The new channel 7 program called Under the Hammer provides a couple of great examples as to why buyers need to take the time to better understand the real estate market before parting with several hundred thousand dollars.
This week’s episode highlighted the nerves of buyers attending auctions as well as those who are prepared to bid against themselves during the auction and in the post auction environment – even to the tune of $60,000. I nearly fell off my chair when I watched a buyer bid 60k against himself which was almost 10% of the final purchase price.
Welcome to my final installment in this series of Auction articles. Over the last month you should have developed a more comprehensive understanding of the auction process. To finish it off, let's take a look at how to prepare a good strategy for auction day. Here are my top seven tips:
This week I share with you one of the selling agents' tricks of the trade when it comes to selling via auction. I frequently get asked - `Why are auctions becoming a more popular method of selling property?' I believe it's because a lot of selling agents enjoy the set timeframe and the additional control that they have as part of an auction campaign over both buyers and sellers. In addition, auctions usually have a larger marketing budget which is used to advertise the property - a spin-off is that the individual selling agent and their real estate agency gains extra publicity.
Observing and understanding the often subconscious, psychological factors that influence bidding is part of my business. It helps me to get the best deals at auctions for my clients. The psychology of auctions is absolutely fascinating and it's something that all bidders should be aware of before auction day. Why? I hear you ask. It's because auctions are highly emotional environments where a bidder's focus, reason and common sense can easily be lost momentarily costing them thousands.
If want to buy well at auction then ask yourself this important question. How do you work out the value of a property up for auction so that you know where to set your bidding limit? The answer is `research, research, research'. There are no shortcuts here, research is the key to knowing the true value of any property and is absolutely essential in order to make sure that you purchase a good property for a fair price.
Before you can even start thinking about buying well at auction you need to take some time to fully understand what the auction process actually involves. Put simply, a property auction is a public sale by a licensed auctioneer where the property is sold to the highest bidder, providing the reserve price is met.
An auction takes place under unique fair trade and legal conditions when compared to a private treaty sale. These conditions vary across Australia and it is advisable to check the rules that apply in your state or territory by contacting your local Office of Fair Trading.
Yes there are some negatives to showing your cards early in a negotiation that you need to consider. Firstly you will be breaking the golden rule of being the first to name a price and secondly you run the risk of your pre-auction offer (if rejected as they often are) becoming the benchmark of the vendors expectations e.g. "the reserve".
Following is a copy of my letter to the editor at the Sun-Herald:
I’m writing with reference to the article titled “Pest plan to put bite on vendors” which appeared on August 16. In it, NSW MP Matt Brown called for the NSW Government to make it mandatory for auction vendors to provide pest and building reports to prospective buyers. I believe this suggestion has some merit and should be explored further.
Media reports this week say that the ACCC will be bringing in very heavy fines – not only for the selling agents but also for the vendors who engage in underquoting.
The Office of Fair Trading (OFT) already has fines and guidelines in place to deter selling agents from underquoting which has certainly reduced the practice since 2003 but failed to stamp it out. Now it looks like the ACCC is prepared to take it one step further and include home sellers as well in a bid (excuse the pun) to stamp out the unethical practice.
The article in the SMH on May 24 called ‘Emotion runs high as an era ends’ shows just how easy it is for bidders to get carried away with the auction day hype. The article says the successful buyers bid $35,000 dollars above their pre-auction maximum bid price to purchase the property as a relative spurred them on to keep bidding. I hear this type of story all the time and stress again and again how important it is for prospective buyers to set a maximum bid price based on research and stick to it.
