Buying a property is a huge commitment and nothing tests the nerves more than bidding at an auction.
One in two Australians report experiencing anxiety ahead of attending an auction and 48% of people said they’d lost sleep over it, recent research suggests.
Worryingly the St George Bank research also found a lot of us are ill-prepared to buy properties at auction, with 62.1% of buyers saying they do not have a bidding strategy when attending a home auction.
So what do you do if you want to secure that dream property at auction? There are three chief ways you can do it:
- Engage a professional buyer’s agent, to whom you pay a fee.
- Ask a friend or family member to bid on your behalf.
- Bid for yourself (if you’ve got the nerve).
We look at each option and review the perks and pitfalls.
Use a buyers agent:
Professional Renovator Bernadette Janson has attended about 40 auctions and bid at two of them. She wasn’t successful at either and says she won’t DIY bid again.
“The bidding was fierce, one bidder was bidding by proxy, you see plenty of buyers paying too much and getting far too emotionally attached,” says The School of Renovating founder.
Janson discourages her renovation students from bidding for themselves for properties.
“I just think it is smarter to detach yourself from the process, it is a task that should be entrusted to someone buying at auctions on a regular basis and who has no vested interest … they’ll be more objective than you.”
Veronica Morgan, Principal of Sydney agency Good Deeds Property Buyers and Co-Host of Location, Location, Location, on Lifestyle Channel agrees.
“Many buyers, if left to their own devices, get scared off by aggressive bidders and stop bidding prematurely while many others derive confidence from a competitive auction and end up bidding well above their limit,” Morgan says.
“When they are being advised by a buyer’s agent, they are going to have a much greater chance of success, while also limiting the possibility of paying too much.”
Advantages of using a buyer’s agent:
- No chance of emotional ‘must have at all costs’ bidding;
- No risk of paying beyond your pre-auction agreed maximum bid;
- A professional who can read the crowd, knows bidding strategies and bids with confidence;
Disadvantages of using a buyer’s agent may include:
- Feeling detached from the purchase;
- Engaging a buyer’s agent can add extra cost to your budget.
Do the bidding yourself:
Can you keep a poker face? Do you have a good head for figures and thrive under pressure?
Mum-of-three Leonie Cuneo loves buying and selling real estate and has attended about 50 public auctions, including one in December 2013 which she ended up buying for $100,000 less than its market value.
She had been watching the “awful” looking three-bedroom in Manly on Sydney’s northern beaches.
“I turned up at 10am and the house had everything I was looking for in the perfect location, needed a bit of work but nothing I couldn’t handle,” Cuneo recalls.
“I knew there was a chance I could get a bargain.” She bid for herself against three rivals including a young couple. “But they didn’t have a chance as I was prepared to bid above them every time.”
Cuneo says the most important things when doing your own bidding are know your upper (bidding) limit, make sure it is realistic and never go above that figure.
“I cannot stress enough how important it is to appear confident, in control and cool. For me, I would never let anyone else do my bidding as I’m confident, I know what I’m doing and I’m good at it.”
Pros of DIY bidding include:
- Can save lots of money;
- Puts you in the box seat to watch rival bidders;
- Can quickly respond with counter bid/change strategy.
Cons of going it alone include:
- Not suitable if you don’t like crowds;
- Attending spouse/young children can distract/pressure;
- More likely to bid too high the heat of an auction
Ask a friend or relative to bid for you:
Property expert Peter Boehm has successfully bid for himself and others at numerous auctions.
He says if you decide to engage someone else to bid on your behalf, make sure:
- The auctioneer has been advised your proxy bidder is acting on your behalf;
- Your stand-in understands the auction process;
- Your proxy knows your top price before bidding begins and what bidding strategy to use.
Boehm, who wrote The Great Australian Dream: How to buy your first home, says he once used “a knock-out first bid to blow the competition away” while doing the bidding for a mate.
“I assisted a friend and they won their auction with their one and only knock-out bid … just make sure it is within their limit.”
Perks of asking someone else to bid for you include:
- No emotional connection with the property so unlikely to bid higher than agreed;
- Trusted and expects little in return;
- Can help hold you to your limit, reducing temptation to bid beyond your means.
Pitfalls of friends and family members doing your bidding:
- May feel they’ve let you down if they don’t win;
- If things go bad it could put relationship at risk;
- It is a big responsibility and they too may get nervous, so choose your proxy wisely.
Article written by Caroline James and originally published on realestate.com.au.