Pre-Auction Tips: 8 Things To Do BEFORE Auction Day

pre-auction tips

Property auctions can be a great place to acquire your next home – if you know what you’re doing.

There are many things you must know and understand before diving into this high-stakes/high-stress process.

Here are some of my best tips. You’ll find one that’s is often overlooked — but not by you — after you read this.

1. Check Your Financial Capacity

pre-auction financial assessment

This pre-auction tip involves going to your wealth manager and checking your financial capacity. It’s critical to know you actually have the money to buy that property before you even contemplate bidding for it.

If you need to apply for a mortgage to buy a property, it’s good you discuss your indicative borrowing capacity with a property finance consultant before auction day.

Lenders use higher interest rates when checking your borrowing capacity to stress test your ability to make repayments if the interest rates move upward. You will need written approval and deposit (around 10% of the purchase price) on the day of the auction.

2. Vet the Sale Contract

vet the home purchase contract prior to auction

At the back-end of the shiny, new property being sold at auctions are legal issues. You want to sort these out before you go to the auction.

Prior to any property auction, you must get a copy of the contract and show it to your lawyer for review.

Your conveyancer can explain to you any possible risks that comes with buying the property you’re eyeing, and at the same time, give advice on how you can be protected from them.

He or she can also point out some bargaining chips you can use during the auction, from a legal standpoint, like longer settlement periods, reduced deposits and/or additional terms and conditions.

3. Make Sure You Have a Professional Building Report

An auction sale is legally binding. Therefore you must know about any potential issues with the home before the auction starts.

Too many people rely on their gut feel, which is incredibly dangerous. No matter how shiny or new the home seems, make sure you know what you are buying.

Unless you are a builder yourself, get a professional building report done for you. Without it you are buying half blindly or worse.

4. Check More Than Just The House Condition

check the neighbourhood before a home auction

This is one of my favourite pre-auction tips, and often overlooked.

Prior to any auction, there is usually an open house where potential buyers can check out the property they are eyeing. All good.

However you should not stop there. If you’re thinking of buying an investment home at the next auction, don’t just check the home itself – stake out the neighbourhood as well.

Walk by at different times of the day. Gauge the noise levels, the light conditions and traffic volume. Real estate agents will always try and have the open homes at the best times of the day with the most light and quiet ambience. View the home at other times.

If you can, make an appointment to see the home at a different time of day. You may be surprised.

5. Register to Bid with Proper ID

Prior to the auction, you have to register with the selling agent and be given a bidder’s number. You can do this when you inspect the property, or on the day itself.

You need to provide an ID, a card or document issued by government or a financial institution showing your name and address, such as your driver’s licence or learner’s permit, vehicle registration paper or council rates notice.

Do not forget this on auction day!

6. Visit Auctions

Bidding is a skill that you can hone by attending property auctions. This specialised skill is what buyers’ agents have.

Don’t let the property auction for your dream home be the very first one you attend. Go and see 10, 20, or 30 auctions, and interact with real estate agents, buyers agents, and auctioneers.

You will pick up the language they use and even learn strategies that you can use by the time you bid on a property.

By experiencing what it’s like being in an auction room and seeing how property auctions play out, you will gain the confidence needed in successfully buying property at an auction.

7. Have a Bidding Limit and Stick To It!

winning auction strategy

The final crucial pre-auction tip is to prepare your bidding strategy before auction day.

Set a bidding limit so you don’t go overboard and become an emotional bidder. The history of auctions is littered with people who literally bid their families into financial ruin, because emotion got the better of them.

Most importantly, your limit must never exceed your borrowing capacity.

However, do not set it too low, hoping for that bargain. This just sets you up for regret when someone else snaps up your dream home at a price you could have afforded. There is nothing wrong with bidding at your borrowing limit if you love that home.

8. Take the Emotion Out Of The Auction Process

buyers agent for auction bidding in Sydney

If you are not a seasoned, confident bidder, I do recommend appointing a buyers agent to bid on your behalf.

It’s a strange thing that happens when you buy a home for yourself. It is very hard to not become emotionally attached. Again, I have seen this too many times. So keep yourself safe. Take the emotions and stress out and let a professional keep a cool head, use all their experience and bid on your behalf.

Your buyers agent will need a letter of authority to do this, which must be provided to the auctioneer before the auction starts.

It’s a wrap!

Each pre-auction tip listed here should help you create a more successful property auction experience for you. Knowledge is power – and so is being prepared! It’s always good to come prepared and equipped with a plan, rather than getting embroiled into a crazy bidding war.

If you are thinking of buying a property in Sydney’s eastern suburbs, give me a call and I’ll find ways to help you through the process.

Let’s get that dream property at a dream price!