Auctions can be a very intimidating place, especially for first time buyers and sellers. With the lingo, the fast pace, fellow auction competitors vying for the best deals on the best homes, and so on, you might not feel like you are cutthroat enough to participate.
Fortunately, auctions aren’t actually cutthroat—they’re just lively and exciting. They can also be great places to both buy and sell a home. Whether you’re on the market for a new home, or putting a home on the market, here’s the basics of buying and selling at auction.
How do auctions give the seller an advantage?
Auctions are often the best place to earn the highest bid on your home. As a seller, auctions offer numerous advantages that won’t be found elsewhere in the marketplace. This is just part of the reason why more homes are being sold on auction every year.
Here are some of the advantages of selling at auction:
- Conditional buyers still have a chance to negotiate with sellers if the home doesn’t earn an acceptable bid on the auction block.
- Selling a home without a fixed price often means that more potential buyers will be willing to consider the property, even those looking to pay cash.
- Buyers attending an auction are ready to buy, making them high-probability clients, and often have the liquidity to make a purchase the day of the auction without conditions. Frustratingly, conditional contracts fail at a rate of over 30%.
- Buyers at an auction are prepared to pay the maximum price for the home they set their sights on and are competing with other buyers rather than with you.
- Because buyers are determining the value of a property on auction, you eliminate the risk of third-party valuers or consultants placing a lower than necessary price on your property.
What should you expect when selling at auction?
Your real estate agent can help you navigate the auction process, from pre-auction to contract signing. Here’s what you should expect along the way:
- Count on your residential property management services to keep you abreast of what’s going on in the market, specifically in your area and with similar properties.
- You should go over every aspect of your auction marketing plan in detail. This can include everything from the snacks on offer at your open home to the images and text you’ll use in your advertisements.
- You should be kept abreast of daily updates with weekly face-to-face meetings.
- You should receive a written report on the delivery and success of the marketing campaign and any interest your property might have received from prospective buyers.
- You should receive assistance setting an ambitious yet realistic starting and reserve price.
How do you prepare for buying at auction?
Many people mistakenly assume that auctions are ideal for sellers because they disadvantage buyers, but this isn’t true. Buyers are given the opportunity to compete on an even playing field, with negotiations held publicly to ensure fairness. Should you succeed in the auction and win the home, you can sign your contract that day without fear of the deal falling through due to hardball or shady negotiating tactics.
While the format of a home auction is inherently fair, you still need to know the ins and outs of the process to make sure you’re taking full advantage of the opportunity before you. As you prepare to bid on a home at auction, keep the following in mind:
- Ensure that your finances are in order before showing up to the auction. This guarantees that you know exactly how much you can bid and eliminates the risk of some unforeseen financial hurdle that could derail your deal at the last minute.
- Thoroughly review all auction documents before the day of the auction, so that you have time to seek out answers to your questions before bidding starts.
- Arrange for a professional property inspection for the property in question and request that your solicitor review the title and any adjacent legal matters.
- Familiarise yourself with the local housing market so that you have a clear-eyed understanding of the value of the property you’re bidding on. If you feel like the starting price or likely bids are noticeably higher or lower than you think they should be, consider a property valuation from an independent registered valuer.
- Attend a few auctions without bidding before going to the auction for the home you actually want. This will help you acclimate to the auction environment and give you a better idea what to expect.
- Bring your pocketbook and your pen! Once you’ve won the auction, you’ll need to sign a sales agreement and pay a deposit on the purchase price (this is usually about 10%).
If you find that you can’t attend the auction, you can also consult with the property owner and submit a pre-auction offer if they’re willing to accept one. Either way, always keep your sales consultant in the loop and make sure they’re aware of your interest in the property so that you can be contacted if other interested parties submit higher re-auction bids.
Get what you want from your next home auction
Whether you’re buying or selling at auction, knowing the ins and outs of the process is crucial to your chance of success. Do your homework and come prepared. Udy Realty is one of Auckland’s leading property management services. They can help you navigate home auctions to find the perfect property. For more information about buying and selling property at auction, contact Udy Realty today.