If you are looking to buy a property at a foreclosure auction, you should know a few things. Auctions follow a specific format and you can improve your chances to win. Knowing how to confidently navigate an auction helps you increase your chances of success. To make sure that you are able to buy the property for the best price, you’ll have to prepare in advance. This is what these 9 tips to win yourself a bargain property at auction article will help you do.
Auctions differ substantially from a typical residential sale as there is no haggling over the status of the property. Online auctions let you bid on any item with no problem. The rules are the same as that of a traditional auction. If someone bids higher than you, the property will go into their possession. But with the right approach, you can increase your chance of winning an auction.
Learn everything you can about the property
After you have selected a property it’s time to do your due diligence and research. Start by asking the important questions such as:
- What is the reason for the property being sold?
- How long has the property been on the market?
- What features and amenities does it have?
- Is the location a desirable area?
- Are there any potential repairs or improvements the property needs?
For properties that are listed online, you can check out the competition to see how much interest there is in the property through views and clicks on the listing.
During your research, you would want to check if any building and pest inspections have been carried out. Also, do a solicitor’s title search to eliminate unwanted surprises that come with the property. Some auction houses allow you to take virtual tours of the property, which is a good way to see what you can expect.
Research the market
In addition to knowing the property, it’s also important to have an understanding of the particular market you want to buy into. Start by looking into how much the property is potentially worth through comparable sales in the area.
In some areas, the property’s auctioneer is the one to have this information. You can go down the route of an independent valuer who can look at the property. However, only work with those who understand the local market well. You can also turn to local real estate agents for reports on other similar properties that have sold in the area recently and their respective values. This way you won’t overbid at the auction.
Set a budget
A common mistake buyers make at an auction is not setting a budget. They fail to determine what is the maximum price they can afford to pay and stick to it.
The dynamic of property auctions can be overstimulating, which gets people overly excited when they think they are close to winning a property they are really keen on.
When buying a house at an auction, there’s typically no cooling-off period. Before you place your bid, you need to know how much money you can put in as an offer.
Don’t get dragged into the competitive environment, have your finances organised before the auction and be prepared to walk away if the price exceeds your budget. There will always be another property.
Know how the property auction process works
Auctions function in a certain way and you need to know the process to feel comfortable navigating it.
You can sit through a few auctions to see how it works. If you can attend auctions held by the same person or firm who’ll auction off your chosen property that is even better. These don’t necessarily have to be face-to-face auctions. This will give you an idea of their auction strategies and habits.
It’s a good idea to observe other buyers’ auction bidding strategies to see what works and what doesn’t.
Prepare a bidding strategy
Confidence is key. But you also need to stay alert and know when to bid. You can increase pressure by placing a large bid from the very start to knock out the competition. But this is a risky strategy as it can push the sale price beyond your budget.
Alternatively, you can wait until the auction is near its end to enter a bid. This can catch the bidder in the lead off guard. But you need to be decisive and fast or the auctioneer may end the auction and confirm the sale before you have had the chance to make a bid.
Many people don’t have the full amount to cover the property they are bidding on. If you don’t have the money for the property you like you need to have your loan pre-approval in place. Understand your borrowing capacity and apply through a lender for a bridging loan. Unlike traditional auctions where you are often required to pay for the purchase up front, a foreclosure auction only requires a down payment. You need to bring a certified check for an amount that covers a certain percentage of the home. This way if your bid is successful – you will have the money to cover the cost of the property in full.
Bridging loans provide the capital you need to pay the auction house and secure the transfer of ownership of the property. You can later switch to a traditional mortgage.
Make a good first impression
On the day of the auction, go to the event dressed for business and don’t be shy about getting noticed. The way you carry yourself is one way for everyone in the room to know you are present and ready to win. But avoid being the first to bid. Enter the auction in the second half or after the bidding has calmed down. You have to know if you really want this property. If your mind is set, then arrive at the auction determined to win.
Lower the reserve price
Lowering the reserve price can win you a bargain if your bid is successful. The auctioneer will know if the reserve has been met during the auction so you can ask. You are also letting them know you won’t place a bid until the auctioned property is at a sale worthy point. The seller can still choose to lower the reserve price if there is low interest. But this could attract the interest of more bidders.
Another tip for buying at home auctions concerns when you bid. You may be tempted to make the first bid, but it is best to hold off for a few minutes before you enter the contest. When other bidders start dropping out, place your offer.
Even if someone places what they consider to be a very high bid, you can go over it in small increments. Even if it’s not a rounded number, this can lower their morale and put you back in the lead without going over your budget.
A Final Word
Following these 9 Expert Tips can help you learn how to win a property auction and buy a home that is a good investment. Auctions present a good opportunity for making money in the real estate market. With this information in mind, you should be one step closer to securing the best property at the right price come auction day.
When done correctly, auctions are a good way to secure attractive properties in the area you are interested in. If you want to learn how to buy a propety at an auction, visit our blog for a step-by-step guide to maximise your chances of winning.