Online auctions are relatively new for buying and selling property but they are becoming more popular. While there is not much difference in terms of advertising, it allows you to bid from anywhere in the world. You no longer need to be on site to purchase your dream home.
So how does it all work?
Buying at Online Auctions Australia Wide
Online auctions are not that different than bidding while on site except they are more convenient and user friendly. You can usually complete the whole transaction online. But they are still competitive. Many bidders can be competing at an online auction for the same house that interests you.
Here are 10 tips to help you win an online property auction.
1. Research the Market
Before bidding at online auctions, do your research. Avoid bidding blind on a property you know little about. You need to understand the current housing market and the value of the home you want to buy.
Never were truer words spoken, “knowledge is power” and this is doubly true at online auctions. The last thing you want to do is pay too much for a house that is not worth it.
Assess the value of the property. Get a list of houses recently sold at auction in the area and compare the prices. Also look at the difference between the features of each property and consider how they impact the price, and of course look at the location.
Talk to the agent to find out what price they think the property will sell for and check the price ranges. Look at other houses in the area to compare different property values to the one you want to buy. You need as much information as possible to make a good decision. After all, buying a house is a huge financial investment. You want to get it right.
2. Due Diligence is Still Essential
Do not fail to do your due diligence on any property you intend to buy. It is too late after winning the auction.
Complete building and pest inspections as they can affect the price you are willing to pay. Inspections that do not have a good result, can be enough to change your mind about a property. Avoid making an expensive mistake.
Also request a copy of the vendor statement. This is usually given to anyone who intends to buy a property. It contains all the information you need to know. The seller has to disclose anything that may affect your decision to buy the property. If you do not understand it, have your conveyancer go over it with you.
Also request the contract of sale and read it.
3. Set a Budget
This may seem obvious, but set a budget. How much do you have to spend? No matter how much you love a property, you do not have unlimited funds. Remember, do not to get caught up in the excitement of an auction and bid higher than you can afford. This could leave you in financial dire straits.
4. Finance Pre-approval
Online auction property buying is the same as in person — you are legally obligated to purchase the property if you hold the winning bid. This means sorting out your finances before the auction.
Seek mortgage pre-approval so you have the funds to purchase. It lets you know just how much money you can borrow. Your pre-approval will come with loan application terms and conditions, so make sure you read them.
Here's an article that we wrote on how borrowing capacity is calculated if you wish to learn more.
5. How Online Auctions Work
It is important to understand the online process before auction day. Read the terms and conditions of the auction platform to understand how it works. They are all different, so it is important to know the rules of engagement — how to bid and what they expect if you win the auction.
Some platforms have the ability to digitally complete the contract if you win the auction. Where this is not available, the listing agent will contact you personally.
With auctions being such high pressure environments, knowing how it works and the expectations will give you a sense of control. This gives you a better chance of placing the winning bid.
6. Register to Bid
Property auction platforms take security seriously. They are transparent and must comply with all Australian laws.
You will have to register as a bidder before the auction. As part of the process you will have to provide contact details and proof of identity, and the platform will complete a fraud check.
Once you register to bid, you will receive a link to a livestream of the auction you can access from any digital device such as a smartphone, laptop or tablet.
Before you register as a bidder, it can be a good idea to register as a spectator and attend a few online auctions so you know what to expect. This will remove the fear of the unknown when you are ready to buy at an online auction.
7. Property Inspections
Whatever you do, avoid buying a property blind. Where possible, make an appointment with the agent to inspect the property in person. The other alternative is to take a virtual tour.
Pay close attention to the condition of the property while looking through. It is wise to have a checklist to help you assess what work may need doing before deciding to buy.
8. Get Help
Buying a property can be overwhelming, especially if it is your first time. Ask for help from a real estate agent. Brief them on your ideal property and price range, and leave it to them to narrow down the available properties.
Also talk to them about online auction property buying and how it works. Your real estate agent can give you valuable advice and tips for forming winning strategies.
When you find the property you want to buy, ask the agent questions such as:
- Is there much interest from other buyers?
- Has anyone made an offer?
- What price do you expect it to sell for?
- What is the vendor’s expectations?
This gives you valuable insight into what to expect at an online auction. It also helps you decide the price you want to pay.
9. Use a Strategy
Have strategies in place to use when bidding at online auctions when you are serious about winning. Consider the following:
- Make a strong bid at the beginning that is 15 to 20% under your budget. This will unsettle other bidders and knock others out right from the start.
- Set a bidding limit on an odd number such as $657,000 rather than $650,000. That odd number could be the difference between winning or losing the auction.
- Bid using odd numbers such as $433,000 and $517,000. This can potentially disrupt the bidding of others and is likely to surprise them. You do not have to make bids in even numbers such $1000, $5000 and $10,000.
- Online auctions tend to be slower so make another bid as soon as you receive notification of a bid. Notifications of new bids are via text or email. This gives you time to think about your next bid.
10. Keep Emotions Under Control
Keep your emotions under control when bidding. How you feel is good when searching for your home, but it has no place during an auction. When bidding, remain cool and clear headed to stay within your budget.
Auctioneers will try to play on bidders’ emotions to sell for the highest price. Do not fall for it. Be philosophical. You have a budget and cannot afford to blow it. Be prepared to walk away once bidding reaches your maximum price. Know there is a better property somewhere you still need to discover.
Pre-approved Finance Without the Stress
Preparing for an online auction has never been easier. With Joust you can now create an auction for lenders and brokers to bid on your home loan. Sort out your pre-approval before bidding at an online auction for houses. It takes under three minutes after you create a free profile.
Create your online profile now and discover how much you can borrow.
