How to stay within your budget at auction and come out on top
Have you finally found a place that you can picture yourself owning? Here’s some ways to step up your auction strategy and land your dream home for a dream price.
Do your research
We’ve said this before, but it’s so important that you do your own 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. Some property websites such as realestate.com.au and domain.com.au offer a great 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 listed price.
Once you know how much the house is likely to sell for, find out how much you could be able to borrow. You can do this by using our borrowing power calculator. You’ll also need to get pre-approval for the loan so you know your bidding power. Doing some background work will help you know how much you can bid, as well as how much you should bid.
Emotions are for house hunting, not for auctions
Emotions are a great way to narrow down the search for your potential dream home. A property is a big purchase that you should have some form of emotional attachment to, otherwise it’s probably not the right one for you.
When it comes to auctions and staying in budget, you need to be a bit more emotionally distant. 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 property. Just like fish in the sea, there are plenty of houses on the market so be ready to walk away once your budget is capped. There is something more perfect out there that you just haven’t discovered yet.
Familiarise yourself with the auction process
Auctions can be overwhelming. To help you come out on top (without getting carried away), you’ll need experience. Consider attending one or two auctions in the same area in the weeks leading up to yours to get a sense of how they work and what buying tactics work best.
Auction tips and tricks
Control the pace
An auctioneer’s job is to maintain speed and momentum with the bidding and get the highest possible price for the seller. As a buyer looking for the lowest price, you’ll want to slow things down.
There’s a couple of ways you can do this:
- Move the bid up in uneven increments. If the bid is rising at $5,000, offer a bid at only $1,000 more.
- Have a budget in mind. Set a maximum price you can afford to pay and stick to it.
Bidding can 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, let the bidding start and move in at a later stage with a strong bid. This move could cut out a chunk of bidders and gives you a chance to size up the competition.
While no one can guarantee the outcome of an auction, hopefully these tips will allow you to keep calm under pressure, stick to your plan, and avoid being pushed into a bad investment.