Buying Property at Auction – Should You or Shouldn’t You?
Ever heard of buying property at auction? If you have, then you may be wondering how you can benefit from it. If you haven’t, then you may be wondering what it is and if it’s a good idea for you to look into it. Whichever the case may be, this article will give you an overview of what this is, its pros and cons, and useful auction tips that can help you when you decide to try it.
Before we dive into the information stated above, you should know that the number of people buying property at auction has almost doubled over the past 10 years. According to research from Domain, over 13% of Australian property sales in 2021 were achieved by auction. That’s a record-breaking 42,918 properties!
Why is selling at a house auction becoming so popular? According to Dr Nicola Powell, Domain’s Chief of Research and Economics, “buyers and sellers are embracing the transparency and efficiency” of auctions. But for some, the idea of buying a house at auction can seem overwhelming. To give you useful insights on this option, let’s first begin with the pros and cons of buying property at auction.
Pros of Buying Property at Auction
There are some real benefits to buying a house at auction. These include,
- Competitive pricing and the potential for bargains: While auctions have the potential to foster urgency and competition, buyers often bid strategically to avoid paying more than the perceived market value. In some cases, this intense competition may actually deter bidders, resulting in a lower sale price.
- Transparency in the bidding process: When buying property through a real estate agent you can never be sure whether your offer is significantly higher or lower than your competition. In contrast, auctions provide a transparent platform where buyers can witness bids in real time.
- Opportunity to secure a property quickly: Unlike the traditional buying process, a house auction usually has set timeframes for bidding and finalising sales. This means that the bidders can usually settle on the property much quicker and without prolonged negotiations.
- Chance to gauge market interest and demand: A house auction is a great indicator of current property demand, offering valuable insights into market conditions and trends. This information can enable buyers to make informed decisions prior to purchasing.
Cons of Buying Property at Auction
There are certain drawbacks to buying a house at auction, such as:
- Intense competition can drive prices up: Competition amongst bidders has the potential to inflate prices. This can result in the winning bidder overpaying for the property.
- Limited opportunity for thorough inspections: There may be limits on how thoroughly you’re able to inspect a property before buying at a house auction. This can increase the risk of discovering structural issues or pest infestations post-purchase.
- Emotional pressure during bidding: It’s easy to get caught up in the emotion of a house auction. If you’re not careful, this could lead to overbidding and paying more than the property is worth.
How to Bid at Auction
Understanding how to bid at auction can save you a lot of stress and money. So, before you start making bids, it’s a good idea to:
- Research the property so you understand its value.
- Set a firm budget and then stick to it!
- Attend local auctions to watch and learn how the process works.
- If you’re still not feeling confident, consider using a buyer’s agent to bid on your behalf.
Auction Tips for Buyers
What else can you do to ensure you won’t regret buying a house at auction? These are some of our top auction tips for buyers:
- Arrange for finance pre-approval in advance.
- Arrive early so you have plenty of time to thoroughly inspect the property.
- Aim for a bidding strategy that is confident, but cautious.
- Try to avoid getting caught up in the heat of the moment.
- Whatever you do, don’t go over budget!
- Be prepared for the possibility of post-auction negotiations if the property passes in.
Talk to a Broker for More Auction Tips
Buying property at auction can feel intimidating. But when you understand how to bid at auction and you apply the above auction tips, you can be successful.
Obtaining pre-approval for finance is a key element to securing a sale by house auction. At North Brisbane Home Loans, our expert brokers can help you accurately assess your borrowing capacity and apply for pre-approval on a competitive mortgage. If you’re thinking about buying at auction, contact the team at NBHL today!
Patrick Cranshaw, a Certified Mortgage Professional for over 21 years, founded North Brisbane Home Loans in 2002. His career began with ANZ Bank in New Zealand, where he progressed over 16 years to a Business Banking role in Virginia. After moving to Brisbane in 2000, Patrick led the QLD market for a home loan agency, helped set up the REMAX Real Estate Finance division, and practiced as a broker.
