Professional Advice by Mitchell Lambert, Lambert Willcox Estate Agents
If you are thinking about buying or selling a property at auction, here is some make or break advice from an experienced real estate professional and auctioneer. From how to play it cool to strategies that will help you win.
What Are Your Auction Strategies or Secrets That Have Shown Success?
Mitchell Lambert: “The big one is research. The number one thing for me is I would usually find the address of the property, and then I would do a map search of any properties that have sold within a kilometre radius within the last 12 months. Then I would do my research and identify between three to five comparable sales. From those comparable sales, you will usually be able to identify a range in which you believe the property is going to fall.
The other thing that is very important, is if you have an interest in the property you need to make yourself known to the agent that is in charge of the property. That doesn’t necessarily mean showing your hand, but it would look along the lines of “I’m interested in 123 Jones Street, I’m not sure at this particular stage. However, if there are any changes or there are any updates, please make sure that you make that known to me.” The reason that you do that, is because if the property is potentially sold prior to auction or negotiation is entered into with another party, you may potentially miss out. So, just make sure that the agent in charge knows you are interested and want to be kept in the loop.”
Read the Documentation & Do Your Research
ML: “The third, request a copy of the contract. So that you can understand when the auction is going to take place, what are the terms, what is the deposit amount and what is the settlement time. It is very important to read all the documentation available because it is there for you to look at.
Lastly, have a set budget in mind. Always be ready to negotiate there and then on the day if you think it is a good opportunity. But, have a reasonable budget of a couple of percent of where you would like to sit and base that budget on the comparable sales. The agent may even point out a few comparable sales to you, but it is always good to inspect a number of other properties as well. This is so you can know that say, ‘444 Giant Street was a four-bedroom house and this is a three-bedroom house, but it has a pool. It is also in an inferior location, so I think it is between $X and $Y. This way you can logically put the pieces together.”
Should a Buyer Play it Keen or Play It Cool When Buying a Property at Auction?
ML: “I much prefer when a buyer is more upfront with me as an agent or if I’m conducting a campaign as an auctioneer because then I know that I can keep them up to date. Particularly, if you have had a high number of inspections, it is very much project management. There are a lot of moving parts and interest coming from everywhere, it can be very difficult to manage it from time to time. You don’t want to give away your hand. There needs to be some element of a poker face but definitely demonstrate to the agent if you are keen.”
Don’t Automatically Bid
ML: “When it comes to bidding at auction, that’s the interesting one and it depends on the purchase price of the property. For example, you are in a million-dollar home and the reserve price is $1.5, it is likely the auctioneer will be going in $50,000 bids or $100,000 bids. So, what you don’t want to do is automatically bid over the reserve price if you haven’t been asked to do so by another party.
What I mean by that, is the only time ideally that you are bidding over the reserve price is if you are organically being pushed up from live bids in the marketplace. An example of this would be two other parties are fighting it out with you, three bidders on the day going in $5,000 increments until it is sold. That is a true demonstration of the market and it sold there on the day. On the other hand, what you don’t want to do is be the only bidder there and you throw out a bid on the day that is just accepted instantly because you don’t know what the actual reserve price is.”
Quid Pro Quo
ML: “Again, indicate to the agent that you are here to purchase a property and not play games, but you are going to enter into a negotiation as well. If the agent or owner wants to play the game, well you just play it with them. Alternatively, if they are being very upfront, then you are probably going to be more upfront in your own behaviour. It is very much a quid pro quo style of situation. Usually, you can pick up on the type of owner you are dealing with by the impression that the agent will give you.
Most importantly, don’t feel pressured. Stick to your guns and back yourself. If it is not in your budget, don’t break any rules. Do your research and stay within your means.”