Auction sales are legally binding, so it’s essential to understand the entire process and approach it with seriousness.
Raising your paddle to make a bid is an express acceptance of the terms of the contract — which should be on display ahead of the action — and a forfeiture of the right to further negotiate terms, says the Victoria consumer regulator.
Being prepared will help ensure yours could be the last paddle raised.
Key terms for first-time buyers
Haven’t done this before? Make sure you know a few key words:
Reserve price — This is the lowest amount for which the vendor will sell the property.
On the market — When bidding approaches the reserve price, the auctioneer will consult with the seller to ensure they’re prepared to sell at the highest bid. Upon agreement, the auctioneer will announce that the property is on the market.
Passed in — This term means the property has been withdrawn from auction. The property is passed in when bids do not meet the reserve price. At this point, the highest bidder is invited to negotiate with the seller. If an agreement between these two parties cannot be reached, the seller may approach any other bidder.
Buyers must pay the deposit should they win the auction. Deposits are generally 10 per cent, although a different amount can be arranged (in writing) prior to the sale. So your preparations should include speaking to the real estate agent to make sure your method of payment will be acceptable. Bank cheques and e-deposits are usually sufficient.
Buyers will be required to register they are allowed to bed. Registration will include providing an official form of identification. Upon completion of registration, buyers will be given a numbered paddle. The paddle must be raised to signify a bid.
If you’re truly committed to a property, consider paying for a building inspection ahead of the auction. This gives you the chance to understand any possible issues with the home and factor costs of possible renovations into your purchase.
Finally, anticipate emotions to run high on the day of the auction. Plan not to overbid during a heated auction. After all — this sale is final. Write down your upper limit and carry the paper with you to the auction, suggests a Melbourne economics professor, via ABC News.
Employ some bidding psychology
Most auction strategists agree you’ll want to confidently establish yourself as a serious bidder. There are many actors in this play: the real estate agent, the auctioneer, the seller and other bidders. Each will play a role, so it’s essential to contemplate how you’ll interact and — let’s be honest — be influenced by all the actors involved.
Consider dressing as you would for business and standing in the front row of bidders. Arrive early and maybe bring a notebook. Greet the real estate agent. This all clearly establishes you as a committed bidder.
Bid with confidence to save money
Consider offering the opening bid for the same reason, suggests leading Sydney real estate auctioneer Clarence White. The conundrum of offering the opening bid, of course, begs the question: how high should you bid?
White says most bids begin about 5% below the advertised price.
Starting on the high side might make less serious bidders at the auction think twice before getting involved. Setting the competition back on its feet can be in your favor. Starting on the lower side also offers some advantages. White suggests that offering a lower bid will encourage more bidders to speak up and tip their hands. You’ll gain an understanding of how many bidders are interested and at what level.
Regardless, make sure you keep bidding in regular solid increments. Your persistence can eventually make other buyers believe they’ll never bid you. Once they have that belief, they’ll be more likely to stop bidding up the price, White said.
Want to know more about how this works? Our team can help with any and all aspects of your next real estate transaction, so do reach out.