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Ten Things You Need to Know Before Going to an Auction

1. They are unconditional
You can’t bid subject to finance or a building inspection, everything has to be sorted out in advance.

2. … but some things can be varied
If you require a settlement date that is different from the one on the auction agreement, you can request a variation from the vendor that will just apply to you.

3. Bring your cheque book
If you are the successful bidder you will need to make a 10% deposit there and then, unless a different percentage has been pre-agreed before the auction.

4. The vendor sets a reserve price
The house will not be sold until the bidding has passed the secret reserve price. When it passes the reserve the auctioneer will announce that it is “On the market.”

5. Auctions are often “passed-in”
If the bidding doesn’t reach the reserve price the auctioneer will pass it in. This means the auction is over and the highest bidder has the first right of negotiation.

6. The auctioneer may make “dummy bids”

If the bidding falters and loses momentum the auctioneer may make a bid on behalf of the vendor to raise the price. This can only be done when the bidding is below the reserve price and it must be clearly announced as a vendor bid by the auctioneer. Find out more here.


7. Watch out for “trial closes” 

To entice new bidders who are holding back and to stimulate competition, the auctioneer will often give the very strong impression that the property is about to be sold by saying, “Going once, going twice, for the third and final time ….” However, this is only a device to uncover further bidders. Unless the property has been announced as “Now selling” it will not be sold. If in doubt, pipe up and ask the auctioneer if the house is now on the market or not. Find out more here.


8. Know the rules about pre-auction offers
The Vendor may accept an offer prior to the auction date, but that does not mean that the buyer has secured the property. A pre-auction offer - which must be unconditional – simply brings the auction forward to three working days from acceptance. Other interested buyers will be contacted and invited to attend. The accepted offer will become the opening bid and might be bettered by other buyers.

9. Don’t be intimidated
The auction room can be a daunting environment for buyers unfamiliar with its protocols and they are often cajoled into increasing their bid by agents representing the auctioneer. Remember that you have the right to say, “No.” If your bid is highest it will be passed-in and you can negotiate away from the glare of the crowd.

10. Bid confidently
Try not to hesitate or consult with your partner too much during the bidding, instead respond positively and quickly to rival bids. You may be close to the very edge of your limit but give the competition the impression that you’ve got plenty more gas in the tank and that they may as well just give up.

Want more details on Dummy Bids and Trial Closes? See the video here.

 

For more advice on buying by Stephen Hart of Hometopia and Auckland Homefinders, go to BNZ Good Home.


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