5 Auction Tips For First Home Buyers

1. Chat to an expert

While buying a property through private sale or auction has pros and cons, the option you choose shouldn’t matter. What’s most important is that you have saved a deposit, have pre-approval to borrow a certain amount, and can service your mortgage. 

However, if you genuinely have your heart set on a property going to auction, you’ll need to do a bit more to prepare. Start by talking to a buyer’s agent or a mortgage broker. These experts can give you pointers on what you should expect on the day and how to bid. 

You can even ask your agent to do the bidding for you. That way, if someone outbids you on the day, they can likely point you towards similar properties on the market.   

» MORE: 10 questions to ask your mortgage broker

2. Do your due diligence 

Researching the property before the auction is vital if you want quality for a good price. Familiarise yourself with what to expect and look at property valuations for comparable homes in the area. 

You should also attend some auctions beforehand, preferably for similar properties. That experience will help you get a feel for what’s going on and how the auctioneer controls the bidding.

Due diligence should also include a review of the contract of sale by your solicitor to make sure you are comfortable with all the clauses or amendments contained in it. They should also review the title deeds to ensure there is no outstanding debt on the property or the land you may be liable for in a worst-case scenario.

» MORE: Understanding property appraisals and valuations

3. Talk to the selling agent

Ask the selling agent as many pertinent questions as possible during the open house inspections. First, you’ll want to know how much they think the property will go for, also known as the indicative price. 

Agents in the past have notoriously low-balled figures to get as many people as possible to register and make bids. However, they are obliged to give you an estimate that is as accurate as possible without disclosing the reserve. 

You could also ask them when the property last on the market, how much it sold for, and how many other contracts for sale they’ve handed out.  

» MORE: What is an estimated market value?

4. Get building and pest inspection reports 

Real estate agents are required to disclose any information they have regarding property inspection reports to registered bidders and hand over reports on strata schemes, known as a ‘strata search’.

As a prospective buyer, you should ask the selling agent for copies of existing property reports. If none exist or were conducted years ago, you should arrange to get building and pest inspections done before the auction. They may cost a few hundred dollars each. Still, they will save you considerable aggravation if a property you are interested in bidding on has a structural deficiency or pest problem. 

You’ll also need to arrange these inspections before auction day, as you won’t get access to the property again until the settlement date, which is usually at least 30 days after the auction. Remember, if you successfully bid for a property, you must exchange contracts of sale and pay the deposit on the spot. 

You should also be aware that sellers are not under any obligation to disclose building defects before auction. So, getting inspections done in the absence of up-to-date reports is essential for your peace of mind. These reports can bring to light any issues, such as plumbing, sewerage or electricity. The knowledge you’ll gain should also give you confidence that the property is sound, and you can go ahead and bid. 

» MORE: 10 questions to ask a real estate agent

5. Understand the bidding process and come up with a strategy

When talking to an industry expert about property auctions, you should be able to devise a bidding strategy. This strategy should include a hard limit that you absolutely cannot go over because you don’t have pre-approval from your lender to bid any higher. 

The trick is not getting swept up in the moment’s excitement or intimidated by the auctioneer, especially if a bidding war occurs. Remember, there will be similar opportunities if you miss out this time. Avoid getting too attached to a particular property before laying your claim.