Buying at Auction

Do your homework! Visit as many similar properties in the area as possible and ask the Agent for a list of recent sales in the area, this will help give you and indication of the market value of the property.  Don't rely on the CV these can be all over the place, generally the inner city suburb properties are selling for over the CV however there are a few that are not.
You can get an independent valuation and some banks will require one before they lend you any money however valuation is not an exact science and no two properties are exactly the same. 
Go to some auctions and get a feel for the process, this may also improve your knowledge of market value.
You may have to compromise on your wish list, remember there are many things you can change about a property subject to resource and building consents with the exception of changing the location.  Also remember changes cost money and take time.

Get all your ducks in a row.  You should have your solicitor check the auction document, the land information memorandum (LIM) and also the property title.  You will also need to get pre approval for mortgage money from a bank.

The property will usually be open for a final inspection 1/2 an hour prior to the start of the Auction so get there in plenty of time to have a final look around.  Don't be phased if there is a big crowd of people at the auction only a fraction of those present will actually be there to bid on the property.  The others will be friends, neighbours and other people doing their homework.  Remember to bring your cheque book as you will be required to pay a deposit (usually 10% of the purchase price) and sign the action agreement.  You will then be require to pay the balance on the settlement date then you get the keys to the property. 

The auctioneer will have been given a confidential reserve price by the vendor at which the property cannot be sold under. 
Prior to the start of the Auction the auctioneer will read out the basic terms and conditions.  He will probably outline the benefits of the property and then call for an opening bid.

The auctioneer may bid on behalf of the vendor provided he makes it clear he is bidding on their behalf and he will only bid below the reserve price.  If the biding does not reach the reserve price the property will be "passed in". The highest bidder at this stage usually has the first right to negotiate with the vendor directly (depending on which company is running the auction).  If nothing comes to fruition here the vendor may consider conditional offers at this stage.

There are a plethora of different strategies for bidding at auction.  Some of which include:

  • to open the bidding with a strong high bid,
  • to wait until the auctioneer is about sell the property and then come in with your bid
  • to be assertive and respond quickly to any competing bidders
  • and a king hit bid of say a $5000 bid when the bids are just going up in $1000 bids.

What we can say is set yourself a price you are willing to pay for the property and bid with confidence.  The beauty with auctions from a buyers perspective is you can rest assured you have paid very close to market value. Being just $100s over the second highest bidder.


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