How to make an auction work for you

Auction tips for Vendors and Buyers
09-11-2020

For an auctioneer, there is no better feeling than when a crowd hungry to buy a property bid against each other pushing the sale price above the reserve.

On the other hand, their worst nightmare is the deafening, awkward silence when buyers keep their cards close to their chest and no one is prepared to offer up an opening bid.

KR Peters Director Peter Nicolls has experienced both in his long 44 year career.

"When you conduct an auction and no one bids it gives you goose bumps, makes you feel ill in the pit of your stomach. Every time I do an auction I still get nervous," he said.

COVID restrictions have upended the way auctions are conducted with strict in-person limits forcing more auction activity online.

So why are auctions appealing to vendors and what tricks should buyers know to give them the best chance of winning?
VENDORS
For the vendor the decision to go to auction rather than private sale signals to the market that the property "is fresh, not stale" explained Mr Nicolls.

"The longer a property is on the market the less desirable it becomes. An auction creates a deadline, which creates urgency.

"You are also creating competition. Once people get emotionally involved and they don't want to lose it, they end up paying over.

"An auction also means an unconditional contract, which is good for the vendor."

Mr Nicolls said it was important for vendors to set a reserve that was fair and in the right buyer range. Recent sales are your best indicator.

"If similar houses are selling for $680,000 (in your area) and your reserve is $720,000 it is not going to sell."

He said vendors should not be afraid of the move towards online auctions.

While the real estate industry had been slow to embrace online auctions, he believes COVID has forced the industry to adapt incredibly quickly and implement the technology needed to pivot online when in-person auctions were forbidden by health regulations.

He says moving forward, agents and vendors will need to take a holistic approach to creating confidence in the market by, for example, making available building and pest reports to potential buyers.

BUYERS

Mr Nicolls' top advice for buyers is do your homework and make sure you can service any borrowings.

"Buyers need to understand the fundamentals of supply and demand and understand the market they are in," he said.

"The most critical thing is will the buyer be able to service the loan? If it's the right property and it presses your buttons and touches your soul and it's where you want to be, even if you pay $10,000 to $20,000 too much today you are never going to regret it."

He encourages buyers to research the myriad of government grants on offer at the moment and factor those into their calculations.

And if you are going to bid online, it is important to register early. He has seen buyers miss their chance to buy a property because they didn't register in time or get flustered at the last moment trying to register.

He advises buyers not to be fooled by aggressive bidders who may seem like they have deep pockets. Aggressive early bidding may be a mirage to put off other potential buyers.

"Another strategy I think work wells is when the bidder has more than one person bidding for him or her. Other people think they are bidding against more than one person and feel like they will be outgunned."

And he reminded buyers to keep in mind that the highest bidder retains the right to negotiate with the vendor should the property fail to go under the hammer.