First time auction bidder

I’ve been carefully watching the market for units and strata apartments in Melbourne’s inner north and have started to see properties I might want to buy. But I’m a first time home buyer (for a PPOR) and daunted by the buying process in general, especially if I’m bidding at an auction, which is what a bulk of the listings I’m interested in are for. I’m wondering if someone could give me a run down of things I should do before the auction?

1. Can I get the bank to valuate the property before the auction? If I win the auction, what happens if the bank evaluates the property later and values it lower than what I expected? I’ve been preapproved and can pay a 20% deposit but I’m scared of buying something that looks good but turns out to be rubbish, then it’s too late to cancel and my LVR will be bad.

2. Pest and building inspections - are these necessary for an apartment building?

3. Conveyancers - should I get one now or is it only necessary if I’m ready to buy and need someone to look at the Section 32 etc?

4. Pre-offer advice: as an amateur I’d like to avoid auctions and instead to make pre-auction bids but am scared of losing money because I don’t know how to negotiate. Especially as the market has changed a lot recently so it’s hard to gauge the true market value. What’s worse for an inexperienced person - bidding at auctions or making pre-auction offers?

4. Other - what other things do I need to do to have all my Ts crossed and Is dotted before the auction date?

 

I'll refer to the above post for points 1,2,3.

4 - Indeed, lots of properties are well purchased under auction condition (at auction or after).
I personally have won 3 auctions myself and others negotiation after auction. But, I have walked away from lost auctions at least 5 times more than all purchases combined thus far, if not more, that I am saying this because it is something important to remember.
During auction, you feel under pressure, lot more than when there is negotiation happening and there is time to think over a cup of tea.

I'm sure many would have told you about the usual auction attending tricks. Most are applicable, general common sense works.
But what will work against you is if you are emotionally rattled. The strategy you had in mind escapes you and thought pattern changes as the auctioneer put more and more pressure on you.

One thing that you need to do if write down the max amount you are prepared to pay, past that just have the steel to say no and let it go. There is always another great property around.

A lot of times, the vendor may be open to accepting an offer, test the water, place what you think is a fair offer. See if they bite, because the vendor may also be emotionally strained. They do not know what is going to happen on the day of auction. This I can tell you from experience as well, I'd rather be a bidder in an auction and loose, then be the vendor in an auction and have the property passed in, because after that its just a struggle and luck. I dont like luck, would not recommend use of luck as a strategy, ever (I know it does not make sense, but I can explain...)

Another thing is that during auction, don't care about who will think what. When the bidding starts, throw in a low ball bid. Even if the realtor is saying we are looking for a bid of lets say $600,000 you stick to your guns, $450,000. Does not matter if you are subject of ridicule, keep at it. bid at increment of $1000, less when it slows down. The agents will advise you against it, don't listen, stall the auction.
This may not work all the times (or it needs some practice), there are times when its down to two bidder, and its my bid next. I just said to the auctioneer one moment and started talking to my wife, they will hate you for doing this. The auctioneer goes 'going once, going twice' the gavel NEVER FELL, NOT ONCE. Drag the auction out. I have won this way, as an average family buyer has only so much mental stamina, and they are tiring. Me, I have been to so many auctions, its nothing new, I can go all day. Again, this is not a polite thing to do, but sure is a viable and tested tactic.

Good luck mate..

 

1. Yes. If the valuation comes in under, you’ll need to get a second opinion, or find the extra cash to fill the gap.

2. Depends on the building and your appetite for risk.

3. Now is a good time to build your trusted team of advisors - mortgage broker, accountant, financial advisor, building inspector and lawyer/conveyancer.

4. Know exactly how much you can borrow, thoroughly inspect each property (turn on all appliances and heaters/air cons) and don’t make a rushed, emotional decision - there is plenty of fish in the sea.

Good luck @jinx77 !

 

The most important thing is to get a great lawyer who will investigate everything for you. We recently came across a property and our lawyer said something feels funny as they did not and refused to provide a recent sewage map. We looked at what was provided and the information was incorrect.

 

Haha. I wonder why he/ she would have asked that? Maybe it’s due to a past case?

 

Or move/buy in Qld. Auctions aren’t very popular up here.

 

Auctions can get real expensive if you are doing building and strata inspections (yes that is important!!) and then fail to have a successful bid.