Crucial homebuying strategies in a hot market

To succeed in buying a new home in the current market you need to know what you’re up against.

Bidding at auction can be a nerve-racking way to make one of the most significant financial decisions of your life, but as the experts show, there are a range of tricks and tactics you can use to help you win the keys – but first, you need to know what you’re up against.

WHAT TYPE OF AUCTION IS IT?

There is no one size fits all approach to bidding at auction, which is why the strategy you choose needs to fit in with your intentions as a buyer and with the type of market you are purchasing in, REBAA president Melinda Jennison from Streamline Property Buyers said.

“The strategy at auction will often depend on the number of other bidders who are actively participating,” she said.

Whether it’s a hot or cold market or you are buying an investment property or a home, there are several tactics to keep in mind.

Sometimes you have to jostle through the crowd to make a bid. Picture: David Clark

BUYING AN INVESTMENT PROPERTY

Bidders should always have an upper limit in place – and this is particularly important for investors, buyers agent Lloyd Edge from Aus Property Professionals said.

Any bids made over what the property is worth from an investment perspective could cost you in yield, cashflow and future capital gains.

“It’s just about the numbers, as an investor, there’s always going to be another property around,” he said.

Mr Edge said he prefers to avoid auctions altogether when buying an investment. Otherwise, getting in early with a low bid is his preferred tactic.

Property buyers agent Michelle May.

Michelle May from Michelle May Buyers Agents offers a different perspective.

“As an investor, you’re probably better off waiting until you see it play out,” she said, explaining that if the auction is full of emotionally charged owner occupiers, the property will likely sell for an inflated price.

BUYING YOUR DREAM HOME

This is where a poker face really comes into its own. Ms Jennison said auctioneers and professional bidders can tell when most people are approaching their limit.

“You can see it in their body language and their gestures,” she said.

Engaging a professional to bid on your behalf could be the best course of action if you can’t keep your nerves in check.

Emotionally charged home buyers tend to drive the momentum at a hot auction. Picture: Tom Parrish

Otherwise, it’s important to avoid discussing whether to “go another $5000” during the auction, as this shows you’re almost out of the game.

Ms May suggests setting your limit ahead of time – and making it an odd number to keep others guessing. Mixing up the size of bids and bidding in odd numbers has the same effect.

“It makes people think about what you are doing,” Ms May said. “You look a lot more in control.

“It also takes the flow out of the auction because you have to do the maths. This interrupts the tic tac toeing the auctioneer likes.”

When it’s a cold market without many bidders it might be better to hold back.

BIDDING IN A HOT MARKET

Ms May said when you go to an auction with dozens of registered bidders who have been attracted by a lower price guide, you shouldn’t fool yourself into thinking it will sell for cheap.

She said solid research beforehand is important so you know what the market value really is. Then it’s a matter of knocking out as many people as possible by opening with a large bid.

“By being that person who is the bold opener, you’ve also given a sign of confidence to the other people that are still in with a chance that you’re the one to beat.”

Ms Jennison said bidders should pay attention to the language used by auctioneers that could indicate the reserve has been met, such as “we are selling” or “we’re on the market.”

Buyers' agent Lloyd Edge from Aus Property Professionals

BIDDING IN A COLD MARKET

Often agents will sell via private treaty rather than auction if the market is not very competitive, Ms May said. But if the property does go to auction, it could be a good opportunity to strike a deal, she said.

“So don’t bid and wait for everyone else,” she said. “If it gets passed in, then you have the opportunity to negotiate.”

Mr Edge said it’s important to keep your cool if you are the highest bidder.

“Sometimes people have got the highest bid and then they get nervous and put in another bid,” he said. “You need to make sure you don’t do that.”

A poker face is essential for auction success. Picture: Max Mason-Hubers

AUCTION DOS AND DON’TS

* DO set your absolute walkaway price before the auction

* DO research what the property is really worth – even if the guide seems low

* DO make a strong opening bid in a hot market

* DO wait to see how the auction plays out if it’s a cool market

* DO bid in odd increments to slow things down

* DON’T discuss whether you can afford to keep going during the auction

* DON’T go over your upper limit

* DON’T let your body language give you away

* DON’T be fooled by a low price guide in a hot market

* DON’T bid against yourself

Originally published as Crucial homebuying strategies in a hot market