the auction is the key to giving yourself the best opportunity to end up with the property on offer. And the homework you do will get you closer to understanding the auction process and ‘working with’ the agent on how the auctioneer will ‘run’ the auction.
Step 1. So, let us start with what you can do well before the auction.
- As always build your relationship with the agent. Let them know you are interested but without giving away too much. Keep in touch regularly on a personal basis and not by text or email but where possible in person.
- Find out from the agent, the seller’s motivation for selling – this will tell you a great deal about the seller’s needs and will help you to potentially make an offer before the auction that suits the seller’s position.
- Ask the agent if the seller will take an offer before the auction.
- Ask the agent what the price guide might be.
Not every agent will be forthcoming with information as they must protect their seller’s position, however, if you don’t ask, you may not get the insight you need to ‘position’ yourself at the auction. You may also create the opportunity to make an offer before the auction with more knowledge at your fingertips and with a better relationship between you and the agent.
Step 2. The auctioneer may be the key.
- Find out who the auctioneer will be on the day.
- Attend as many auctions conducted by this auctioneer to help determine the auctioneers ‘style’ of auctioneering. You will learn a great deal about how you should behave on the day.
- Introduce yourself to the auctioneer at these auctions and let them know you will look forward to seeing them at the property you are interested in – relationship building.
Step 3. On the day of the auction
- Ask if the auctioneer will be calling the property ‘on the market’. Hopefully, you will have witnessed this when attending other auctions conducted by the auctioneer, but if not, ask any way. This is a term many auctioneers use when they have reached the reserve price and will give you a real indication as to the auctioneer’s position.
- When bidding, bid late and bid high! Do not expect an under bidder to stop bidding if you are bidding small amounts.
- When bidding, don’t stop at odd amounts. For example, if one of what appears to be the final bids ends in $827,000 do not bid $828,000 – go straight to $830,000. If you go up by $1,000, the other party will go to $830,000! Be the bidder who ends up on the round number.
Buying at auction is nerve wracking even for me as an auctioneer, however following the above processes may give you a better opportunity to get the desired result.