Expert Advice with Brett Warren 05/02/2018
Heading to an auction with the intent to make a purchase can be a nerve-wracking experience, especially if you’re new to the property game.
Emotions run high, which can get in the way of good decision-making, and the prospects for making a costly mistake is heightened.
When all is said and done, you want to look back at your property decisions with pride, not regret.
So, with this in mind, what are the most common auction mistakes made by rookies, and how can you avoid them?
- They hesitate
It’s normal to be nervous when you go to auction for the first time – but don’t let those nerves get to you.
Hesitating on your bid can allow the other bidders to sense your nervousness and recognise your inexperience.
Furthermore, agonising over each and every bid is the quickest way to give others the leg up they might need to make the winning call out.
Here’s my tip:
When you go to auction, stand tall and make concise bids with an air of authority.
Jump right into it and give it your all, until you reach your spending limit.
Which takes us to the next mistake...
- They don’t know their spending limits
A big mistake many rookies make is failing to set clear spending limits – or rather, failing to stick to them.
You might think it’s enough to go to auction with an idea of how much you’d like to spend, but the fast pace of an auction can leave your head spinning.
Trying to calculate the amounts in your head for what you can and can’t afford can have you agreeing to spend too much, or missing out on the property.
Here’s my tip:
Head to the auction knowing your limit.
Consider setting an unusual amount, such as $803,500 rather than $800,000 even, as it gives you some wiggle room if your reach your maximum limit.
If that that amount is hit, do not make another bid – there are plenty more properties in the sea.
- They start too small
Never forget the aim of an auction is to eliminate as much of the competition as possible.
When the bidding pool is small, you have a higher chance of winning, and less people means less bidding mistakes, less rushing and less stress.
The best way to do this is to bid big.
Stick to within your spending limit of course, but rather than bidding a few hundred each time, increase it to a larger amount like $10,000.
Here’s my tip:
Be bold.
Not only does this let everyone know you’re a serious competitor, it might also intimidate a few other bidders and lead you towards a successful outcome!
- They let emotions get in the way
Buying a property, whether for you to live in or as an investment, is an experience full of emotion.
You’ll feel excited, nervous, scared, wary and enthusiastic, all at the same time.
However, emotions are not helpful in an auction.
They can cloud your judgment and cause you to make snap decisions that you wouldn’t normally make.
Far better to keep cool and remain level-headed as much as you can, as you’ll get a much better result.
Here’s my tip:
In order to avoid this, treat the whole experience like a business transaction (which is exactly what it is).
By putting it in very black and white terms, you can limit the emotional ride during the auction.
It also lowers the chance of an escalating bidding war between hopeful owners – which is just what the auctioneers aim for.
- They fail to prepare
Congratulations… you’ve won the auction!
Now, are you ready to pay for it?
If you’re the highest bidder at the close of the auction, you’re legally obligated to buy the home, and most sellers will require you to put down a deposit right then and there.
This means that prior to the auction, it’s essential that you make sure you’ve got your finances sorted.
Check the contract so you know what will be expected of you should you win, and remember that there is no cooling down period when it comes to auctions.
Here’s my tip:
Once that hammer falls, if you’re the highest bidder, the property is yours.
So, enter the auction as if you’ve already won, with a deposit cheque ready to hand over, and all of your inspections and due diligence complete.
The process of bidding at auction can be overwhelming and intimidating at first, but it’s also a real thrill to secure a property this way.
If you’ve never bought at auction before, I would encourage you to attend a few that you have no interest in.
This way, you can observe the other bidders and also the auctioneer, to gain an understanding of how the process works in a low-pressure situation.
It may even showcase some "auction don’ts" in action for you to learn from!
At the end of the day, the more prepared you are for auction day, the better the result is likely to be.
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Brett Warren is the Senior Property Strategist at Metropole Properties in Brisbane and uses his 12 plus years property investment experience and economics education to advice clients how to build their portfolios.
He is a regular commentator for Michael Yardney's Property Update.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.
