There is no simple auction strategy that will guarantee a win. Basically, its the last person standing. But there are a lot of little tips and tactics that can be employed to assist a win at an auction. The best tip is to know what you are doing, not get emotionally hooked in and stay calm. Sometimes this is not possible as it can be a tense affair.
If that is the case, I advise you to get someone to advise you and then to bid for you on the day. Many buyers agents act for clients at auctions. Here at BPS, we charge $750. If you are not in the Northern Rivers area, you can find a buyers agent to assist you in your area by looking at the REBAA website.
Here are some terms and tips that you need to be aware of before attending an auction – either as a buyer or a seller.
Auction or Private Treaty
I often get asked what’s better, auction or private treaty? There is no set answer, of course, as it really depends on the house and the current market. An auction is certainly better if you have a set deadline because of finance or moving. But an auction can be more expensive and stressful. In a strong market, like we are experiencing now, an auction can sometimes pay dividends.
In this article, I want to give some advice to both auction holders and auction bidders. There are a few principles anyone attending an auction needs to be aware of:
A vendor’s reserve is not the price a seller is happy with but the worst price they will sell for. The role of the reserve price is a misconception to many vendors and buyers. Buyers believe it’s what the owners want, and vendors sometimes think it should be the price that gives them reason to celebrate – it’s actually not, its often “the worst case scenario”.
On the market
When the reserve price is reached the auctioneer will say the property is on the market, which means the vendors are ready to sell at this price.
In order to get the bidding going, the auctioneer is entitled to one bid only. It must be declared as the “auctioneers bid”. If not used to open the bidding, it is sometimes used to declare the reserve price, but not always.
You do not always have to pay the full 10% deposit. With an arrangement with the selling agent, you can pay a small amount on the day and the balance on the following Monday morning. Or a buyer can arrange with their bank for an ETF on the day if you win the keys. Or see the DEFT payment in the related BPS story. A bank cheque is best but you can also bring a personal cheque as long as you have a bank statement showing you have funds to cover the cheque.
If the property does not sell on the day it is “Passed in”. Don’t always think that everything is going to happen on auction day. A house can be snapped up with a pre-auction bid. Or, just as likely, is negotiated with a few interested parties in the following days.
Rights of the highest bidder
Despite what some auctioneers want you to think the highest bidder doesn’t have any official right to exclusively negotiate with the vendor first. Many inexperienced bidders get anxious about not being the highest bidder for fear they will ‘miss out’ on a chance to buy the property if it is passed in. Promoting the ‘rights’ of the highest bidder is simply a tactic by the auctioneer to get more money out of potential buyers during the auction in the hope to avoid a property being passed in.
Buyers who don’t want to bid until the property is on the market need to let the selling agent know immediately after the property passes in that they are interested and would like to be included in the post-auction negotiations.