As the housing market in Sydney strengthens, with recent auction clearance rates of over 75%, there are increasing stories in the media of properties selling under the hammer at a price well above their reserve, with many other buyers missing out.
There is nothing more disappointing than spending weeks, months, or perhaps even years spending Saturday after Saturday looking at homes or bidding unsuccessfully at auctions, time and time again.
I myself, have bought multiple properties at auction and have also helped my friends bid successfully at auctions. Each time, there are 3 key strategies I employ that help me to win at auction – without going over budget.
Firstly, make sure you understand your borrowing capacity and have your loan pre-approval in place. Next, do your research on the value of the property you’re interested in. Talk to the agent and find out what other properties have sold in the area recently.
If you wish to have an independent valuer look at the property, ensure to choose a valuer who understands the local market well. I missed out on a great property in St Ives, because I took the advice of a valuer who didn’t understand the St Ives market very well. He pointed out that the property last sold for $400,000 not so long ago and now had an asking price in the $800,000s – which didn’t add up. I later learned that the previous sale price was a result of a divorce, with one spouse selling their half of property to the other – i.e. the sale price only reflected half the property’s total value.
Before you go to the auction, you need to first be very clear in your mind that you want that property. Ask yourself: “Do I really want this property?” If the answer is yes, then arrive at the auction determined to win.
This sounds really simple, but many people don’t do this. They turn up feeling not quite sure about if they really want it, or lacking confidence that they will be able to win. And if you keep losing at auctions than it starts to further impact your confidence and you lose momentum. Be determined to succeed from the outset.
You also need to position yourself financially. When I set a budget for an upcoming auction, I usually set two budgets: the first is how much I’m willing to spend – my ideal budget. The second budget is the maximum amount I can afford or am willing to pay if the bidding goes beyond my ‘ideal budget’.
It’s worth noting that more properties tend to sell at auction (as opposed to private treaty) in a rising or hot market. In this type of market, expectations of sellers and agents are high, and auctions can help get the vendor the top price – playing off the emotions of the buyer within the energy of an auction. This makes it pretty hard to get a ‘bargain’ at an auction – it’s usually only likely with a mortgagee sale or with a highly motivated seller for example, due to divorce or who has already purchased elsewhere. Accordingly, you will likely need to forget about trying to get the property cheaply – and instead raise your ideal budget.
Remember, if you miss out, that means even more months spent looking and bidding on houses – as well as the potential lost opportunity cost. In my experience, property is a relatively forgiving asset – if you hold it long enough it doesn’t matter if you pay a little more.
What I’ve found is that winning at auction is much like succeeding at any aspect of life. You need to be prepared, do your research, set a goal and be determined to succeed. You also need to be willing to go the extra mile and pay a higher price if it’s something you really want. Get help when you need and walk away when it’s the right thing to do.
It’s a great feeling when you win – and I hope sharing my experiences will help arm you for a successful auction experience, so you too can enjoy all the benefits that come with property ownership. All the best!
Joseph Chou is the CEO and Founder of Ironfish and author of ‘From Bicycles to Bentleys.’ He presents regularly around the country at a range of seminars, workshops and events. You can download his latest e-book: 6 ways to take your life to the next level via the link below.