Dream home up for auction? The auction experience can be both exciting and tense – it's fast paced and competitive, creating a high pressure and emotional environment. Whether it’s your first-time or you’re a seasoned bidder, here’s your guide to auctions and what to expect.
Make sure you’re registered to bid
Before you begin, make sure you’re registered to bid – keeping in mind there are different rules between each state and territory in Australia.
In New South Wales, ACT, Queensland, Northern Territory, and South Australia, it is mandatory to register prior to the auction and provide photo identification. If a buyer’s agent or real estate agent is bidding on your behalf, they’ll have to provide their licence number.
However, in Victoria, Western Australia, and Tasmania, you’re not required to pre-register, so anyone can turn up on the day and bid.
Understand the auctioneer’s guidelines
When the auction starts, the auctioneer will typically outline all the rules that bidders must be aware of. These rules vary for each state and territory, but typically include:
Only one vendor bid is allowed (this rule only applies in NSW and ACT – in other states multiple vendor bids are permitted), and the auctioneer can do this on their behalf. A vendor bid is a way of steering the auction towards the desired sale price.
The auctioneer can reject bids that are not in the best interests of the seller.
The auctioneer can’t accept a bid after the fall of the gavel.
The auctioneer will help negotiate if there is a disputed bid.
Prohibition of dummy bidding. Dummy bidding is when bidders, who don’t intend on buying the property, bid to inflate the price of the property to help the seller.
Monitor recent sales up until auction day
By looking at recent selling prices of similar properties in the area, you’ll be able to get a good indication of the market value of the property you’re wanting to bid for.
Set a set cut-off range
Auctions can be a high-pressure and emotional environment – you want to avoid making hasty decisions. Determine a price range that you’re comfortable with, as it will give you some flexibility and a guide to use on auction day. The bottom of this range would be your best-case scenario and the top of this range is what you’ll accept to stretch to but aren’t willing to go over.
Obtaining conditional pre-approval from a lender can help you clearly define a budget and remove all the guesswork. Learn more about conditional approval here. If your borrowing power is less than your desired amount, you can learn more about four ways to increase your borrowing power here.
Analyse the competition
Arriving early to find out how many bidders are registered can help you determine your opening bid. For example, if there are 25 bidders, you may decide to open with an aggressive bid to immediately decrease the bidding pool. On the other hand, if there’s only a handful of bidders, you could open with a more conservative bid.
Arriving early could also allow you to find a prominent position to observe your competition throughout the auction. Keep an eye on verbal and non-verbal cues from other bidders that show the auction isn’t going their way. These signs include:
Facial expressions and body language including Hesitation
Having an in-depth conversation during the auction with partner and/or family
Couples and/or families looking at each other
Bring out your best poker face and stay calm throughout the auction to avoid revealing your intentions to other bidders. Try to avoid showing that you’re emotionally affected by different situations that occur throughout the auction (eg. becoming upset when you’re reaching towards your bidding limit)
Remember to think about your cut-off range. You want to avoid becoming emotionally vested to the property during auction which could cause you to make impulsive financial decisions above your bidding limit.
Consider using the smaller or odd-numbered bids
Bidding in odd increments can help slow the pace of an auction. This results in forcing the auctioneer to rethink and engage in more challenging calculations.
This could be a helpful tactic if the bidding begins to creep closer to higher end of your cut-off range.
Looking for your dream home? Learn more about where to start here.
The article does not have regard for the financial situation or needs of any reader and must not be relied upon as financial product advice. As this information has been prepared without considering your objectives, financial situation or needs, you should, before acting on this, consider the appropriateness to your circumstances.