Buying at auctions – expert tips to come out on top

Buying a home at auction can be a pretty stressful time. The money stakes are high and most people are well out of their comfort zone. But there's no reason to dive into an auction feeling out of your depth.

We spoke to property experts Chris Gray (Your Empire buyer's agent) and Adam Vernon (Vernon Partners) to get the real insider advice.

9 expert tips for auction success

1. Be prepared
2. Visit auctions before you bid
3. Ask the agent for comparable sales
4. Keep your cards close to your chest
5. Bid early, start low
6. Go slow
7. Be confident
8. Set yourself a limit
9. Consider a buyer's agent

1. Be prepared

Before you arrive at auction, make sure you have home loan pre-approval. This puts you in a better position to bid, as you'll already know your limit.

You also want to make sure you've completed any building and pest inspections, because when you bid at auction, the sale is final. There are no opportunities to do these inspections afterwards, and you don't want to get slugged with a nasty surprise (termites! Rot! Structural issues!) after the fact.

2. Visit other auctions before you bid

"Go and see 10, go and see 100 auctions," advises Chris Gray.

"See the language the people are using, and go and talk to buyer's agents, real estate agents or auctioneers."

3. Ask the selling agent for comparable sales

A selling agent should provide evidence as to why a property should sell at the asking price.

For buyers who are keen to increase the value of their investment through home renovations at some stage in the future, making enquiries before purchasing a target property is ideal.

Expert insight: The selling agent will help you

"The selling agent will try and help a buyer. They can help by providing you with past sales within a block or in a street. That's probably the best way in which they can help you
Ask the agents, 'Has anyone renovated in the block?' That will give you an idea of what you can and can't do, from a strata perspective. Sometimes, that agent might get you to go and see property that's been renovated. Then straight away, you can see what you can achieve if you just spent $20,000 on the apartment you're thinking of buying."

Adam Vernon

real estate agent & principal, Vernon Partners

4. Don't give too much away

Don't share specifics with the selling agent or be drawn on the amount you're willing to pay. This doesn't mean you should be vague or too tight-lipped; you want to communicate that you're a serious buyer and you're ready to take action. Just don't show all of your hands, or you risk giving the other side too much information, which they can use to their advantage during negotiations.

5. Bid early, start low

If you bid early and low, you're far more in control of the situation than if you jump in late. By the time the property goes on the market and the serious bidding begins, nerves should settle slightly.

"The truth is if the market's there, it's going to find its value anyway. Start low and go slow," says Vernon.

6. Go slow

It's not a race. Drawing the process out allows time to put pressure on the seller to adjust the reserve price downwards. If they really want to sell their property, they will have to accept a fair market price for it.

Set yourself an upper price limit loosely based on a property valuer's valuation range.

7. Be confident

Call out your bids loudly and with confidence. State your bids in the whole dollar amount rather than the increments the auctioneer is calling out. In other words, say "$505,000" not "$5,000".

8. Set yourself a firm limit

It's not a good idea to bid more than your budget. Your absolute limit should be what the bank is willing to lend you plus your saved deposit. Getting pre-approval is probably a good idea before heading into auctions. Decide on a price ceiling for the property itself as well. Remember that there are some cashed-up buyers not concerned about your beliefs of what is a fair market price for a property.

9. Consider using a buyer's agent

A professional buyer's agent can help you navigate the complexities of an auction and even bid on your behalf. Learn more about buyer's agents here.

What happens after the auction?

If you've won at auction, you'll need to pay your deposit. This will usually be at least 10% of the purchase price. This is why it's important to be ready with a form of payment when you attend auction.

There are a couple of ways you can pay:

Bank cheque or personal cheque: You will need to order a bank cheque in advance. Have the cheque made out for an amount that's 10% of your budget. If you end up winning at auction at a price lower than your limit, the deposit will be larger than 10%, but this just means a smaller home loan debt.

Bank transfer: You should be able to pay by bank transfer, but it can depend on the vendor and who you bank with. Banks usually have limits on the amount you can transfer each day. Although you can often increase those limits by speaking to your bank, some limits may still not cover the full cost. You may be able to discuss with the auctioneer whether you can pay over a couple of days. Note that it is a lot of money to transfer to the wrong place, so be aware of where you're sending the money.

DEFT Auction Pay: Created by Macquarie Bank, DEFT Auction Pay is an electronic funds transfer which allows the large transactions expected with a deposit, even without requesting a larger transfer limit. Confirmation emails are also sent when the funds have been transferred for peace of mind.

You'll also need to sign your contracts. Remember, until the contract has been signed the seller is under no legal obligation to follow through on the sale.

Auction advice from former The Block auctioneer, Damien Cooley

• Transcript

  Damien: I think the best advice that I can give a first time buyer, I mean, obviously, they need to do their homework and whether that fits for them, the property is right for them. And I say to them, "Well, are you investing or are you buying where you wanna live?"
  
  If you're buying where you wanna live, just go and buy in the area that you wanna live in. If you're investing, you need to be a little bit more strategic about where you buy to try and get the best yield rental return that you can for that property.
  
  Affordability also comes into play. If you've got half a million dollars to spend, well, you know that you can't go and buy a three-bedroom house in Rose Bay. So, you're gonna be saying this off, "Well, where can I afford to buy? Let's look at where I can afford to buy then. Let's find what sort of property. Is it a one-bedroom unit, a two-bedroom unit, or a three-bedroom unit can I afford to buy?"
  
  When that first time buyer then goes to auction, the best advice that I can give them is to take some along to the action with you, take someone who's got the experience. You can employ a buyer's advocate or a buyer's agent in any area throughout Sydney, Melbourne, or any state or territory in Australia and you can actually just employ them.
  
  If you prefer to, if you can afford the full service to get them to find a property for you and search, you can employ them and even a real estate agent to go and bid at auction for you. Having a professional bidder represent you at an action can save you tens, if not hundreds of thousands of dollars.
  
  My role is to get as much as I possibly can out of the buyer and I make no apology for that. That's what I'm being remunerated to do and that's why I think it's always good to get somebody to represent you, to bid for you at auction because their role is to buy it cheaply as they possibly can. They remove emotion. They bid at thousands of auctions and they understand how auctions work and I understand what I'm thinking and how I'm trying to get the most out of them.
  
  So if I was a first time buyer, I'd really be investing in getting someone to represent me at auction. And if I couldn't afford somebody like that, I'd have my mom, my dad, or somebody who's been to auction before, that been around the traps and know what they're doing.

Frequently asked questions about buying property at auction

• Is it better to buy at auction?

  Whether or not buying at auction or buying privately is better depends on the circumstances around your purchase. The benefits of buying at auction include the potential for a bargain, you can assess the competition, you know it's a fair competition and you might be able to buy property quicker. However, some of the downsides of buying property at auction include the sense of urgency among bidders creating higher price rises.

• Should you make an offer before auction?

  If you're clear on your budget and how much you're willing to pay for the property, you can make an offer before auction. It means you avoid the pressure and potential price increases of an auction. However it also might mean you pay above what would actually be bid on auction day. While there's no harm in putting forward an offer, you should talk to your buyer's agent first. They can always speak to the sellers to see if they're willing to accept private offers.

• Are buyers agents worth it?

  Buying property can not only be a confusing time but also an emotional time. Having a buyers agent can help you manage your property search, ensure you have everything you need and keep you cool when you want to jump at buying a property. Buyers agents also have existing relationships with real estate agents, so can ask all the right questions about the property and price expectations. They may also be able to bid on your behalf at the auctions or negotiate a private sale for you.

Written by

Richard Whitten

Money Editor

Richard Whitten is Finder’s Money Editor, with over seven years of experience in home loans, property and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Graduate Certificate in Communications from Deakin University. See full bio

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