Buying a house at auction can reward you with exceptionally profitable deals. However, the actual process of winning an auction can be a bit challenging, especially if you have no prior experience with biddings. Unlike the conventional buying methodology, it demands more knowledge and strategic development from your side.
Fret not; if you are considering purchasing your house at auction online, we have got you covered. Here are the most successful 9 strategies that you should know before going to a property auction:
1. Examine everything about the property
The first step towards any successful bidding is knowing everything about the property. Once you are impressed with some property and feel likely to participate in its auction, start doing your research. Find out all relevant information about the property, such as why it is being sold, how long it has been in the market for sale, and how many buyers are interested in it.
If you are looking at the property for making it your new home, make sure you explore the neighborhoods, the title of the solicitor, the living conditions of the area, amenities, and the rights included in the property. Likewise, compare the property with others and determine its maximum potential worth. You can also contact the auctioneer to get some information.
All such information will help you determine your budget for the property and assist you in making the right bids.
2. Learn the real estate auction procedure
If you haven’t bought a property before via auctions, it is fundamental for you to learn the basics of real estate auctions. Unlike the conventional methods of buying properties, the rules for auction properties are absolutely different, and you must know about the financial consequences of auction sales.
The best way to learn about the real estate auction process is by attending other real estate auctions. Attend auctions, especially held by the person who auctions off your selected property. Learn how it works, keep an eye on the strategies of other buyers and prepare for your own auction day!
3. Learn auction psychology and never fall for it.
If you are new to the auction world, you might end up paying more than your budget. So you must learn about auction psychology. Consider it as stepping your foot on the brakes, no matter how much other drivers provoke you to go faster than your safety limit.
Auctioneers often use a few tricks to increase the highest bid. So even if you win the bid to satisfy your impulse or ego, you would end up paying way more money than the property actually deserves, and nobody would be at loss but you.
Therefore learn never to express your emotions, and forbid yourself from making impulsive bids and crossing your limit.
4. Arrange your finances before bidding at auction
Financial procedures are way faster in auctions than in regular real estate buying. Once you win the bidding, you have to manage the settlement within the time limit, even if you don’t have money.
So, it is best to have unconditional financial approval before going to the auctions. These kinds of loans will make the lender approve your sum without much dependence on the property and also make you feel confident in the bidding.
Also, these kinds of approvals are generally granted to those who possess sufficient cash or equity. So, start managing your finances as early as possible.
5. Understand the sales contract
The most important thing to do while buying a home at auction online is to understand the sales contract fully.
Once you win the bidding, you would have to sign the non-negotiable sales contract immediately after the auction. There might be clauses that make you spend money, especially if you re-sale the building.
The best way to protect yourself from loss or legal trouble is to get a copy of the contract from the agent and seek legal help from a solicitor, conveyancer, or lawyer.
6. Always stick to your budget
As we’ve already said, the biggest risk to consider in an auction is paying more than your initial budget.
The bidding process is fast and often competitive. Therefore, even if you love the property, never cross your limits and go for something you cannot afford.
Once you have fixed a budget after merging your finances, conditions of the property, and all other factors, stick to it. Plus, the best way to stick to your budget is to write your maximum limit on a paper and keep it with you on the auction day.
7. Keep your house deposit ready
Once you win the auction, you will be required to hand over the deposit to the seller. They might ask you for a cheque, bond, or cash and demand 10% of the sale price, etc.
So you must read all the information in the sales contract, find out how the seller wants the deposit, how much they want immediately and keep the sum ready on the day of the auction.
8. Arrive early and arrive smart
It is always better to arrive early at the auction, especially your first time. This will allow you to examine the property one last time and register yourself for the bidding.
Also, choose the best position in the auction hall from where you can see the other bidders, and the auctioneer can see you as well.
9. Place strategic bids
Make some research on bidding methods, learn how to place bids, and make a strong strategy for how you will actually place your bids. Here are a few things you can do:
- Keep someone with you, such as your lawyer or agent, to help you in the bidding.
- If possible, wait until the property has reached its reserve price, and only then start making your bids. You can always ask the auctioneer if the property is ‘on the market’ or not.
- Combine several bidding strategies altogether, such as making knock-out bids or bidding in odd increments such as $7000 rather than $5000. This will slow down the bidding momentum as the auctioneer might need time to add the figures. Similarly, you can break down your bids to slow the bidding. For example, if the auctioneer asks for $5,000 bids, offer $1,000 or $2,500.
- Call out all your bids with full numbers. For example, instead of saying ‘$7,000’, call ‘$107,000’ so other bidders hear it.
- Speak with confidence, and in any case, don’t spill out your emotions.
All these strategies in your arsenal will help you win the auction and get the most out of the opportunity without making any kind of loss.the rules for