‘For Sale’ signs are popping up all over the place, your mail box is being flooded with property brochures and a stream of prospective buyers are about to come traipsing through the neighbourhood.
That’s right: auction season has begun.
There are 688 auctions currently scheduled to take place across Australia this weekend, up from just 276 the previous weekend, according to data from CoreLogic.
If you’re considering buying a property, now is a great time to make your move as the market stabilises – and even falls in many capital cities like Sydney.
But between misleading price guides, unintelligible contracts and fast-talking auctioneers, the whole process can be overwhelming for the uninitiated.
That’s why we spoke to experienced buyer’s agent Peter Kelaher from Pk property to find out what you need to do to secure your dream home – without ending up drowning in debt or owning a financial liability.
Here are his top tips for success when buying a property at auction:
1. Come prepared.
There’s nothing worse than turning up on auction day and only then realising that you have no way of paying for the deposit should you be the winning bidder, or that your solicitor hasn’t had time to check the contract.
That means there are some steps to go through before you even start looking at properties – starting with determining how much money you’ve got to spend.
“Before you even attend the auction, it’s really important that you make sure your finances are approved and you’ve also had a solicitor look over the contract and that everything is fit and proper in that area,” Mr Kelaher said.
If your financial affairs are complicated (for example, if you’re planning on selling down shares or dipping into your superannuation) it may be worth talking to a financial advisor, Mr Kehaler advises. But for the average punter, consultants at their bank should be able to provide them with all the information they need.
Once there’s a property you’re interested in, the next thing to consider is pest and building checks.
According to Mr Kelaher, that’s one area not to cut corners on.
“You need to make sure that you’ve done your pest and building checks to ensure your building is safe in the area of not having lice, pests, roof problems, sinking foundations – and what you’ll need to fix if you do buy the property,” he advises.
“With an apartment block, you’ve usually got a strata report with its whole history so you probably won’t need to do it but with a house, you’ve always got to do it.”
These checks generally cost around $550, but could save you big time in the future value of your property – not to mention the headache of discovering after purchase that your new home is infested with terminate or leaks in the rain.
If building and pest checks get the all clear, the next step is to make sure to have a solicitor look over the seller’s contract and negotiate on any terms you’re unhappy with.
2. Don’t turn up to your first ever auction and start bidding.
“Before you start bidding, attend auctions in your area and price range – as many as you can – before you go to your auction,” Mr Kelaher said.
As well as helping to familiarise yourself with how to bid, this will also help to calm your nerves on the day.
“It also gives you an idea of what prices properties are actually selling for in your price range, so you can get a better idea of what you want to pay for the one that’s coming up for auction.”
According to Mr Kelaher, you should aim for ten auctions at a minimum.
3. Don’t give anything away.
“In other words, never tell the selling agent on the day how much you are prepared to spend, what your reserve is or give any indication what it is,” Mr Kelaher said.
“If you tell them that you’re willing to spend a million dollars, then they’ll make sure that the reserve is $1 million even if it was going to be $900,000.”
4. When it comes to bidding, exude confidence.
… even if you don’t feel it.
“You need to bid strongly,” Mr Kelaher says.
“Don’t hesitate or the other buyers will see that you’re coming to your limit and that will alert them to spend that little bit more to beat you.”
That means speaking in a loud, clear voice, delivering quickly and never hesitating over a bid.
“Even if you’re down to your last $5,000, make it look as though you’ve still got $100,000 left.”
If you don’t feel up to the task, you can always get a trusted relative or friend to bid on your behalf, but you’ll need to make sure you do the paperwork.
“A letter of authority needs to be given to the agent or auctioneer to say that you’re bidding on someone else’s behalf and if you’re the successful person at the auction you might even need a power of attorney to actually sign on their behalf,” explained Mr Kelaher.
5. Bid strategically, not early.
While some buyer’s agents advise getting in early in the bidding to establish control, Pk property’s Mr Kehaler believes that in most cases it is better to wait until the property has hit its reserve price – that is, the minimum price at which the seller will actually sell the property.
“Otherwise, you’re just bidding against thin air, because they’re not going to sell it unless it hits the reserve. So why get involved in that arena?
“Let everyone else do it, and then come in if you’ve got more money later.”
Of course, working out when a property has reached its reserve price isn’t always simple, with auctioneers using all their tricks of the trade to keep the bidding moving.
“The auctioneer will often tell you that we are selling now… he’ll threaten that he’s going to sell it when it hasn’t even hit the reserve,” Mr Kelaher said.
“He’ll pretend at the beginning and then when it gets serious that’s when he’ll really tell you.”
6. You set the price rises – not the auctioneer.
It’s your money; you determine how much you’re prepared to raise the bid, Mr Kelaher advises.
“Make sure that the bids you place are in the increments that you feel comfortable with, not what the auctioneer is instructing you to make.
“They’ll say ‘oh, another $50,000 and you say ‘no, I’m not giving you another $50,000. I’m giving you another $10,000’.
“Take control of your own money. Don’t let them instruct you.”
7. Know what your reserve is – and stick to it.
Determine how high you’re willing to bid before you attend the auction – and stick to it.
“If you feel as though other people around you are stalling and hesitating and that if you did put in another bid, you might win it, then you can,” Mr Kelaher said.
But whatever you do, don’t go over your finance-approved amount (that is, the maximum amount the bank will lend you, plus any savings you may have).
8. Check your contract – and then check it again.
“It’s really important that once you’re successful person under the hammer you really make sure that all the things that were agreed in the contract are in the vendor’s contract and your contract,” Mr Kelaher said.
“The contracts have to be exactly the same.”
For example, if you agreed to a settlement term of eight weeks for the sale, you need to ensure the same terms are put into your final contract before you sign it.
“You need to take your piece of paper that’s got everything that’s been agreed upon by both solicitors – your solicitor and the other solicitor –with you so that you can check those terms and conditions are in there.”
9. Consider using a buyer’s agent.
“For $550, to get a buyer’s agent who is experienced in this arena and bidding all the time to handle all of this for you – bid, put you in a position where you’re relaxed, and they’re taking all the pressure and using all their experience… I think that is money well spent,” Mr Kelaher said.
“There’s so many tricks in the trade. Most people are sitting at an auction every seven years; they’re sitting at an auction every seven days.”
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