With auctions becoming increasingly popular in Perth (and for good reason too) we have been sharing articles recently to educate our subscribers on the sales process that is very popular in other parts of Australia but, until recently, has been largely avoided by Perth home buyers and sellers. This blog highlights the most common mistakes buyers make at an auction.
If you’ve been looking to buy a property for a while and you’ve attended an auction or two you may have witnessed some bad buying behaviour.
Love them or loathe them, auctions present buyers with a level playing field, which is a positive thing. That being said, there are 6 common mistakes buyers make at auctions that you would be wise to avoid.
1. Lack of preparation – There is nothing worse than the hammer falling only to discover that the deposit that’s due or the settlement date that’s required can’t be met.
It is vital to consider all aspects of the auction process before auction day, from how much deposit is required on the day to the agreed settlement terms, the legal review of the contract and determining who will bid and who will sign the contract.
2. Failing to review the contract – Some properties have covenants preventing the new owners from certain activities or making changes to the property. Avoid nasty surprises by reading the contract thoroughly BEFORE bidding on the day.
3. Failing to stay in touch with the agent – Sometimes properties up for auction sell prior to the day if any offers received early are good enough. Without staying in touch with the agent, you could find a sold sticker on the signboard without having had the opportunity to put your best offer forward.
4. Letting emotions rule – Some buyers become overly caught up in the emotion of it all, causing them to become very competitive and potentially end up paying more than they set out to pay. It is very important to have a firm budget in mind and stick to it. If there’s someone at the auction who is happy to pay more, walk away and accept that it wasn’t meant to be.
5. Being too scared to bid – Being intimidated is another common mistake buyers make. Some buyers are too nervous to even put up their hand to bid only to end up regretting it when the home of their dreams sells for a price they would have been happy to pay.
6. Neglecting to arrange unconditional finance – This mistake is probably the worst one a bidder can make because, unlike the process when a home sells by private treaty, auctions require the successful buyer to sign an unconditional contract and pay the deposit on the day. This is regardless of whether the finance has been approved or not. If the buyer is unable to obtain finance they lose the deposit and could even be sued for damages if the vendor suffers any losses associated with the default.
7. Making incorrect assumptions about the Auction process – Many potential bidders think they know how the process is going to unfold and refrain from bidding because they presume one thing or another. For example, ‘you always must be registered to bid’ or ‘dummy bids are allowed’. Talk to the Agent prior to the Auction and ask lots of questions about the process. You may find your presumptions are wrong and you are comfortable to make a bid!
Buyers who succeed at auction are confident in their budget, understand what needs to be done to prepare for the auction, and are confident bidders. These are the 3 keys to bidding like a professional.