I recently attended an auction for a new home being sold in Park Road, Surrey Hills (Victoria). The turnout was impressive with more than 250 people in attendance and more than 8 genuine bidders. To say that the atmosphere was electric would be an overstatement, unless you were one of the 8 who were in the race. You see, Surrey Hills is going bananas. Capital growth in the area has been double digits for the past couple of years and potential purchasers continue to brace themselves for the likelihood of being priced out of the market. Add to that, Park Road is one of the most impressive tree lined streets in the suburb and the auction of this newly built, contemporary home with all the bells and whistles had the potential to set new records in the area. The entire neighbourhood was a chatter with talk of a record breaking price.
As I glanced around at the crowd that was amassing I wondered to myself how those potential purchasers were feeling. Only earlier that day I had attended an auction in Richmond (3121) that wiped out the initial bidders before accelerating at hyper speed to a price that ‘only a developer’ could afford to have paid. Whilst at that auction it was clear that the bidders were professional and galvanised with clear strategy and experienced, by marked contrast this Surrey Hills auction was undoubtedly going to be a purchase of passion and result in the creation of a new family home, something the older generation of neighbours were particularly excited about.
We had had the privilege of tracking with one such purchaser in the lead up to the auction and whilst unsuccessful on the day, I felt some analysis of their approach may have been beneficial to some of our clients. You see buying at auction can be stressful. Yup that’s right… very stressful. So here is our guide to purchasing a ‘home’ at auction. No, it’s not sanctioned advice, but it is the collected knowledge of dealing with hundreds of successful and unsuccessful bidders and a good dash of personal experience thrown in as well.
Step 1: Love it
I know they say not to let your heart run away, but if you’re going to commit to a property – love it! Whilst your conveyancer, the stamp duty office, the federal government and real estate agent all want you to buy and sell, buying and selling is Expensive. IF you truly love the property you purchase and are likely going to stay in it for a longer term than paying a premium for “the one” can pay dividends in the medium to long term.
Step 2: Know your capacity
Some people phrase this as know your limit. Sure, that’s what I meant to say…kind of. What I am trying to say is know your capability to repay and your Willingness to commit. People who buy property pay the highest price. That’s a fact. Artificial limits create remorse when the property sells just out of your price range but within your reach. We hear about it every day, believe me. Now I am not saying loose your mind (we’ve seen that too!), I am saying though know what you can and are willing to do and don’t be afraid to go there if you want to buy the property.
Even writing this makes me feel a bit nervous if I am honest, but my experience with so many buyers underwrites my confidence to proceed. If you want a greater sense of certainty, have a look at the historical performance of the suburb and surrounding suburbs and get an greater understanding of what you can expect in terms of growth, it puts the purchase price into perspective.
Step 3: Do your homework
I know you could see this one coming, but I want to be clear. To buy a property in a competitive market you need to be single minded and resolved. To garner this resolve, conducting adequate ‘homework’ on the property is essential. Building inspections are a must for those of you intending to purchase at auction. Did you read that, a must. I cannot tell you the number of times a buyer has come to us after an auction and asked about building issues. Without a building report (or being a builder yourself) you just cannot know what is going on. I implore you, get the inspection it creates that necessary base line in any post signing negotiation at settlement. As a property practitioner I also always advise on getting the contract reviewed. Its just too late after the auction and whilst many of you have read a number of contracts, do you really know when something is omitted or missing, why take the chance on such a significant personal investment. It just defies logic to me. Proceed at your own peril. I should however also say, that a substantive contract review prior to auction should undoubtedly assist you in the property evaluation as to price. Yes, you heard that right. By better understanding the ‘What’ if in ‘what you are purchasing’ you will be better able to anchor a price to the asset. That is where the Section 32 in Victoria and the Section 149 coming into play in NSW. Check out the articles on each of these very important disclosure documents by going to the link.
Step 4: Be bold
No I am not saying be that person at the auction who bids first, I am saying you need to bid to buy. Going back to the Surry Hills auction I was thrilled to see the persistence of the successful purchaser throughout the auction. Surrounded by family, she bid with confidence. The crowd knew she was a player from the first bid. It wasn’t the size of the bid it was the boldness of the bidder and her clear engagement with the process. At one point, when the agent finally put the property on the market over $2.1 million, the crowd genuinely cheered. The momentum she had built and the support of the crowd carried her to a successful purchase.
No I know this guide is a little less list and more approach, but I guess that’s what I really was trying to highlight. Buying at auction is more art than craft. Whilst some might argue this bidding technique works better or swooping at the last minute is the only way, I am less about the approach and more about helping our clients achieve the outcome they desire. Let’s be honest, only one person can buy a home, so if you’re going to bid, you may as well be in a position to win. It doesn’t matter where you are in Australia, buying at auction can be stressful.
This article is provided for general information purposes only. Its content is current at the date of publication. It is not legal advice and is not tailored to meet your individual needs. You should obtain specialist advice based on your specific circumstances before taking any action concerning the matters discussed in this article.