You’ve overcome two of the biggest hurdles of property purchasing: saving a deposit and getting mortgage pre-approval. Now it’s time to face the last obstacle between you and your first property purchase, and win at the auction.
Only last week news outlets reported on a Sydney auction that saw “hundreds” of attendees line a suburban street to compete under the hammer.
The latest figures from Domain show that Sydney Auction clearance rates for Saturday 15 May sit at 77 per cent, two percentage points higher than the same time last year. Although still high, these results may come to the relief of would-be buyers, as auction clearance rates recorded an intimidating six-year high in March of 81.4 per cent
Melbourne auction clearance rates came through at 73 per cent for Saturday 15 May. These figures are up from clearance rates of only 53 per cent recorded last year as the city battled the worst of COVID-19 and lockdown restrictions.
There is still a clear appetite for property, and first home buyers in particular may need a little helping hand to come out on top of the other bidders. Here are some helpful tips that may help you to win at the auction:
1. Dive deep into research
It’s not enough to rock up to an auction after a cursory browse online. First home buyers hoping to see success at the auction will want to arm themselves with as much information about the property and its area as possible. This may include knowledge of the number and value of properties sold in the same suburb or street, and even auction clearance rates for that suburb.
This may better help would-be buyers to prepare themselves if the property we’re to go above reserve, and, if the property sale enters post-auction negotiations, they may be able to haggle for a more competitive price.
2. Watch and strategise
One of the best ways to shake off those first-auction nerves is to check out a few before you approach one for a property you’re genuinely interested in. Hop online and take a look at auctions occurring nearby and spend a day observing them, including the pace of the auctioneer, which types of people are bidding and when they make their bids. Pay particular focus on who is winning auctions and how they play the game.
Then you may want to consider setting an auction strategy based off of your observations. Some buyers choose to bid early and try and take control, whether that means distracting buyers with odd value increases or slowing the auctioneer by bidding at your own pace. Some buyers opt to wait until the very end to place their bid, keeping a cool demeanour and not getting lost in the initial bid rush. This strategy does require discipline and a bit of luck to pull off, as you never know if an auction will go over your maximum bid limit early on.
3. Set a bidding limit
Speaking of a maximum spend limit, establishing this before you go to an auction may be a helpful way to ensure you’re acting with your head and not your heart by getting swept up in the moment. Auctions are designed to get your adrenaline pumping and affect your emotions, meaning that keeping a level head is essential for success.
You may want to consider setting two auction bidding limits based around your ideal spend limit and your absolute maximum bid limit. Your ideal limit is where you’ll try and drive the auction to, and is typically less than your pre-approval limit. Your maximum spend limit is then the amount you absolutely cannot go past in your bidding. By keeping these two limits in mind, you may be able to keep the emotions at bay and bid sensibly.
What is your maximum bid limit?
Not sure exactly what your limit is? One way you may be able to calculate the maximum property value you can afford is to discover how much you can afford to borrow through a Borrowing Power Calculator.
Reduce Home Loans’ Borrowing Power Calculator allows would-be buyers to enter details, like their income and expenses, to see an estimate of how much they may be approved to borrow from a mortgage lender.
This is also a good starting off point if you want to do some auction research while you wait for mortgage pre-approval. Visit a few auctions of properties you may be interested in with your borrowing power result in mind, and you may get a good idea of the property market in your chosen area.
For more information, you can talk directly to one of Reduce Home Loans accredited Personal Finance Managers on 1300 REDUCE (733 823).