You might be thinking it’s a little early for a blog about getting auction season ready, as the auction frenzy doesn’t kick off until spring but there is a mini auction season just around the corner in March before the traditional winter slowdown.
Whether you’re buying your first property or fifth, here are some tried and tested auction tips I’ve picked up along the way for getting the right property at the right price:
Tip 1# Shop around for a competitive home loan deal
Take some time before the auction to compare home loan deals online for a package with a competitive rate, low fees and flexible features like an offset account or extra repayments facility. Once you’ve chosen the home loan that fits the bill for you, the first step is gaining pre approval from the lender, which will allow you to bid at auction up to the limit specified by the provider.
But keep in mind, there is a trap (which I’ll run through below) of paying too much for a property and not getting fully approved for the loan amount.
Tip 2# Do your research
When purchasing any big-ticket items, you’ll need to knuckle down and do some thorough research prior to purchase. If you find yourself overwhelmed, a good starting point is familiarising yourself with the conditions included in the Contract of Sale.
Before the bank can give a formal valuation, have a firm idea of what the property is worth to avoid paying too much at auction. Suburb data tools such as Domain and realestate.com.au and talking to local real estate agents may be helpful and depending on your lender, you may be able to request a free guide that provides information on the history and market value of the property.
While you are researching, it’s also worthwhile to organise a building inspection to ensure the property is structurally sound and free from any major defects such as water damage, termites and asbestos. Once you know the state of a property, you can determine how likely it is a lender will finance the purchase.
Tip 3# Flex some negotiating muscle
Many homebuyers aren’t aware you can negotiate on the T&C’s of the Contract of Sale prior to auction and often accept it without question. The reality is you can negotiate especially on the essentials like the amount of deposit required and length of the settlement period.
Tip 4# Set a price and stick to it
I’ve been asked many times by homebuyers what the best strategy is when it comes to bidding at auctions and my advice is to avoid getting caught up with bidding strategies because you may find yourself paying way too much or missing out on the property entirely. Instead, set a maximum price you’re willing to pay based on what you can afford, as well as the property’s market value and don’t go over it on the day of the auction.
With these tips under your belt, you’re well on your way to success when the final hammer falls, providing you stay well away from these common homebuyer traps:
Trap 1# Failing to get your finance approved
Homebuyers who haven’t properly organised their finances or set aside an emergency fund prior to purchasing at auction could find themselves trapped if their lender doesn’t fully approve the loan. Unlike a private treaty sale, you don’t have a cooling off period to get the property valued when you buy at auction and may wind up with insufficient funds if you receive an unexpectedly low bank valuation.
If this is the case, you run the risk of losing your hard-saved deposit and could end up being sued by the vendor to cover the shortfall.
Trap 2# Buying with your heart
Many homebuyers can easily get carried away in the excitement of an auction and forget that they’re purchasing a future investment. Buyers who get caught up in the competitive side of things or become too attached to a property can often find themselves in a bidding frenzy and may end up paying more for a property than what it’s actually worth.
Trap 3# Getting intimidated
On the other end of the scale, homebuyers may feel overwhelmed especially if it is their first auction and won’t attempt to make a bid. In this instance, you may want to ask a trustworthy family member or friend to do the bidding for you.
Looking to secure pre approval for an upcoming auction? Fill in your details below and I’ll haggle a great deal on your behalf.