Q: What advice would you give to someone looking to buy property at auction?
A: Buying a property at auction can be a very scary thing to do for a buyer, especially if they haven't participated in one before.
As agents and auctioneers we typically work for the vendor and are employed to achieve a desired outcome for them, however this shouldn’t stop us from helping a buyer achieve their ideal result at auction.
We’re big believers in providing quality buyer management. In this relationship it is really important to understand what the buyer wants to achieve and then put them on the right path to succeed using your valuable experience within the industry.
Always remember ‘the buyer of today is the seller of tomorrow’. We often hear anecdotes where buyers complain that their agent didn't assist them enough in finding and buying the right property. Obviously this could be for many reasons. The buyer may have missed out on their dream home because of unrealistic expectations or misinformation on pricing given to them by agents in the past.
Whatever the case, buyers won’t forget bad experiences with you and agents like you. Keep this in mind when you’re assisting them and set out to provide as an exceptional service as possible, so they tell their friends and come back to you down the track.
The key here is coaching and education. Help buyers by researching prices and clearance rates in their areas of interest, explaining how the auction process works and setting out a strategy they are comfortable with.
Remind the buyer they will need to get their written mortgage pre-approval prior to the auction date and they are required to pay a deposit on the day, usually 10 per cent of the sale price.
Recommend attending a few ‘practice’ auctions before the real thing, so they get a feel for auctions and know what to expect. Afterwards review what happened and discuss how they should handle the same scenario when they step up to bid.
Make sure your buyer doesn’t just stand there waiting for someone to bid and then react, guide them to be a proactive buyer and the aggressor come auction day.
Bidding tips and strategies:
Tip 1. Open the bidding.
Advise the buyer to open the bidding. When someone else bids encourage them to bid straight away and repeat this throughout the auction. Most buyers will be put off by this and lose the desire to keep bidding because they miss the chance to feel a sense of ownership of the property and don’t form an emotional attachment to it.
Tip 2. Bid with odd numbers.
Direct the buyer to open with an odd number and to always increase their bid in odd numbers. This may slow down the auctioneer, and confuse and slow the momentum of the other buyers. Make sure the buyer understands the importance of standing their ground and being aggressive at auction. Suggest they take control and show that they mean business by putting in their odd numbered bids straight after everyone else’s.
Tip 3. Wait it out.
This one is a riskier tactic where you want others to bid first and you give them the chance to gain a sense of ownership and become emotionally invested in the property. Here the buyer should wait until the very end of the auction to place a bid when everyone else has stopped. At this point a majority of buyers are likely to have reached or exceeded their budget and have already let the property go.
Tip 4. Use research to plan your bidding.
Remind buyers to do their homework. This will help them to gain a better understanding of how much the property will cost. They should look into what comparable properties in the area have sold for by weighing up their key features, such as the number of bedrooms, whether off street parking is included or not, the property's condition and size. Also, consider what the overall growth has been in the suburb over the past 12 months and beyond. Look into plans for future developments that will impact the value of the property, like shopping centres, train stations or schools. Get the buyer to factor in all of this research when thinking about how much they're willing to pay for the property and setting their maximum bid before auction day.
You will find your buyer will really appreciate that you took the time to help them where other agents didn't bother. Even if they don't buy from you immediately, we can assure you they will remember the help and advise you provided and they’ll come back to you in the future because of it.
If you have any questions for Rocky and Rob please send them to firstname.lastname@example.org or add them to the comments section below.
From the Homely Team.
Rocky Bartolotto is the National Sales Director at Homely.com.au and works closely with real estate groups in Australia, tasked with building strategic partnerships and growth. Connect with Rocky on Twitter and LinkedIn.