Would you like a free property profile & valuation report? Request your report here.
If you’ve got downpayment money burning a hole in your pocket and can’t seem to find any available homes listed in your neighbourhood, you might be looking in the wrong place. Not every owner chooses to simply set a price and wait for their real estate agent to bring in prospective buyers. Especially in high-demand neighbourhoods where the owner can reasonably predict dozens of eager buyers, they have every reason to hold an auction in order to get the best possible price for their home. If you’re eager to buy and think you’re ready for the high-competition world of property auctions, work with your real estate agent to find a few that you’d be interested in checking out.
Of course, buying from an auction has incredible potential risks considering that there is no price cap and you are entirely capable of bidding yourself into financial ruin without care and due-diligence. It’s important to remember that if you win an auction, the sale is final with no contract negotiation or additional lead time. You also need to be able to pay the deposit on the spot.
Making a mistake at a property auction is easy. Actually getting the house of your dreams at an acceptable price is much more difficult. To help you prepare, we’ve collected a few tips and tricks that will ensure you’ll know what’s going on and exactly what you want to do by the time you’re ready to bid on a house you love.
Set Your Budget
The most important rule about attending any auction is to know exactly how much you’re willing to spend. Your final bid is final and an impulsive raise could haunt you for decades if you make the wrong financial decision in the moment!
Before participating in any auction proceedings, get your personal finances in order, organize your ‘house fund’ savings, and figure out exactly how much you can afford to bid. If you win, you’ll need to pay the downpayment in full, which means you definitely shouldn’t bid any more than ten times your current savings. By knowing how much you can spend you will both narrow down which auctions to attend and know when to fall back gracefully if a price exceeds your predetermined budget.
Don’t Get Your Heart Set
In this highly competitive housing market, there’s always a chance that someone will outbid you. It’s important that you not hinge your personal health and happiness on getting any one particular piece of property, even if it’s really nice and potentially in your price range. Go into every auction confident about your bidding power and ready to accept if someone who’s more desperate with more cash to burn exceeds your final bidding price. It is also entirely legal and reasonably common for the seller or auctioneer to pull a property mid-auction or even cancel the auction entirely right before the event in order to accept an alternate offer. Simply never count on getting the property through an auction.
Research the Property
Once you get to the auction, all sales are final, but that doesn’t mean you should skip your due diligence on properties you’re interested in. After all, when the auction is through you could potentially own the place, and the last thing you want is to be stuck with maintenance money pit! Just like you would with a normal real estate deal, visit the open house events or schedule a tour beforehand, let the owner know you’re interested, and hire your own inspector to thoroughly examine and vet the house before you commit to bidding on it. Don’t forget to also hire the services of a conveyancer to ensure that the title is also free and clear and ready for a legitimate buyer.
Visit Other Auctions for Practice
By no means let an auction you care about be your first experience with the system! Look into several properties you might be interested in and practice the entire process. Usually, the contract terms that will be accepted without negotiation are clearly displayed before the main event, giving everyone a chance to read them and understand what they’re getting into. Bids can be fast or slow and you are allowed to ask a reasonable number of reasonable questions of the auctioneer who is working on behalf of the seller. At any point, the auctioneer can step out to consult with the seller and, in some cases, they can issue a ‘vendor bid’ on the seller’s behalf to raise the amount closer or passed the seller’s reserve price. By visiting a few practice auctions in which you don’t intend to bid, you can get the feel for the process and be ready to handle bidding with smooth aplomb when your targeted properties come up for auction.
Auctions can be an amazing resource for finding and acquiring high demand property. Whether you’re looking for a downtown apartment or a lavish townhouse, just be sure you know exactly what you’re doing before you start to bid. Understand the contract terms, get pre-approved for financing, know how you’re going to pay the deposit, and remember never to bid above your budget. Go in knowing the home’s real approximate value and if you don’t win this time, take it as another learning experience and try again.
Whether you get the home of your dreams through an auction, sale, or if you decide to build it yourself, we wish you good luck and happy house hunting!
Read to talk to us about conveyancing? Get started here.