You shouldn’t be bidding if…

Auction bidding isn’t for the feint-hearted, but there are five critical tasks that must be done before being auction-ready. Ignoring just one of them could do more damage than just reducing the chances of success, and some of them could result in financial losses.

Unlike a private sale campaign, auctions in Victoria are bound by strict auction rules and they do not permit any cooling off periods. Vendors and agents expect all bidders are prepared to purchase unconditionally, so the onus is on the buyer to have conducted all of their due diligence prior to bidding.

The first task is one we’ve documented many times over the years, but it’s a very serious one. Buyers must have the sales contract professionally viewed. A full legal review will identify elements that may deem the property unsuitable for the purchaser; and often these issues are missed when buyers don’t engage the services of a great legal professional. Some of these problems include, (but aren’t limited to) the following.

• Zoning that precludes a residential loan option
• High future levies and repairs
• Garages/sheds/decks built over easements
• Nasty special conditions that reduce the buyer’s legal rights
• Covenants that could pose a threat to the buyer’s future plans for the property

Once the buyer signs a contract bound by auction rules, they cannot escape any of these issues, nor can they legally expect the vendor to rectify them.

The second is finance pre-approval. A deposit will be required on auction day and the deposit will be forfeited (and any additional losses potentially pursued by the vendor) if the buyer fails to finance the property.

The third relates to the settlement terms and the deposit. If the bidder hasn’t checked that they can manage the deposit and settlement terms being called for, they may be at risk of default. An insufficient settlement period, or a deposit exceeding their available funds are threats to a purchase settlement. Buyers must negotiate alternative arrangements long before auction day if they require variations.

The fourth item that needs to be checked off before being auction-ready relates about price setting. A buyer should have a firm sense of where the property value sits. As professional bidders we almost always have insight into the vendor’s reserve too. The latter requires dialogue with the listing agent, but a firm sense of market value comes from market analysis. Flying blind into an auction often threatens a buyers chances of success, because they’ll only be guided by quote ranges or gut-feel and so many bidders find that they embarked on a property that was never going to align with their budget. Comparable sales analysis isn’t rocket science and buyers owe it to themselves to ensure they aren’t flying blind.

The final item that is required in order to be auction-ready is a plan. Having a firm and exhaustive upper limit enables a buyer to bottle their confidence, think strategically about the bidding task ahead, and give the big event their best effort. The worst bidding efforts we see are those efforts with no firm plan. Buyers who start strongly and then turn to each other, privately questioning whether they should bid another ten thousand dollars, holding up the auction awkwardly and looking pressured are the buyers we often intimidate.

Many bidders have told us after an auction that they would have kept bidding against us, but things just didn’t work out for them with their nerves.