By Rich Harvey, CEO & Founder, propertybuyer.com.au
There are plenty of stresses and strains to deal with in modern life. Deadlines, financial commitments, family relations, work pressures… the list goes on. The affliction of unease is all pervasive and paralysing.
And while I can’t help you negotiate all the nerve-wracking events in your day, there is one where I’m wholeheartedly qualified to deliver a solution.
And that’s the anxiety around bidding at a property auction.
What causes auction anxiety?
On paper, an auction seems like an ideal way for people to trade property because, when conducted properly, it’s a totally transparent process.
The terms of any contract are clear. All buyers are bidding on an equal footing. You get to see who you’re competing against and can make decisions with full knowledge as to what will likely happen at the conclusion of the event.
But as things progress, the problems start to manifest
There’s the pre-auction emotional roller coast. You might, at first, experience the joy of finding a great property. Then you might feel confident it’s within your price range – perhaps you’ll even convince yourself you’ll jag a bargain because the bidding will start low and no one else will be there.
Then you start looking at how much you’re able to pay. Can you really afford to be the last bidder standing? You talk to your bank and broker. They need to deliver an iron clad decision about how much they can lend you, because an auction contract is immediately unconditional.
Then there’s determining the property’s market value. What the heck is the darn thing worth? You don’t really know and might end up paying too much. Many buyers spend sleepless nights waxing and waning between knockout bids and their ‘line in the sand’ number. Most will change their minds right up until the auction starts.
You might feel buoyant and excited on the morning of the event, then you arrive and see all the people there ready to bid. So much competition!
Think about – you are being handed a deadline. Now the stress starts to set in. Can you come up with the dough?
You make an opening bid and it’s immediately beaten by another buyer. Was your opening high enough? Did it scare anyone?
Your confidence starts to wane.
Now the race is on. You are competing with everyone else, and they all seem to have deep pockets. It’s becoming a bit much.
Then there’s the auctioneer’s assistant. Every time you’re the under bidder they’re in your ear suggesting it’s time for a knockout offer. Just one more bid might do it… right?
Your spouse really wants the property too. They’re nudging you in the ribs – just pay $50,000 more – they really want it. But sometimes it’s you. You’ve been searching for ages and this property is ideal. I’ll just go another $10,000…. And then another. “What are you doing!” your significant other says, “We can’t afford that!”. You don’t care. It’ll be worth it and with the market rising so quickly, the property will value up at your over-the-top buy in price for sure.
Then you win the auction. It’s moments of happiness before the second guessing sets in. Did I pay too much? How am I going to secure those extra funds? What happens if we don’t settle?!
Or… you miss out. A depressing scenario. The long search continues. Why couldn’t I just come up with a little more?
In fact, when you think about it, auctions are clearly designed to benefit the seller by heightening anxiety among buyers.
What’s the solution?
Yes, auctions are all a bit much for those not experienced with them. The keys to offsetting the anxiety are preparation and assistance.
First up, you must determine the property’s real market value. This is done by looking at comparable sales in the area to see how your potential property stacks up.
Also – if prices are rising quickly, what reasonable premium should you factor in for FOMO? Will it be justified as market values increase?
Here’s where you need to lean on a local expert. They can take the emotion out of the process and look at the pure numbers. Buyers’ agents and valuer can also provide a little experiential advice. They might suggest how much more you’ll need to pay to secure the home and whether that’s a reasonable figure under current market circumstances.
It’s also imperative to get your finances in order. When the hammer falls, the contract goes unconditional and if you don’t come up with the borrowings, you risk losing your deposit and potentially much more.
Make certain you’ll qualify for funds prior to auction day. Know exactly where the buck stops in terms of finance well before you raise a paddle.
Now you must have an auction plan.
With the above elements covered off, determine your hard and fast stopping figure. No ifs, no buts. This is where you pull up and not a dollar more.
If you are at the auction with your partner, make sure you’ve discussed this figure and will stand firm together. If either of you is wavering, it would be best that person doesn’t attend the auction.
Better yet, get a buyers’ agents to do the bidding on your behalf. We put an emotional barrier between you and the auctioneer/agent. We will filter their pressure signals and provide clear headed guidance on your strategy. A buyers’ agent will be your sounding board and security net during the process.
A buyers’ agent can also walk you through an auction plan before the bidding starts. Will they open the bidding? Will they wait until the reserve price is met? What will be the best increments to bid? When will they slow the bidding and when will they go hard and fast?
An auction plan and a rock-solid bid ceiling are crucial when buying under these conditions.
There’s another advantage to using a buyers’ agent – sometimes we can help you secure the property before auction day. By completing comprehensive due diligence and determining your specific needs, wants and resources, we can consider making an early approach that will lock away the property. Utilising our negation skills and experience can bring a great outcome before anyone else even gets a chance to make an offer.
Yes, auctions can be a tense time for buyers, but they don’t have to be. Utilise an experienced buyers’ agent and save yourself the woe. It’ll be your best chance of securing that home at auction without the worries or stresses of doing it yourself.
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