A guide to Auctions for First Home Owners
Auctions frighten a lot of people especially those buying first homes. They worry about the pressure of the day but if you take the time to get prepared then property auctions can be a wonderful way of securing your dream home.
Get stuck in to some research
First home buyers should inspect as many properties as possible in the local area as research to get an idea of fair market value. Just visiting five properties isn’t sufficient to give you a good understanding, visit as many as you can to get the full picture. Buyers can also check published sales results in newspapers and buy sales data reports from companies like Home Price Guide or Residex. 
Decide on a price limit
Decide on a price limit and do no exceed that limit. Some people may ask others to bid on their behalf so as to avoid making hasty, emotional decisions. Make sure however that the purchaser name given to the auctioneer is the name which will go on the contract as this cannot be changed unless you stipulate 'and/or nominee' on the contract.
Fortify your Finances
Applying for pre-approval is a must if you want to bid at auction. Finance should always be organised before auction day as bidders will need to access deposit funds or a deposit bond paid by bank cheque or personal cheque on the day. You must arrange for finance before the auction or run the risk of costly delays or mistakes. Knowing you have pre-approval will also allow you to know how much a lender is willing to lend you.
Get a Pro to check the Property
It is a good idea to get a solicitor or conveyancer to look at a contract on your behalf.
Obtain all the relevant documentation from the agent selling the property prior to the auction. The contract needs to be checked to ensure settlement dates, inclusions (curtains, light fittings, clothes lines etc) and terms are agreeable to you. Organise for a building and pest inspector to carry out pre-purchase checks.
Tactics on the Day
Now you are prepared, you can tackle auction day. The key to keeping the bidding at auction in control is working out how many other bidders will be there on auction day, competing to push up the price to make the house theirs. This can prove harder than you may think, as no matter how many bidders the agent says are coming, how many actually turn up on the day is another story. Try to show little interest and don’t let the selling agent or auctioneer know when you have reached your bidding limit. Staying as unemotional as possible puts you in control.
Other tactics include:
- Holding bids: don’t bid until the auctioneer announces the property is on the market, which means reserve has been reached
- You could try breakaway bidding. Basically, you wait until bidding has slowed right down to $1000 increments and go in hard with a $10,000 or $20,000 bid to intimidate other bidders.
- Bluff bidding: bid small amounts early in the auction, then wait for other bidders to reach their limit before re-entering the auction with a strong bid.
Remember, you cannot stipulate any conditions on the purchase of the property, for example:
• Buying the property subject to a building inspection.
• Buying the property subject to the sale of your own property.
• Buying the property subject to arranging finance.
You must arrange all of the above aspects before the auction, or bear the risk of your bid being successful and these aspects not already being finalized by you. This is because the contract conditions are generally set at the time of auction.
Signing the Contract
If your bid is successful, you will sign the contract immediately after the auction. Once the vendor also signs this contract, a binding contract will exist and both you and the vendor will become bound by the terms and conditions of the contract. During the signing you may not be given the opportunity to formally review the terms and conditions, this may have to wait until the settlement date.
Reserve Price
The auctioneer states that "the property is on the market" once the reserve price is met, and this is when the serious bidding starts, assuming there are genuine bidders at the auction. If the final bid falls short of the reserve price, the property may be passed in. The highest bidder may then enter into negotiations with the agent, if you speak with them following the auction. An alternative outcome is that the vendor may agree to sell at this lower price, at which time the property is said to be 'on the market' and the auctioneer may attempt to extract more bids prior to making the sale.
You may have the opportunity to make an offer on a property before the auction date. The agent will advise you of the price the property is expected to reach at auction, but understand that the agent may lower the reserve figure somewhat in an effort to get you to attend the auction.
Are you ready?
There are numerous benefits to buying a property at auction but there can be pitfalls too. If you are ready to buy your first home and keen to move as soon as possible, then the best approach is to seek professional advice from an independent mortgage broker who can assist you with your search. To find a mortgage broker in your area call  …..
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