Auctions can be high-pressure, high-drama environments which often set emotions running pretty high, too.
The heady mix of risk, possible strong-arm tactics from fellow bidders and the chance of unwanted surprises can make auctions a daunting prospect. It’s all so very public too, and not everyone is a dab hand at sticking to their strategy and yelling out confident bids when the stakes are high and they’re surrounded by people they don’t know.
On the plus side, auctions present buyers with a level playing field, however there are six common mistakes buyers should be aware of – and try to avoid.
1. Lack of preparation
Being unprepared on the day can play havoc with bidding and this includes the due diligence phase of the process.
All aspects of the auction process need to be addressed before auction day – from deposit payment to agreed settlement, legal review of the contract to determining who will bid and who will sign contracts.
2. Skipping a legal review of the contract
This is a critical oversight and can result in more than just a boo-boo.
Some properties require commercial financing while some have covenants which prevent the owners from certain activities or making changes to the dwelling.
Some of the worst surprises can be averted with a thorough contract review.
3. Losing touch with your agent
If the property you’re interested in attracts suitable offers from competing buyers and the agent can’t contact you to keep you in the loop, you could end up disappointed.
Without a doubt, one of the most disheartening auction-related experiences is the discovery of a sold sticker on a property with a future auction date.
4. Letting emotions blur good judgement
This is a regular mistake for many bidders. Whether it’s overpaying in the face of competition or having a serious freak out moments before the auction bell rings, buyers often fall prey to last-minute irrational decisions.
It’s easy to spot the person at an auction who is more determined to ‘win’ the property fight than apply pragmatism and give up.
They are the ones whose partners are tugging their sleeve and telling them to stop, or the bidders who make frantic phone calls to their mortgage broker long after they’ve signalled to the auctioneer that they were opting out.
The best bidders are those who have a firm plan and stick to it. Obviously, choosing your bidding strategy and setting your upper limit is best done before the auction.
5. Overlooking research on price and value
Relying on the agent’s quoted range or leaning on a comparative market analysis report isn’t sensible.
Buyers need to take recent sales results into consideration and apply the comparable sales analysis to the property in question.
Many buyers feel despondent at auction when the starting bid is above their maximum, but in many cases doing a bit of homework would have saved them precious time and energy.
6. Neglecting to arrange finance approval
This is possibly the biggest mistake a bidder can ever make. Auctions require successful purchasers to sign an unconditional contract.
Regardless of whether the finance has been approved or not, the buyer must sign the contract and pay the deposit.
If they can’t obtain finance they not only lose their deposit, they can be sued for damages if the vendor suffers any losses associated with the default. Finance approval requires more than just a phone call or online enquiry. A full credit assessment needs to be conducted.
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