Purchasing a property is probably one of the biggest investments, if not THE biggest investment you will make in your whole life. It still surprises me how seemingly intelligent and educated buyers will attend an Auction with the ‘I’m just going to see how it goes’ plan.
They may have inspected the property a few weeks earlier and liked it, but were too busy to follow up, and in the final days before Auction, were convinced by the persuasive selling agent to attend the auction, with comments like “The owners are very keen to sell, and have bought elsewhere, they will take whatever the market offers on the night, if you have at least $x ( x = lower than it will really sell for) , you should definitely be there or you will miss out on a great buy!”
The uninformed purchaser will likely rush off and get a contract looked over by their solicitor, and purchase a Strata Report or Building Report, then head off to the Auction with their hopes and dreams starting to rise. You will see more than a few bidders at every auction that fit this description, nervously holding onto their bidding cards. In the following few minutes, you will see their jaws drop in unison, as the bidding flies past the price they wanted to pay, and eventually sells for something much higher than they have been led to believe it would.
Now don’t hate the selling agent. They are just doing their job of getting the best result for the vendor. That usually means the worst result for you, the purchaser, unfortunately. The selling agents’ number one job in an auction campaign is to get as many bidders to an auction as possible. To their defence, a lot of buyers will quote their budget as being well below what they really have, and buyers are often likely to get emotional and pay more than it is logically worth.
These are a few reasons that can partly explain why a selling agent behaves the way they do.
The 5 critical steps you must follow before attending an Auction are;
Before you go to your first Auction, you need to have inspected at least 50 properties in the same area and price bracket, where you want to buy. That way, you will fully know the market you are buying in, and will be able to tell roughly how much a property will sell for, and not be distracted by agents ‘bidding guides’.
You will then know if this property is within your budget and know if you can proceed to the next step
Have your solicitor check over the sales contract to make sure you are buying what you think you are buying, and there are no nasty clauses or special conditions.
Get a Building and Pest Report, or with an apartment, a Strata Report. From there, you will find out critical information about the building, and potential defects to budget for in your purchase price.
Quality properties sell quickly, but this is no excuse for shortcutting critical steps and buying off the cuff.
If renovations are required, get an independent guide on the likely costs and potential risks, not a guide the selling agent sometimes gives. I have personally heard an agent quoting to a potential buyer than a second storey can be added for just $80k on a freestanding 3 bedroom house!
It is best to keep the agent informed of your interest (within reason). If the property is about to be sold, they will only contact buyers that have expressed interest, so if you only give the agent negative feedback of the property, they will interpret that as you’re not interested, and not keep you ‘in the loop’. You may not end up being the successful purchaser on this property, so building a relationship with the selling agent is very important as they may come across other nearby properties that will suit you even better, during or after this auction campaign (These are sometimes ‘off market’ opportunities that you can purchase without the crowds of competition to battle against). Ideally, you will need at least 10-12 similar relationships built with the leading agents in the area, to ensure this strategy is effective.
If you can find out the sellers motivation, and are able to negotiate a pre-auction purchase, this can often be a better way to purchase, especially in a popular area or strong market. If done correctly, it can potentially remove the risk of competing against emotional bidding at Auction, and therefore paying too much.
However, this is very difficult to navigate for the novice purchaser, and it is critical that steps 1 and 2 are completed thoroughly first. If done incorrectly, it will expose your position before Auction and actually let the selling agent use your offer to create even more interest and competition.
Simply showing up on the day with very little or no strategy is a dangerous one. Even the most intelligent and successful person can let the emotion and competition affect them during an auction. If you haven’t got a clear strategy and price limit prepared earlier, it is very difficult to make one up once the bidding commences. It is then easy for the selling agent to convince you to act against your best interests. The auctioneer and selling agent are highly trained to create an atmosphere that is very difficult to deal with for the inexperienced buyer. If you haven’t engaged a Buyer’s Agent yet, then even just hiring one for the auction, to bid on your behalf, can be a wise choice for many reasons.
If the only professional advice you receive in the purchase process is from the selling agent, then this is like receiving advice from the opposition coach, during a game of sport. The selling agent is being paid by the vendor, to get THEM the best possible result, not you.
An experienced and Licenced Real Estate Buyer’s Agent acting on your behalf, will be able to assist with each of the above 5 critical steps, and guide you away from the common costly mistakes that uninformed buyers generally make.
A Buyers Agent will generally secure your property quicker, for a better price, and with much less stress and heartache, and you’re much less likely to make a costly error or poor purchase.
Address: Suite 1512/83 Spring Street Bondi Junction 2022
Postal Address: PO Box 2192 Bondi Junction NSW, 1355
Telephone: 1300 132 970
E-mail: info@searchfindinvest.com.au
