Tips for Buying at Auction – Part 3
Auction Tip No.4
Now my fourth tip is actually, don’t be afraid of the Auction process because I know a lot of buyers are really scared off by bidding at auction. It’s a really transparent process. If we’re buying something at a private sale, say the agent rings you up and say, “Hey, I’ve got 2 people interested and I need you to put your best and final offer in by 5 o’clock tomorrow”, you actually don’t know how much they (the competitors) are prepared to pay for the property. So you might put an offer in for $550,000 and find out, well you probably never find out but they might only put in an offer of $520,000. Which means, you’ve paid $30,000 more than the next best person is prepared to pay. That can often be frustrating and you’ll be doing a lot of guesswork. Where else in an auction, there’s no guesswork. It’s fully out in the open and fully disclosed. Typically, you might be spending $1,000 or $500 more than the under-bidder. So I think it is something that you should embrace the auction process and if you have some skills and some strategy on what you’re doing, it shouldn’t be something that scare you off too much.
It’s also important to know that you can put a pre-offer in. The real estate agent will take that but I say you got to do it at the right time of the campaign cause typically its a four-weeks campaign and they generally won’t accept and this is not a fast and hard rule, but generally speaking they are not going to accept too many pre-auction offers in week 1 or 2. Basically, at this time, you’re just giving them feedback to take back to the vendor that they know that some people are interested. Usually, the agent will come back to you and say, “Look, this property hasn’t been in the market long enough and we might wait for the campaign to go through a bit further before we decide to sell it prior”. But when Week 3 comes, that tends to be the sweet spot when it comes to put in that prior-offer because they’d have enough time to test the market to see where they are at and see where the buyers feedback is at. And you’re still far enough away from the auction that you don’t actually stuff that part of the campaign up.
So it is quite likely, if the owner doesn’t like the auction process or the agent is motivated to get it done, in that third week is when it is the best time to put the offer in.
Now if you think about the fourth week, you generally only 6-7 days away from auction and its a really risky strategy for the agent to accept prior offers in that last week. It can be done, but generally speaking for them, its much easier for them to go through with auction.
So it is a transparent process and you can put in an offer prior to auction but in my view, embrace the auction process with a few strategies and skills prepared for in advance.
Here are other parts of Bryce’s Auction Series: