Sydney home owners are making the switch and selling via auction in today’s booming market. With clearance rates consistently above 91% in 2021, why wouldn’t they?
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As a buyer, you need to be ready to buy at auction – especially if you’re in Sydney. Unfortunately many people struggle with this, with a St George Bank survey of 1,000 prospective buyers showing:
- 62% had no strategy to win on auction day
- 48% felt they were not as prepared as they could have been
- 46% said the most difficult buying process was bidding at auction or making offers, followed by assessing good value (44%)
Buying a property is a huge financial decision, and once you add in the inevitable stress and excitement of buying at auction, the odds are you’ll make mistakes if you’re not prepared. You’ll pay too much or even worse, you’ll lose your nerve and walk away knowing you could have stretched a little further and bought it. And now you’re back to attending opens every Saturday to find a suitable property.
Here are my tips for getting past these issues, to get you on your way to owning your dream home.
Preparing for auction day
The most critical thing you need to do is establish your walk-away price. This figure is not just what the bank will lend you plus your savings. You need to ask yourself, what else am I willing to do if I need to stretch my budget to secure this home? For example, Could Mum and Dad lend you $5,000? What if you scrapped or delayed your next holiday? Should I buy a less expensive car? Whatever you do, don’t push your boundaries so hard that you end up in financial difficulty. But do consider your priorities and ask yourself, will I be happy walking away from this property if an extra few thousand could have bought it? Get comfortable with a number and stick to it.
Strategy to win
- Make a low bid to start the auction
- Once others begin to bid, just sit tight, size up your competition and watch how the auction unfolds
- Project confidence and create the impression you will continue to bid until you own the home, no matter what. This is about psyching out the other bidders
- Make your bids fast and assertive. Agonising over your next bid is a sign of weakness
- Call out your offer in full (i.e. say “$350,000” instead of the increments, i.e “$5,000”)
- If it’s going to pass in, make sure you are the highest bidder, as this usually gives you first right to negotiate (whether this is a legal right or courtesy varies between states)
Fear of ‘overpaying’
In a rising market, ‘overpaying’ today often ends up being ‘good value’ tomorrow, especially when stock is low. In Sydney, people who paid 10% above what they considered market value in 2013 are laughing all the way to the bank, because the market is now up more than 30% on 2013 prices. Even in markets that aren’t booming, if you’re in it for the long term and you really want that particular property, don’t be afraid to overpay a little. In 10 years’ time, the extra $20,000 you paid on auction day simply won’t matter.
Final word on buying at auction
In my experience, fate can play a hand in you finding the right home and you should go with it. Certainly, create a plan to bid and win but also accept that if it’s not meant to be, it’s not meant to be.
If you really don’t think you can handle the stress of bidding on the day, hire a buyers’ agent or ask a confident friend or colleague to do it for you. Just check with the agent as to what you need to do to officially to authorise your nominated person to act on your behalf.