Place a bid

THERE can be few undertakings more nerve-racking than making your first bid for a home at auction.

main

There can be few undertakings more nerve-racking than making your first bid for a home at auction.

Should you go in early and keep topping other bidders as long as your money holds out or is it better to come in with your best offer and walk away immediately if beaten?

Then there’s the vexed question of the price. In Queensland, real estate agents are prohibited from giving potential buyers any guidance on price. In other states, an agent can give interested parties an estimate but end up being hundreds of thousands of dollars off the mark.

“To accept that there’s no ‘price’ is very hard for a buyer,” says Ray White New Farm and Spring Hill principal, award-winning auctioneer Haesley Cush.

“Sometimes its just that the market performs better than expected. I sold a property once for $1 million over expectations. Then I sold it again after the global financial crisis for $1.5 million less than before.”

The keys are to have done your groundwork by using online calculators such as those found in Suncorp’s Home Buying Guide, be ready to buy and not to let emotion drag you above your budget.

“Establish a level where you feel comfortable,” Cush says.

The first steps to establishing the price you’re prepared to pay for a property are:

1. Do your sums and figure out what you can afford, factoring in a potential interest rate rise. It doesn’t matter what the home could sell for, should sell for or does sell for if you can’t afford it.
2. Check out the market. Visit properties at the weekends. Write down prices and really understand what buyers want.
3. Find out what similar properties have sold for by using websites such as Core Logic or Price Finder. Knowing the prices of completed sales will help you to estimate values.

Auctions have become an increasingly common way to sell property, more so in New South Wales and Victoria than in Queensland.

The most crucial factor to set up before you start bidding is your pre-approved home loan. A home loan pre-approval is  based on your ability to repay a loan. This means you can search for a home knowing how much your lender is likely to be willing to lend you.

“When you bid at an auction, you’re bidding on an unconditional basis,” Haesley Cush says. “Your contract is not subject to you getting a loan. When you bid at an auction and buy the property, that is one of the strongest contracts you can sign. It is completely binding.

When you find a home that fits your criteria, make sure to do the groundwork before you start bidding:

• Check the title deeds. You can search titles online, or the agent can help you with this.
• Ask the agent for a copy of the contract. You can request a variation, such as a fixed deposit amount rather than a percentage of the sale price, or a longer settlement date.
• Organise a building inspection and pest inspection. Sometimes the seller will provide a building report, but it’s always better to have your own expert check the property, meet you onsite and walk you through any issues. If the home has a swimming pool, ensure it’s covered in the inspection and meets safety regulations.
• The Queensland Government recommends doing a land tax clearance search to ensure you’re not taking on the seller’s unpaid land tax (rates) bill.
• Hire an independent expert to give you a property valuation. This will help to balance some of the emotions you might be feeling.
• Decide whose name will be on the contract. The name you write on the bidding card is the name that will be on the contract. If you want the contract to be in the name of two or more people, all of those people must be at the auction, with identification, to sign the bidding documents. Otherwise you must bring a written, signed statement giving you authority to bid on behalf of another person, say, a spouse, whose name will be on the contract.

Haesley Cush advises buyers to hire their own building inspector before the auction. If you’re serious about buying the property, an inspection can save you a lot more than the $350 to $750 price tag.

“When you commission a building inspection, go and meet the builder at the property and get them to show you what they’re talking about,” Cush says. “Don’t just read the report. You want to walk around the property and find out what the problems are. If the roof is falling in or the stumps are collapsing, you need to know that.

“If I was bidding on a property I’d get my own building inspection done.”

Finally, rehearse your bidding game plan.

When you’re confident that you have all your ducks in a row – with a pre-approved home loan, valuation and inspection reports in your back pocket – take a position up front with an unobstructed view of the auctioneer.

Speak clearly and audible and raise your paddle when you make a bid. Looking and sounding confident – but not arrogant - can help you appear more determined to your rivals and shake off less serious bidders.

Cush says you could open low and bid to the next round number each time you’re outbid. For example, if someone bids $523,000 take it up to $530,000.

But the tactic he recommends, even to his mother, is to open at your maximum price. “If it goes over that, then get in your car and leave.”

If you stay, your emotional attachment to the property might get the better of your financial sense.

His hottest tip is a simple one: spend time talking to the agent before the auction day. You might get a variation in the contract or more understanding of the seller’s position. A seller can be prepared to lose a little on the price to gain the excellent terms of the auction, knowing that the deal cannot fall over before settlement.

“People think that talking to the agent is overplaying their hand,” Cush says. “But to truly understand the rules you really need to talk to the agent.”

Originally published as Place a bid