Six Tips For Preparing To Bid At Auction

Understanding how to handle the pressure of auctions is an essential skill in your home-buying arsenal of knowledge and experience.

While not every market favours auctions, many of the most prestigious properties go under the hammer in the expectation that buyer competition and the pressure of the moment will drive up the price. Nationally, at least a third of homes on the market go under the hammer.

Auction outcomes have a tremendous impact on how we see the market. For any buyer researching diligently, auction results and the percentage of sold properties – called the clearance rate – is an excellent indicator of market mood.

Generally, agents will say a clearance rate of over 70% indicates a healthy market. 

Even when positive results fall below that threshold, that's not the entire story. There's always a large number of properties that will sell within the 72 hours of the auction as agents start negotiations with the most enthusiastic bidders.

If you're going to attend an auction, you need to be on your game.

It's an unforgiving process. If you bid and win, there's no room for second thoughts. You are legally obliged to transact – no excuses.

So, here are some tips for how to prepare for an auction.

Homework: Ensure you have undertaken due diligence on a property before you bid. It's a bad idea to turn up on the spur of the moment and bid. You should have a good knowledge of the quality of the structure and whether it ticks the boxes in terms of location.

Finances: Have a pre-approved loan before raising your hand to bid. As we said, if you win the property you're legally obliged to complete the transaction. Without the finance already organised, you might find yourself in a sticky spot.

Small Print: Review the contract, and building or strata report before even thinking of bidding. If you ignore the paperwork, you could be getting yourself into a situation that is unacceptable but for which you have no recourse.

Focus: Avoid being swept up in the moment. You should never go beyond your budget. When the auctioneer pressures bidders to go higher, you need the confidence to say “no” and stay within your spending limits.

Cash: A deposit of up to 10% is required once the hammer falls in your favour. You should always ask the agent for a deadline for this payment. You may be asked to put down a holding deposit via a cheque and direct transfer immediately, pending the full deposit.

Offer: There's no harm in making an offer before an auction. The seller can only say “no”. It's often a good idea to make your move at least two weeks before the auction. Sellers tend to stick to their strategy as the auction dates approach.