Pre-auction offers and winning bid strategies
For some people, it takes years of searching to find the perfect property. When they do, there’s nothing they want more than to move in right there and then. It’s easy to get caught up in the moment – until you realise your dream home is up for auction.
Auctions are stressful – especially when you’ve fallen in love with a house. However, so you don’t end up paying more than you should, it’s critical to approach any sort of negotiation with logic rather than emotion.
Here’s what you need to know about pre-auction offers and winning bid strategies so when that hammer comes down – it’s in your favour.
Buying before an auction
Making a pre-auction offer means putting forward an offer on a property before the auction date. It’s a simple move that can take some of the uncertainty out of bidding at an auction – and better your chances of becoming a homeowner.
Two things can happen if the seller is willing to accept your pre-auction offer:
- • The auction may be held earlier than the advertised date. If this happens, the pre-auction offer becomes the first bid – and the auction proceeds normally from there.
- • The auction may be cancelled if a sale and purchase agreement is signed.
Here are some things to consider before making a pre-auction offer:
1. Make your offer unconditional.
One of the reasons sellers use auctions is to give interested parties enough time to carry out due diligence – so they can bid unconditionally on the day.
2. Make it worthwhile for the sellers.
Your offer needs to be enticing enough that the sellers want to take immediate action – especially if the property hasn’t long been on the market.
3. Beat others to the punch.
By making a pre-auction offer, you’re likely to cut out other prospective buyers who might not have all their ducks in a row.
4. Use time to your advantage.
It can feel like you’re skating on thin ice but make your offer at the last possible minute. Being too hasty could be the reason you lose out to another buyer.
5. If it’s not accepted, don’t lose hope.
Just because your pre-auction offer isn’t accepted doesn’t necessarily mean the property won’t sell at that price. You can still attend the auction and place a bid if nothing better is presented on the day.
6. Be prepared for the auction to be brought forward.
The most likely action after an acceptable pre-auction offer is made is bringing the auction forward so other prospective buyers can bid. In some cases, no further bidding occurs, but it’s better to be prepared for competition on the day.
Put your best foot forward at an auction
Tips for a winning bid strategy
More homes than ever are being sold by auction, and despite their intimidating nature – particularly for first home buyers – they can be one of the quickest ways to buy a property. But walking into an auction without a plan is a recipe for disaster and heartbreak.
When it comes to buying a house at an auction, what can you do to give yourself the best chance of coming out on top?
Here are our top tips:
Do your homework
Don’t be tempted to gloss over due diligence in a rush to secure your dream home. Once sold at auction, the sale is final – and you can’t pull out. You want to know exactly what you’re buying, so do your research on the property (builder’s report, LIM) and market to find out what the house you’re considering is worth.
Get some practice – go to other auctions
If practice makes perfect, then watching what happens at other auctions will help you prepare for what to expect. It can also help to calm any pre-auction nerves. When it comes your time to bid, if you don’t feel comfortable, you can engage the services of a professional bidder.
Get your finances sorted
Before the bidding starts, speak to your mortgage broker about getting unconditional pre-approval. If you’re able to secure it for the property you’re interested in, you’ll be able to bid more confidently. If you win, you need to pay the deposit on auction day.
There’s a lot of debate around whether buyers should bid early or late, but the most important thing is to bid confidently. Come up with a bidding strategy that allows you to take control – without giving away too much about your financial position.
Know your limits
Try not to get caught up in a bidding war – especially if you can’t afford it! Work out what your limit is before the auction starts, and don’t bid higher than you’re comfortable paying. At the same time, don’t be afraid to hit your upper limit – there’s no point losing out on your dream home because you wanted to nab a bargain.
Be prepared to lose
There is every chance that the property will go above and beyond what you’re prepared to pay, and at this point, you need to be ready to walk away. While it can be hard to watch your dream home go to someone else, there are plenty more fish in the sea. You never know – an even better house might be just around the corner.
Taking control of the auction process
The stress of bidding at auction can make staying within your budget challenging, and the pressure of making on-the-spot decisions pumps your anxiety levels to a new high. Pre-auction offers can be a great way to manage the money you have to spend and reduce your competition come auction day. But whether your pre-auction offer is accepted or not, the likelihood of going to auction is high, so it pays to be prepared.
Ready to place a winning bid at auction? Talk to the Global Finance team today.
**These are general guidelines and are by no means a reflection of bank or lending policies