Homebuyers usually deal with many unknowns at auction. There are different hoards of potential buyers who compete for the same property. These buyers are often accompanied by seasoned investors. This can spook many people because having limited knowledge about how the auction market works and their own irrational exuberance can push them into making unreasonable purchases. The housing market is also very competitive at the moment. The interest rates are pushing prices to a new high and the number of buyers swarming to compete for the few properties available for sale is making it difficult for them to bid at the auction market. To deal with the situation comprehensively, working with an expert is important.
To avoid a face-off with other buyers on auction day and the fear of missing out is driving many homebuyers in making pre-auction offers. The housing market wisdom lore is filled with stories of bargains acquired at lower than market price. The wisdom omits that it is also riskier and a gamble. This process is often fraught with stress and high stakes. To ward off the stress from creeping into the scene, the advice of an experienced broker can prove invaluable.
The certainty of a pre-auction offer is tempting for sellers. Even though clearance rates at auction are stunning in major cities, there is always a nervousness about how an auction would go. The cost of the auctioneer’s fee and ongoing sale campaign is too much to bear and an offer too good to refuse could attract the seller to sell before the auction. If you are a house hunter it’s high time that you plan and strategize. Here are some measures you must understand before diving into a pre-auction bid.
1. Check your financial capacity and have your loan pre-approved
The first step is to know if you have the money to buy that property even before you mull over making an offer. If your concerns are mortgage it’s prudent to discuss with a financial advisor about your indicative borrowing capacity. Establishing a budget and home loan pre-approval is necessary footwork and pre-deployment to complete the purchase.
Every seller has an aversion to the risks and stress of the sale process. You must have a clear objective.
2. Plan, Prepare, Research!
When it comes to property, relying on your gut feelings can have adverse outcomes. No matter how appealing an offer seems, make sure what you are buying. You need to understand the marketplace and have a rational judgment about property’s value. Avoid making any offer blindfolded. A clear idea based on property reports and market insight with the help of a will help you to make a reasonable offer; neither too high nor too low.
Many sellers make cosmetic improvements to the house. You will have to be proactive to see beyond the glitters and grandeur to avoid future hazards. Make sure that the building meets the Australian standard for building inspection.
Enlist the help of a solicitor/conveyancer to assess the contract of sale to avoid unusual surprises after the transaction. A detail-oriented approach has unmatched benefits.
3. Don’t be coerced into a Dutch Auction
When two or more prospective buyers end up making ‘blind bids’ before the property goes to auction. You don’t have any clue about how much the other party is offering, and you may be asked to raise your offer. This price jugglery can go around many times. Dutch auctions push the price of a property a lot. You may over-value a property in isolation out of your competitive spirit. Don’t let emotions astray you in these situations.
It’s better to walk away and wait for an honest and transparent bidding process.
4. Make instrumental use of time and play your cards close to your chest
The process of pre-auction can throw curve balls and can be hard to let go of stress if you make a hasty offer. You can use the time to your purpose by making your bid at the last probable minute.
Sellers have their interests guarded by their real estate agents who are capable of prying information out of potential buyers. You may end up sharing something valuable about your situation and it might be counterproductive to your negotiating powers.
Being restrained and reticent is the key to outbidding others and defense against substantial loss. Keep your cards close to your chest so that no one can take advantage of your circumstances.
5. Be prepared to walk away
If your pre-auction offer is rejected by a seller, hold out against raising the offer. Remember that this situation is at odds with your objective. You will only be contradicting yourself. Use your head not your heart, don’t suspend your rationality by being emotionally blinded. Your desperation may make the seller hold off the property until auction day.
You won’t become a loser if you miss out on one property. It’s just one bidding! You can always find your dream home next time.
There is no doubt that as a buyer there are advantages to snapping up a house before it goes to auction. It avoids stress from sneaking into the scene. To make every situation work in your favor you need to plan meticulously. It’s foolish to get entangled in the bidding war. Remember- knowledge is power, and always use the language of a reason not of the heart.
