Auction process insights: going in prepared
The auction process can actually be fun; didn’t you know? Yes, it can be one of the biggest financial commitments an individual can make in their lifetime and yes, everyone at the auction is putting on their strongest poker faces. But with some research and preparation, you won’t need to put on a poker face. As everyone else sweats bullets, you can actually enjoy the auction process knowing there won’t be any surprises.
Before auction day
The only thing you need to learn is that the more you know the greater the income for yourself. This means research, research, research. Contact real estate agents and ask them about the area you are interested in, gauge their opinions about typical property values in the areas you are looking. Also consider employing, or at least sounding out, a buyer’s agent. A once off meeting with a buyer’s agent should give you great insight into the suburbs you are searching within.
With a sound understanding of the market, both local and citywide, your next move is to go looking. Set yourself six months to really understand and see what is out there, and enjoy the process. If it is going to be the biggest transaction of your life, then maybe you should become a bit of an expert in what it is you are buying.
The actual auction process
So you have been to the inspections and have ensured the integrity of the purchase by using a building surveyor to go over the place with a fine-tooth comb. The final stage is that dreaded auction day.
But you know what’s coming, because you’ve read this article. So you’re as calm as a cucumber.
First things first
Following a final inspection of the property, the auctioneer will begin the auction process by detailing some of the features of the property and then detailing the terms and conditions of how the auction will work in regards to state law. They may make mention of the fact that by bidding you accept the terms of the contract that is on display before the auction. You cannot negotiate the terms of the contract after sale without the vendor’s approval. With this in mind, it is imperative that you have read and accept the contract’s terms before the auction.
Bidding is open
There are a number of ways an auction can develop. It all depends on how the bidding unfolds, if it even does so at all.
- Bids a’plenty.
If the bidding is strong for a property and reaches close to the vendor’s reserve they may consult with the vendor before declaring that the property is ‘on the market’. If there are no more bids, the property will be given to the highest bidder (with that old classic, “going once, going twice, going three times”) and declared sold. However, once it is ‘on the market’ you may see the bidding open up again.
- Bids a’few.
If bidding does not reach the reserve, the auctioneer will usually consult the vendor. The pressure is on the vendor at this point as they decide between three choices. The first is to place a vendor’s bid, suggesting that the vendor would like to see the bidding go higher. This may annoy the highest bidder or it may spark more interest thus it is up to the auctioneer to gauge their audience and help the vendor make the right decision. The second choice is to declare the property on the market if the last bid was close to the reserve. The third (and often the most common) is to pass the property in. In this case the highest bidder has the right to negotiate with the vendor by meeting the reserve. If they do not meet the reserve, negotiations are open to other bidders.
- Bids a’none.
All quiet at the homestead? Just some tumbleweed blowing in the wind? This isn’t that uncommon but for the newcomer to auctions, this can seem like an anomaly. “Why is everyone even here if they don’t want to bid!?”
If the auctioneer can’t attract any bids, even with a vendor bid, they will consult the vendor and if no first bids can be drummed up, the property will be passed in. However, it is common for a property to be sold within weeks of it being passed in.
So, what about all those weird auction phrases, like ‘we are playing for keeps’? Check out our glossary of auction speak terms you are likely to hear on auction day. Avoid losing the property because you think the auctioneer just made up a word.