Although we were very nervous, we were quietly confident the day we bought our house at auction. But the whole experience taught me that auction is not the way to sell a property. Let me explain…
It was the height of the GFC, and in the months preceding we’d been to a lot of auctions in the area, and seen a lot of homes get passed in. One agent even told us that often buyers would be all set to bid, but when the moment came, they’d be too scared to raise their hands! I guess auctions are a thing property investors are more experienced with. I don’t know why real estate agents push vendors to go to auction, but I’m sure it’s a lot less work for them to sell a property this way.
The house itself was small, dark and needed a lot of work. Even though our televisions are full of renovate-and-flip reality shows, in my experience many people have trouble visualising how a property will look once renovated. I know this because I went to all the open inspections (to check out our competition!) and I saw a lot of people take one look through and walk straight out the door.
Only people who have their finance pre-approved or who can sign a cash contract are legally allowed to bid at auction, so that eliminated a lot of other buyers straight away. I was surprised to find out on the day that we were the only people who had organised a bank loan, as it simply involved faxing a few documents to our bank manager. Getting pre-approval is the first thing you should do before you even look at any properties. In fact, a few things that happened made me realise that we won this house because we’d done some simple preparation that others hadn’t, for example:
- The other buyers didn’t know how auctions work. At the final inspection, lots of people wanting to bid were hurredly asking the agent how to participate. A simple internet search or call to the agent prior would have given them the information they needed, without revealing their inexperience to other buyers.
- Another agent told me that often couples want to make an offer on a house but haven’t got the 10% cash in the bank to secure a contract. This agent had even offered once to lend this cash in order to get a sale over the line.
- I had called the agent’s office and asked to see the legal documentation on the property. His secretary told me I was the only one who’d bothered to ring her. Who would buy a house without actually reading the contract, or getting a lawyer to check it? You never know what you’re signing.
- We’d done a lot of research into ther auction laws in our state and had talked to friends who’d bought properties successfully at auction. My husband and I talked for several hours and agreed on a strategy, which was…
We wouldn’t be the first to bid, we would let others bid against each other to find out their maximum prices. Ideally we would wait until the fall of the hammer to make our opening bid.
We wouldn’t go above our agreed price because we knew we’d have to spend more on the property to renovate it. If others wanted to pay more, we’d let it go and find another property that didn’t need renovating.
And my mother would look after our kids so we wouldn’t be distracted; my husband would do the bidding; and I’d watch what the other couples were doing and whisper this to him.
In the end, it was a bit of an anti-climax. There were two other registered bidders, one I’d seen at the inspections and one I didn’t know (I knew this because I took a peek at the registration sheet when I signed 😉 ). It turned out that neither of them had enough finance so they weren’t able to bid. In fact, it was so quiet that we almost missed the “going once…going twice…” call! We made one low bid, and then the agent made a quick call to the vendor to confirm the reserve. The auctioneer then asked us to raise our bid to meet the reserve and the property was ours.
I jumped for joy: I’d dreamed about owning a house since I was a teenager, and this was my moment! Then the crowd disappeared and we went inside to sign the contract while our children played in their new yard. We took our parents out to lunch and talked for a long time, replaying the scene in our minds.
While it may not be this easy for you, you can win a house at auction. You just have to do a lot of research on the property, the neighbourhood and the auction laws in your area. Do not underestimate your competition, but show professionalism and confidence. If it was meant to be, it will be yours.
I’d love to know your experience, have you ever bid at auction?
More from this series:
- The Small Home Buyers’ Guide Part 1
- The Small Home Buyers’ Guide Part 2: how to find the house of your dreams
PS: White – the perfect backdrop has been published on the Living Space blog. I’d like to thank all my readers for your helping me land my first commissioned article!
PPS: It’s exam time at university now, so I will go back to posting once a week (on Fridays) for a while. My next post will be published on 14 June. It’s about how I made more time in my life for reading, so I hope you’ll check back then.