Real estate auctions: Big mistake leaving buyers stranded

The road to missing out on your dream home at auction is paved with good intentions – these are the crucial mistakes you can’t afford to make in today’s market.

It’s the moment one of life’s biggest (and potentially most expensive) decisions is made and it can be over in just minutes so it makes good financial sense to be match fit on auction day.

Although recent real estate data shows a cooling market and decreasing clearance rates in some major markets, buyer demand is still outstripping the supply of quality homes in popular locations. Those hot properties are more likely to go to auction, so unless you make a knockout offer prior, you’ll probably be bidding under the hammer.

While experienced auctioneers and agents come armed with an arsenal of auction tactics, savvy bidders can also bring their A-game.

Be prepared. Picture: Annette Dew

DO YOUR HOMEWORK

Veronica Morgan of Good Deeds Property Buyers said the preparation needed to buy successfully under the hammer could fill a book, so she wrote Auction ready: How to buy property at auction even though you’re scared s#! tless.

“It doesn’t matter whether it’s a hot or quiet market, the important thing is understanding how to price a property. Step one is knowing where it should sell in the current market, step two is working out ‘What is it worth to me? And what’s my limit?’” she said.

“I see people come unstuck when they make all those decisions in the heat of the auction, precisely when all your behavioural biases are running rampant. Auctions are set up for that to happen and most people are blind to it and get caught out.”

Veronica Morgan, leading Australian property expert.

UNDERSTAND THE PROCESS

A switched on buyer knows that auction day is just another part of the marketing campaign, with the auctioneer steering the ship across the line.

“They’re well trained in using all the right trigger points, and many buyers are none the wiser. Buyers know auctions are high pressure, but most bidders don’t for a minute think about the deliberation that goes on behind the scenes to set that up,” Ms Morgan said.

“An auctioneer is expert at reading the room and bidder body language and can tell when someone’s got more in the tank, and when someone else is at their limit. They’re often not trying to get the person at their limit to go further and buy the property, they’re trying to get the other person to pay more.”

Ms Morgan explained buyers shouldn’t be focused on how the auctioneer is interacting with them, but consider how the auctioneer is behaving with other buyers to make you pay more. “I say to my clients all the time, ‘I’m not just trying to win the property for you. I’m trying to stop other people bidding.’”

Know what you’re doing. Picture: Annette Dew

LEAN INTO THE PRESSURE

Director of Sold By Auctions, Andy Reid, said buyers seeking a competitive edge should use the pressure cooker environment to their advantage.

“Remember everybody involved in the transaction is a human being and the motivation for everyone is to get a deal done. And yes, there’s pressure on buyers, but far-out there’s pressure on vendors, agents, and the auctioneer as well,” he said.

“Speed can be an amazing asset for bidders. If they counter bid really quickly then the pressure is shifted to the next decision maker.

It becomes like a timed chess game and whoever’s clock is running, the pressure on them is increasing. And that pressure isn’t just on competing bidders, but the auctioneer as well. They like to get into a rhythm and if you can disrupt that there’s only so long they can give other buyers before it starts to lose its credibility.”

Mr Reid highlighted that in a hot market less experienced auctioneers can get their vendors great results, but when the market slows their job gets tougher.

“With a professional auctioneer you can try every trick under the sun and it won’t work. But if you come up against a part time auctioneer with only a plan A, then disrupt their plan because very few have a plan B.”

RECONSIDER YOUR CO-PILOT

Nervous bidders usually want a support person beside them, but Mr Reid warned to choose them wisely.

“I’m seeing a lot of know-it-all relatives lately, first-home buyers are out with them every single weekend. Don’t bring them along because, bless them, they’re often there with the best intentions wanting to stop anything negative happening, but my God do they get in the way of people progressing.”

Have the right co-pilot. . Pic Annette Dew

Ultimately, the best advice comes from someone with plenty of property experience according to Ms Morgan.

“And they need to be local. You need that intel of what’s a good property in that specific area. What’s a competitive price? What are buyers doing there?

“All that is really relevant because you can’t just look at what’s happening in the macro market.”

RELATED: The new fear driving auctions behind closed doors

Originally published as Real estate auctions: Big mistake leaving buyers stranded