Buying at auction is all at once exciting, heart-wrenching, and utterly terrifying. After all, you could walk away with the property of your dreams, but you could also end up with nothing. Even once you buy, there is the difficult (and often confusing) process of navigating a lightning-quick settlement and performing all the necessary checks to ensure that the home of your dreams doesn’t become the stuff of nightmares.
So, is it worth buying at auction, or should you avoid it wherever possible? And if you do choose to buy at auction, how can you complete the process quickly and easily to ensure nothing goes wrong?
Being informed about the auction process is crucial if you want to minimise risk when you buy. In this blog, we’ll explain everything there is to know about buying at auction so you can score your dream property, minus the stress.
Should You Buy at Auction?
Firstly, should you even bid at auction? Well, yes – but only if you’re prepared! Bidding at an auction can involve more risk than settling privately, but particularly so if you’re not sufficiently prepared. Some people see auctions as intensely stressful situations. They might also be concerned that they’ll end up paying more than they would like for a property in all the auction-day excitement.
That said, buying at auction can mean you might face less competition for that very reason, meaning you end up paying less. Plus, if you have a great knowledge of the current market and you’re well-prepared, there is no reason that you can’t snap up a great buy. If you win at auction, you can also be confident that you paid a good price, especially if you had some competition!
Avoiding auctions like the plague means you could very easily miss out on some fantastic buying opportunities. Often some of the very best properties are listed for auction.
As with any real estate purchase, however, being informed and having detailed knowledge of the local market is crucial.
How Does Buying at Auction Work?
An auction is simply a public sale where the property is sold to the highest bidder on the day. Prior to the auction, the vendor will set a reserve price with the agent, which is the lowest bid the vendor is willing to accept. The auction will usually start slightly below the reserve, and the highest bid at or over the reserve price will win the auction. If the reserve price isn’t met, the property won’t sell that day.
Unlike a private sale, there is no cooling-off period when buying at auction. That means all your due diligence, such as property inspections, needs to be completed beforehand.
Preparing to Buy at an Auction
While you might never feel like you are ready to jump in and buy at an auction, preparation is key! It’s particularly important if you’ve never bought at an auction before. Luckily there are several ways you can research and prepare to buy:
- Get your finances sorted and have a definitive limit on what you’re prepared to pay. Ensure you have the full deposit ready, taking into consideration any additional costs. If you’re seeking finance, you’ll need pre-approval to spend to your highest limit (preferably in writing) prior to the auction day
- Conduct any property and pest inspections, but also check the property thoroughly yourself
- Have contracts and any legal documents checked by a solicitor or conveyancer, and any amendments need to be made prior to auction day
- Organise the cheque for the deposit, as you’ll need to hand this over on the day if you’re successful
Tips for Buying at Auction
- Do your research on how much similar properties are selling for. The more recent the sales are, the better
- Attend at least a few auctions in the area as a spectator to see how the process works
- Observe what these properties sell for versus the asking price
- Stick to your “walk-away” price on the day. Don’t feel pressured to go above what you can afford, or what you’re willing to pay
- Be willing to lose. Even if there doesn’t seem like a huge amount of interest in a property, at an auction, anything can happen! Be prepared to walk away if you need to. Remember, there are plenty of other properties out there!
Buying at an auction can feel extremely daunting. But if you do your research and stick to your guns you could walk away with a wonderful new property on your hands. If you need advice buying at auction, we can help; we’ve been in the game for a long time! For more information on buying property in Sydney, click here.
Or, to find out which Sydney suburb is best suited to you, contact us today.