Work out your best and final offer for a property auction

You’ve found the perfect property and it’s about to go to auction. How do you bid at the auction without breaking your budget? Here’s how to succeed without overpaying.

Understand how auctions play with your emotions

People sometimes end up overpaying at auction when they let their emotions get the better of them. The auction process is designed to capitalise on this by putting buyers under pressure and taking them out of their comfort zone in order to increase the sale price of the property.

Firstly, auctions pit buyers against each other to create competition.

Secondly, seasoned auctioneers know how to work the crowd. They use humour to make you lower your guard and lose focus. They pitch their voice to stir your emotions and pace the auction to create a feeling of momentum.

Thirdly, many people find it intimidating to bid publicly in front of a crowd.

The key to staying level-headed and calm at an auction is to be prepared. Do your homework beforehand so you know what to expect at an auction. Attend some auctions as a participant to get a feel of the situation. On auction day, consider bringing someone who can support you and help you stay grounded. Or if it all feels too much, you could ask someone you trust to bid for you within your budget. Get more tips on buying a house at auction.

Understand the real estate agent’s strategy

Real estate agents put a property up for auction to try and sell the property as quickly as possible, at the highest price possible. Some real estate agents might advertise a conservative value on a property listing to draw a larger crowd to the auction. Remember that a real estate agent is paid a commission to sell the property, so they’ll work hard to get the best price for the seller.

That’s why it’s important to do your homework. Research comparable properties in the area so you know what the property is worth and what the sale price is likely to be. Take advantage of our free ANZ Property Profile Report, which includes property price information, comparable sales results and sales and rental history, to help you with your research.

Find out why the seller is selling

Find out as much as you can about the seller to help you decide on your bidding strategy. For example, if they’ve already bought a new home, they might be under pressure to sell. Or if they’re not facing any pressure, they might hold out until they get the price they want.

Ask the right questions so you can quickly identify potential issues with the property, get a better idea of the property value and understand the seller’s motivations. This could help you make an offer that will put you ahead of your competition.

Set a budget for your final offer

A big part of setting a budget is figuring out how much you may be able to borrow and if you can afford home loan repayments. A helpful way to do this is to apply for pre-approval from your lender.

Armed with an indication of how much you could borrow and your research of how much the property might be worth, you can work out whether or not the potential sale price falls within your budget, and what your upper limit is. That way you can more confidently bid at auction up to your limit.

Prior to bidding you will also need to ensure that you get your deposit ready and have performed the steps outlined above so you’ll have put yourself in a position to potentially make a winning bid.