Auction Bidding by Experienced Buyers Agents

You have been house hunting for months and have finally found the house that matches all your criteria. Price seems good, your fridge fits in the kitchen and you have a list of home improvement visions to make the home perfect. You make the move to buy and realise the property is going to auction in a few weeks.  So what do you need to do from this here?

Firstly, a few points every buyer must know about an auction:

Auction buying is unconditional. This means if you win the auction, you have to commit to buying. No cooling off allowed.

On auction the day, successful bidders must pay a deposit, normally this is 10% of the purchase price. This figure is non-refundable, so if you have problems with your finance and can’t settle on the property, losing your deposit is stand practice under Australian law.  

Buyer beware, if a house has structural defects, unpaid rates or a property dispute with neighbours, this is all inherited when you purchase.

Successful auction bidders must understand a property’s market value, it’s common for bidders to overpay for property. This can causes problems with your finance and your bank not loaning you the correct amount of funds putting the pressure back on the buyer to make up the difference.

So doing your homework is key to making sure you don’t get caught out with a lemon property.

Why real estate agents love auctions.

If all goes to plan, an auction campaign should only take 4 weeks to sell a house. This puts pressure on buyers and sellers to confirm to a time frame. Most importantly, real estate agents need to do very little to condition buyers and vendors to come to terms on price.

Did you know an auction model is designed to return maximum dollars to the pocket of the vendor. It puts buyers under unnatural pressure in front of competing parties where only experienced property buyers know how to avoid the pitfalls and come out on top.  Typical pitfalls buyers get caught up in: 

Auctions are designed to create uncertainty, excitement and tension in buyers. This heady mix of emotions serves to push bidders to extend themselves beyond their price ceilings and what they logically know to be reasonable.

Real estate Agents under quoting: All too often, potential buyers are offered price estimates that fall notably short of the final sale price, in order to ensure that as many interested (and emotionally attached) parties at the auction as possible.

The third factor, of course, is lack of preparation and research. You are almost certain to underachieve in this market without studying comparable local sales, acquiring the proper inspection reports and having a reasonable understanding of the current market dynamics.

How buyers agents help you? 

Buyers agents are experienced real estate agents that have sold hundreds of homes prior to becoming buyers agents. The know the ins and outs of bidding at auction, negotiating when an auction closes and most importantly when to walk away if things get too heated.  

Our Buyers Advocates will spare you the stress, uncertainty and emotional attachment which is associated with any auction process. We will be your own personal representative at property auctions to enter bidding on your behalf and relentlessly try to secure the property of your choice at the lowest possible price – whilst remaining strictly within your budget.

Dummy bids: We have talked to auctioneers in the past and “encouraged them” to stop running the bids up and on several occasions identified bidders to prevented dummy bids from pushing up the price on our client.

Post Auction Negotiations: We have let properties pass in at auction and entered into post-auction negotiations straight after and bought below the pass-in figure.

Real Estate agents and under quoting: We have saved countless clients from wasting their time and money getting building and pest inspections and paying us to attend auctions where the property was drastically underquoted. In every case these properties sold for well above our potential clients’ financial capacity.

No emotional bidding: an advocate understands market value, in other words knowing a good market purchase for the property there bidding on. With current conditions most properties over exceed previous market prices and it takes real estate exprience in knowing when to walk away. 

In making any large purchasing decision you always consult a professional to protect your best interest. Consider the example of buying shares.

Would you invest $20,000 into the stock market with out understanding what the market is doing? How the company is preforming? Is there any foreseen future volatility that can affect the stock positively or negatively? Most people would seek the assistance of a stock broker to avoid massive financial loss. 

Buyer’s advocates are the stock brokers of real estate. The difference between them and the traditional agents are buyer’s agents only represent the buyer.  An Auction can be daunting, stressful and has a high stakes outcome. Having professional Buyer agent at your side to do the bidding for you is invaluable.

At Wise Real Estate Advice, we ensure all boxes are ticked and that sincere care is taken when providing a buyer with the wise advice and action required throughout the buying process. To speak to one of our friendly buyer’s agents click here to fill out an enquiry form or just simply call us on 1300 00 WISE. 

More information on buyers agents service. 

Negotiating After Auction.

In Victoria, bidding at auction is a common occurrence, it seems like most property sells under the hammer but what happens if a property doesn’t sell at auction and gets passed in?

This is a scenario that a buyer’s agent actually prefers to work in because it creates the opportunity for negotiating directly with the real estate agent with no other bidding competition potentially upsetting or disrupting a negotiation. 

Prior to attending auction, a buyer’s agent will have done his homework. He would have inspected the property at large as well as a number of comparable properties in the area. Next, he would compare this to homes that have sold in the last 3 to 6 months. This helps him to design an auction bidding plan.

Come auction day, an experienced buyer’s agent would capitalise on a failing auction. Typically, either by bidding before an auction closes or approaching the agent directly after the auction to enter into a private negotiation.

This is where a buyer’s agents’ experience and homework on a property tie in together to win their clients a great deal. For more information on this topic, check out our page on ‘Negotiating after auction.’ 

Have a chat with a professional auction bidder today. 

An obligation free phone call can help you understand how an auction bidder can secure your home and minimise the risk involved in buying property at auction. In most cases, a good buyers agent will save you enough money to at least cover the fee of hiring a buyers agent and manage the whole process on your behalf.

For an obligation-free conversation, contact Wise Realestate Advice on 1300 009 473 to discuss how their buyer advocates can turn your property goals into a reality.

Auction FAQ’s:  

When you’re new to the world of buying property, it is common to have a series of questions about a process that doesn’t offer much information. At Wise, we have put together some of the most commonly asked questions when it comes to auctions.

Has the seller set a reserve price? At every property auction in Melbourne, the auctioneer usually takes a pause during a live auction to consult the vendor. This is to discuss if the pre-auction reserve has been satisfied. At this point, if the vendor gives the agent the green light, the property is on the market and the highest bid thereafter will purchase the property. 

When is the property sold at auction?

The sale takes place at the time the successful bidder signs a legally binding contract and pays a negotiated deposit for the property. This is known as ‘Exchange of contracts.’

Do I have to pay 10% deposit on the day?
There is no law stating that a 10% deposit is required. Rather, a negotiated amount between the seller and buyer. Property law does state that a deposit must be something of value, usually currency but could be anything the seller accepts, for instance, an expensive watch, a car or painting.

On auction day, successful auction bidders must sign the contract of sale, this will summarise settlement terms, deposit amount, settlement date and amount paid for the property. All of this is negotiable and using a buyer’s agent could leverage these terms to close a negotiation. 

TIP: Real estate agents love collecting a 10% deposit because it covers their costs of advertising and commissions, regardless of if the buyer settles on the property or not.

Can I submit an offer prior to auction?

This is usually up to the seller and their representative the real estate agent. There is a great change of a private negotiation if the auction campaign has been slow.  Hence a high chance of a pre-auction offer being accepted.

A buyer’s agent prefers to operate in this type of scenario as it favours their clients offer by reducing the competition – otherwise known as a private negotiation. For more information on this topic, you can read our article on Making an Offer on a House.

What is the price of the property if it’s selling at an auction?

This issue is one of the biggest problems in real estate and unfortunately real estate agents leverage this advantage.

Why is it so hard to set a price? No two properties are the same hence their price can vary. Sometimes a little but most of the times, a lot. Factors like school zones, land size, quality of interior finishing and size of floor plan need to be taken into consideration.

In 2017 the state government made efforts to establish laws and stop agents from underquoting, it’s still very common for properties to sell well above their quoted price. More information on under quoting.

At Wise Real Estate Advice, our buyer’s agents give clients a detailed market appraisal based on similar sales that have been made within the last 6 months. The price will factor in the market value and what the property should sell for under certain auction conditions.

Auction lingo confuses me, what do they mean?

First call, second call, vendor bid, refer the bid? Check out our page on understanding auction speak.

Is there cooling off, building inspection or subject to finance clauses allowed at auctions?

The reason why sellers and real estate agents love auctions is because the result is final, in other words ‘unconditional’. This means the responsibility falls on the buyer if:

• The property is faulty. It is up to the buyer to organise a building inspection prior to the auction date.
• If you have over-paid for the property and the bank will not offer you finance. It’s wise to have an unconditional bank pre-approval.
• If you change your mind, winning an action means you have purchased the property, no cooling off period applies.

If for whatever reason you choose to not proceed with the sale, at minimum you will lose your initial deposit. The worst-case-scenario would be the seller suing you for further loss or damages.

How many vendor bids can an auctioneer make?

An auctioneer can make as many bids as they seem necessary to push buyers above the vendor’s disclosed reserve price. At Wise Real Estate Advice, our buyer’s agents frequently negotiate below a vendor bid if it’s deemed to be unreasonable. 

Do I have to pay the real estate agent if I win the auction?

It’s illegal for a real estate agent to accept two commissions when selling one property. The real estate agent is paid exclusively by the seller to advertise and sell the property, hence there is no need for a buyer to pay the agent.

If the buyer chooses to engage a professional bidder or buyer’s agent to represent them at action, then the pre-arranged fee is settled upon prior to the auction. More information on buyers agents fees.

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