Winning at an auction goes beyond the luck of the draw and many buyers could potentially be missing out by not having a strategy amid current market conditions.
Aus Property Professionals founder and managing director Lloyd Edge said there still exist a fear surrounding the action process, discouraging many potential buyers.
“However, buying a property through the auction process is actually a very transparent way to buy a property, and if you understand the process, it can be a very successful strategy,” he said.
Mr Edge shared five strategies on how to bid at an auction to up the chances of securing the property amid current market conditions.
Knowing your limits
It is crucial for buyers to not only set the maximum amount they are able to spend on a property but also to commit to it.
Mr Edge said going over the limit even by $1 could potentially put buyers at risk of not getting approved for a mortgage.
“Do not think about what you are willing to pay for a property, but rather what is your absolute limit,” he said.
“If you set an unrealistically low limit that does not align to your borrowing capacity it is likely you will fall into a trap of continually upping your limit during the auction which just comes across as disorganised and let’s your competition know you are inexperienced.”
Hitting the ground running
A successful strategy requires active participation. Mr Edge said buyers must keep a clear head and listen to where the price is at.
“The strongest bids come directly after the competition has bid as this gives the impression you have limitless cash, as well as intimidates the competition as they will need to make a quick decision on what they want to do next,” he said.
“Most people that are put under a lot of pressure would rather back down than make a quick, life changing decision.”
Reading the competition
Knowing the competition is also a must to be successful in any auction ventures.
One way to size up the competition is by starting out with a strong first bid — this is good strategy if there is a lot of interest in the property.
“This will knock out a few who aren’t at your level, and it will put pressure on the remaining buyers,” Mr Edge said.
“If there is a lack of buyers, then it’s important you are the highest bidder so if the property does not meet the reserve price you can ensure you are the one negotiating on the property post auction.”
Maintaining a straight face
Auctions could be extremely stressful and emotional and setting a poker face would go a long way.
Buyers must keep calm and collected even when the bidding gets higher and nears their limit.
“It will give off the impression that money isn’t an issue, and you have the ability to challenge any bid,” Mr Edge said.
“It is important to set a poker face and remove emotion from your bidding to not give away to the competition that the auction is reaching your upper limit.”
Considering an all or nothing approach
Winning auctions requires shifting the perspective from taking a back seat with a wait-and-see approach to a willingness to spend the budget.
Mr Edge said the auction market is not where one can speculate and wait for what happens next.
“It is amazing how many buyers will assume they will be able to sit back and see whether they are able to grab a bargain before they will start bidding,” he said.
“Auctions are a great way to buy a property because the sale price is transparent and by buying at auction you will reduce the risk of overcapitalising from paying too much on a property — the market value for the property is the highest price someone is willing to pay on auction day.”
Mr Edge said inexperienced buyers can seek for an assistance from a buyer’s agent, who can actually bid for them during an auction.
“This will show the competition that you are serious about buying as well as allow you to remain anonymous at the auction should you cross paths with any of the other buyers at auctions in the future,” he said.
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Photo by kanchanachitkhamma on Canva.
Collections: Mortgage News Buying a home Auction
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