How to stay within your budget at auction (and other tips to help you come out on top)
We’ve covered the basics of auctions before, like avoiding rookie mistakes if you’re a first timer. Now it’s time to step up your game and come armed with the info you need to help get your dream home for the dream price.
We’ve said this before, but do your research. Knowledge is power, and nowhere is this truer than at auction. Before stepping on the bidding turf, you should know the value of the property. Realestate.com.au offers a tool for evaluating prices, but we also recommend getting a list of properties that have recently sold in the area, creating a table of details, and comparing how different features might have influenced the price.
Once you know how much the house is likely to sell for, find out how much you’re able to borrow (we have a tool to calculate that). You’ll also need to get pre-approval in principle for the loan, so you know what you can bid with alongside a clear idea of what the property is worth.
Emotions are for house hunting, not for auctions
Emotions are a great way to narrow down the search for your potential dream home – how a house feels is an important part of the decision-making process.
When it comes to auctions and staying in budget, you need to be colder than an industrial cool room. Skilled auctioneers will try to up the emotional state of the auction to entice people to bid more.
To combat this, practice being philosophical about the house. Like fish in the sea, remember that there are plenty of houses on the market and be ready to walk away once your budget is capped, confident there’s something more perfect out there that you just haven’t discovered yet.
Practice makes pretty good
Auctions can be overwhelming. Fact. To help you come out on top (without getting carried away), you need experience. Why not attend one or two auctions in the same area in the weeks leading up to yours, to get a sense of how they work and how they flow.
Control the pace
An auctioneer’s job is to maintain speed and momentum with the bidding, building a sense of urgency, and influencing people to bid more than they might have planned. As a buyer wanting the lowest price, you want to slow things down.
- Simply waiting between bids. Take some time before you bid again, especially if you’re bidding against only one other person. This gives both of you a chance to cool off and think about your next move.
- Move the bid up in uneven increments. If the bid is rising at $10,000, offer a bid at only $5,000 more. This may cause the agent to pause and have to calculate the cost. They may refuse the bid, but this is all part of it.
Opening high can be a good way to shorten the auction and reduce risk. Usually, the bidding will begin 20-30% below the actual value of the property, which is why auctions attract bargain hunters looking for a deal. If you’re sure of the price you want to pay and the value of the property, open a little under your budget. This move could cut out a chunk of the bidders, and might even secure you the property outright.
No one can guarantee the outcome of an auction, but hopefully a few simple steps could give you a good shot at staying cool, sticking to the plan, and walking away with what you want, even if that’s your budget intact for next time.