How To Prepare Yourself For An Auction

The energy of a real estate auction can bring many emotions. It can go from feeling exhilarating – it’s fast-paced with tension building in the air – but can quickly shift to be incredibly daunting, especially if you are not sufficiently prepared as a bidder. 

That’s why proper preparation is absolutely essential. Here’s how to ensure you’re auction-ready and give yourself the best chance of securing your dream home. 

Do Your Due Diligence

You need to know everything about the property before you even think about raising your hand.

• Inspect the property (multiple times): Visit at different times of day to assess natural light, noise levels, and traffic. If possible, arrange a private viewing for a more detailed look.
• Professional inspections: Engage qualified professionals for a building inspection to identify any structural issues, maintenance needs, or hidden problems, and a pest inspection. Remember, once you buy at auction, you accept the property “as is.”
• Research the area: Look at recent comparable sales in the area to gauge market value. Observe local amenities, schools, transport links, and future development plans that could impact value.
• Review the Vendor’s Statement (Form 1): In South Australia, the Form 1 (Vendor’s Disclosure Statement) is a critical document. It provides vital information about the property, including:
  • Any mortgages or encumbrances.
  • Zoning and planning regulations.
  • Rates and charges (council and ESL).
  • Any easements, caveats, or covenants that could limit how you use or renovate the property.
  • Details of any building approvals or defects.
• The Form 1 must be available from the agent’s office at least three business days before the auction and at the auction site 30 minutes prior. Have your conveyancer or solicitor review this document thoroughly BEFORE the auction. They can explain any potential risks and ensure you understand all legal implications.

Get your finances in absolute order

An auction purchase is unconditional. If you win, you must be able to settle.

• Pre-approval is essential: Secure a formal home loan pre-approval from your lender well in advance so you have a clear understanding of your borrowing capacity and demonstrates to the agent (and potentially other bidders) that you’re a serious buyer.
• Set a strict budget (and stick to it): Determine your absolute maximum bid. This price should be a firm figure that you are comfortable paying, taking into account:
  • Your pre-approved loan amount.
  • Your deposit (usually 10% on auction day).
  • Stamp duty (remembering first-home buyer exemptions for new builds if applicable).
  • Conveyancing fees and other legal costs.
  • Estimated costs for immediate repairs or renovations you anticipate.
  • A buffer for unexpected expenses.
  • Don’t let emotion dictate your budget on the day. The excitement can be infectious, but overpaying can lead to buyer’s remorse and financial strain.
• Have your deposit ready: You’ll typically need to pay a 10% deposit immediately after the auction if you’re the successful bidder. Ensure these funds are readily accessible via bank cheque or a pre-arranged electronic transfer limit.

Understand the auction process and rules

• Attend other auctions: Watch the auctioneer’s style, the bidding increments, and how bidders react. 
• Register to bid: All potential bidders must register with the agent before the auction begins (showing identification). If someone is bidding on your behalf, they’ll need written authorisation from you.
• Know the terms and conditions: Familiarise yourself with deposit requirements, settlement periods, and how bids are placed.
• Reserve price: The seller sets a confidential “reserve price” – the minimum amount they are willing to accept. The auctioneer will announce when the property is “on the market” (meaning the reserve has been met or exceeded). If the reserve isn’t met, the property will be “passed in,” and the highest bidder will usually have the first right to negotiate with the vendor.

Develop Your Bidding Strategy

Having a strategy can help you stay in control.

• Decide on your opening bid: Some experts suggest a strong opening bid to assert dominance, while others prefer to start lower and see how the bidding unfolds.
• Bidding increments: You can bid in smaller or larger amounts to disrupt the flow or signal your resolve.
• Stay calm and confident: Maintain composure, speak clearly and confidently when placing bids. 
• Know when to stop: If the bidding goes beyond your maximum price, be prepared to walk away. 

On Auction Day

• Arrive early: Allows you to register, scope out the crowd, and get a good vantage point.
• Find your spot: Position yourself where you can clearly see and be seen by the auctioneer.
• Listen carefully: Pay close attention to the auctioneer’s announcements, particularly regarding the reserve price and any special conditions.
• Stick to your plan: Reiterate your maximum bid in your mind and remember your preparation will serve you well.

While auctions can be intense, a well-prepared buyer is a confident buyer. By doing your homework, getting your finances in order, understanding the process, and sticking to your budget, you’ll significantly increase your chances of a successful outcome. 

If you’re serious about your property journey in Adelaide, reach out to Turner Real Estate to speak with our experienced team.