How To Bid At Auctions
Thursday, March 10, 2016
If you’ve been to a property auction recently, you’d know just how stressful it can be. With so much money at stake and what may be one's home for decades being decided over, it can certainly seem like you're on your own. So, how can you avoid common mishaps and be a better bidder?
Look at your capacity to repay the loan
Before seeking finance, it's best to look at your capacity to repay the loan; that's what lenders will be looking at. Take an honest look any debt you have and work out if you need to give yourself more time to pay it off.
You might also need more to time to save some funds for instance. Not only will this help get your house deposit, it builds a bank balance and helps make you look desirable as a borrower.
Do your homework on the market
You need to know your market and the true value of the property, be familiar with local issues and trends (is that new rail line really going to happen?) and know what amenities are close by, or not.
Legal advice is important, so do consider reaching out to a real-estate lawyer you can trust, early on.
Again, this is very much Real Estate 101, but the little things tend to become more important in an auction environment as things can happen quickly. You need to ensure you keep your emotions in check and are wary of being played.
You need to be in power. You have to know what you want, don't want and to not be easily swayed by sales tactics. Being naive or ignorant of the facts on the ground is arguably the best way to lose what power you may have.
Decide on your auction approach
Auctions are relatively specialised in our set-price economy and constitute quite a different form of transaction than many of us would be used to. Things can be very fluid and confusing and if you don't have your feet on the ground, well, you might be on the lunch menu.
It's wise to not give too much away. The auction agent may pry and seek to mine valuable information on you as a possible buyer, but you are not obliged to disclose anything you don't want to, and you are certainly not required to talk numbers at any point until you actually win the bid.
This isn't a licence to be rude – that may backfire anyway – but more a tip to play your cards close to your chest. Be noncommittal, be vague, don't promise anything and don't give anything away.
It's not a bad idea to decide what kind of bidder you are early on. Many serious auction buyers will say they dress a certain way, look a certain way and adopt a certain style as the auction takes shape.
This may mean that you decide not to take your spouse or your family to the auction. For some, having one's other half clouds the decision-making process – your family might be loving the backyard of the house you're bidding on, for instance, and keeping them happy can take you where you don't want to go.
On the other hand, having one's partner there might be just what you need and can provide a second opinion in the heat of the bid (assuming you're not bidding against each other that is!)
When the bidding starts is a time to assert your position. Generally, it doesn't pay to bid too early. As noted above the reservation price is probably some way north of the starting price anyway and bidding too quick can generate the kind of buying energy you don't necessarily need.
Also, you can take hold of the process a little by changing the auctioneer's increments. For instance, if they are jumping upwards in blocks of $10,000, slow things down a little by bidding a small rise of $5300 over the last price. It can take momentum away from other bidders or the auctioneer and it can give a signal to the auctioneer that the price is reaching its high point, even if it isn't.
The auction game is a contest, always ensure you’re prepared, know your limits and hold your nerve.
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