Property Auctions: A First Home Buyers Guide
If you're buying a property for the first time, there are many points at which it can be easy to feel just a little bit overwhelmed.
As if the mere fact that you are trying to buy a home of your own isn’t enough, there lie ahead such hurdles as saving for a deposit, getting your home loan finance approved, and then making sure you find the right property.
Taking part in a property auction is likely to be near the top of the list of the most intimidating things that first home buyers could imagine having to do.
Cue nightmare scenarios of sneezes and coughs being misinterpreted as bids, and a bad cold landing an unwitting novice bidder in overpriced hot water.
But are auctions really that bad? There are certainly many of them happening every week all over Australia.
So many, in fact, that by discounting properties being sold at auction, buyers could be missing out on some great potential homes.
What happens at an auction
An auction isn't like the meetup of some secret society with strange handshakes and mysterious rituals.
Instead, it is a relatively simple process where all the buyers interested in a property bid on it at the same time. All bids are binding, and the highest bidder wins.
The only time this doesn't occur is when the seller's reserve price hasn't been met. If this is the case, the seller may approach the highest bidder and seek an offer, or bidding may begin again.
At any auction there could be a real mix of different buyers, from first timers through to experienced investors.
You wouldn't just walk in off the street and bid at an auction - as with any method of buying property, preparation is critical.
You'll need to arrange your home loan finance before you bid at an auction, as all bids are binding and unconditional.
A mortgage broker can help you to do so, from evaluating how much you can borrow, through to settling on the appropriate mortgage product and helping you to secure home loan pre-approval.
You'll also need to take care of things like property inspections and research before you turn up at the auction, as there will be no time for that once bids start.
A bit of homework should help you to settle on what you believe the property is worth.
The seller won't be letting on about their reserve price, so to make sure you don't end up spending much more than you want or need to, it is important to impose an upper limit on your bidding.
A good way of establishing the true market value of a property is to look at similar homes in the same or neighbouring areas that have sold recently.
Their selling prices should provide a reasonably reliable guide to what you may expect to pay for the property you are interested in.
Before the big day arrives it is also important to read through the sale contract carefully, so that you understand all conditions set by the seller.
One of the best ways to get comfortable with the auction process is to attend another auction as a spectator.
This will let you see with your own eyes how things go down, how the auctioneer acts, and how bidders conduct themselves.
A real estate agent can also prepare you for what to expect in your first property auction, and ensure you are ready to bid when the day comes.
They can help you get comfortable with the process and gain the confidence you need to stand before the auctioneer and hold your own against the competition.