Bid too low and others will outbid you, bid too high and you will pay more than you should. Buying a home at auction, whether that’s an apartment, a duplex as an investment, or a family home, is often quite a stressful experience for homebuyers.
The following tips will help you understand the factors involved when bidding for a property. However, it’s important to remember that you can’t control how high or how low other bidders will place an offer for, so your best chance of outbidding the field is to go to the auction fully prepared. And hopefully much more prepared than they are.
Secure a Home Loan Beforehand
Just how much house can you afford to buy? Obviously, you can’t make a bid for a property if you don’t have the money to back the bid up, so secure a loan before you make a bid and don’t forget to factor in closing costs which usually total around 5%.
Know the Value of Similar Properties
The best way to understand how much you should bid for a property is to look at comparable properties in the area. This doesn’t mean looking at properties currently for sale, but rather those already sold. The homes to look at should have been sold within the past three to six months, be located in the same area, have the same number of bedrooms and be of a similar age, size and style.
Understand Typical Seller Behaviour
Although you can never completely predict the course of action that a seller will take, most sellers generally follow one of three paths. Firstly, some sellers try to create a bidding war by under-pricing the property, secondly, some overprice the property to afford themselves more room to negotiate, and thirdly, some sellers simply price the property according to what they think they’ll get for it.
Consider the Current Real Estate Climate
When the real estate climate is hot, expect some bidders to place bids that are just too high and push property prices skyward. And when it’s cold, expect the opposite. However, even expert real estate agents can’t predict when the market will cool and empower you to place bids that are lower than what you’d ordinarily expect to pay, so it’s quite often the case that you’re not afforded this luxury. Still, understanding the nature of the current real estate climate is essential when bidding on a property.
Make Sure the Property Is Right for You
Lastly, make sure the property is right for you. If there’s something unique about it that you won’t find elsewhere, it may be in your best interests to place a higher bid. However, if it’s nothing out of the ordinary, do you really want to pay more for it?
These tried-and-tested property auction tips aren’t infallible, but they will help you to confidently bid for a property. And as you can see, outbidding the field isn’t nearly as important as being prepared to navigate your way through the home buying process.