Recent Buying Selling Lifestyle
Recent Buying Selling Lifestyle

The three stages of an auction

Written by Christopher Igoe
For most people the success of an auction is based on the result that is achieved on auction day. If the property is passed in, it’s a disappointment. As a buyer, the result should be judged on how well you purchased during any of the three stages of an auction campaign. Although there are other differences, the major difference with purchasing at auction compared with a private treaty sale, is that an auction purchase is unconditional. This means that at the fall of the hammer, or anytime prior to auction day, you will be required to sign an un-conditional contract of sale and pay a 5% or 10% deposit. The contracts are then exchanged “unconditionally”, the sale is locked in and the champagne is popped to celebrate. The key to auction success is knowing how to navigate bidding and negotiations in the three stages of the auction campaign. Stage one Stage one of an auction is the first 2-4 weeks of marketing the property. The agent will conduct this period of marketing without a price on the property. A buyer is welcome to make an offer to purchase the property in this stage however there are a few things to note. 1. The reasons a vendor may accept an offer prior to auction day is that either they believe your offer is so much higher than other interested parties that they wont achieve the same price at the auction; That they have no other interest in the property and believe they wont get a sale under the hammer or that they are happy to compromise on market reach to lock a sale in. 2. The vendor is unlikely to counter your offer so negotiations prior to auction day are uncommon. 3. If there are multiple buyers interested in the property a vendor will likely choose to take the property to auction and create a biding war to elevate their final sale price. Buying prior to auction day can work in a buyers favour in a weak market or when you really know the motivation for selling and understand the market type you are in however it’s more likely that you risk either paying a premium to secure the property or showing your hand to the agent when you don’t need to. Stage two Stage two is the auction day and there are six key points to bidding at an auction: 1.Write a reserve letter to yourself and sign it. The reserve should be the very highest figure you would go to in order to purchase the property. It can be very tempting to just go another $1000 because you think that you might get it but those little bids add up quickly. Keep this with you on the day so that you don’t go over your limit. 2.Bid confidently. Volley bids back quickly and it looks like you have never ending pockets. It’s an intimidation tactic that works time and time again. Be aware of who holds the bid and don’t bid against yourself. 3. Look confident. Particular body language cues are the key indicator as to whether a bidder is close to their limit or not. Be mindful or your stance and conversations whilst bidding. A poker face is a good thing in this situation. 4. Be in pole position. Introduce yourself to the auctioneer prior to the start of the auction so that the auctioneer knows you are bidding. Maintain a clear line of sight with the auctioneer whilst the auction is on and be aware of where the other bidders are in the crowd. 5. Remain in pole position. Should the auction not reach the reserve, it will be passed in to the highest bidder who holds the first right of refusal. This means that no one else can negotiate with the vendor until the highest bidder has decided not to purchase the property. If the property is going to be passed in, ensure it is to you. 6. Even with some knowledge of the process, it can still be a tough call to buy at auction. When up against savvy agents, during an auction buyers can find themselves being in a seriously disadvantaged position. If you are not comfortable with representing yourself use a buyers agent. A good buyers agent will have bid at hundreds of auctions and have the skill and experience to manipulate the proceedings to your favour. Stage three Stage three will only occur if a property is passed in at the auction. This will be an undefined period of time (sometimes days, sometimes weeks) where the property is marketed with a fixed price. The fixed price may be the last bid made at the auction, the vendors bid, owners reserve or more commonly a price based on the owners expectations of a sale price. It’s important to ask the agent where the price came from and to know what the last live bid was (meaning a bidders bid rather than a vendors bid) as this will give you an indication of where the market thinks the worth of the property is as opposed to where the owner and/ or agent thinks it is. This information will be used to conduct the negotiations, which occur in private between the owner and buyer and will assist you in not over paying. It’s also a period of time where a buyer can add or adjust terms and conditions to the contract that may not have been available under auction conditions. Examples of these would be a longer/ shorter settlement period, the offer being subject to finance or sale or property or the inclusion of the cubby house. Contact details for Ibid: E: P: 1300 331 022 Charlie Garcia: 0499 110 110 Luke Williams: 0412 986 809

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