Nicole AveryAfter a period of lackluster performance, the auctions market in 2023 appears to be making a comeback. A report by Apollo Auctions shows that the start of year saw solid activity across all Australian capital cities with strong clearance rates and increasing numbers of attendees and bidders participating in auctions.
With auctions activity expected to remain elevated in the coming months – most likely driven by peaking interest rates and the return of overseas migrants – 2023 could be the year where an auction is the best place to be for a chance to snap up the perfect investment property.
When paying the right price is critical to ensuring a solid return on your investment, here are a few tips to keep in mind when buying an investment property at auction.
Do your research
In a hot market, it’s important to be aware that prices can become artificially over-inflated. While the media can often stoke panic with reports of buyers ‘missing out’ at auction, there is also the possibility that some real estate agents will understate property values to drive auction activity.
When overpaying for a property will be a real killer when it comes to its investment potential, you should always do your own due diligence to understand a property’s true value. Checking recent sales in the area and attending a few auctions to learn and observe how they work will be key to participating in an auction, confident that you’ve set the right maximum budget.
Ensure your investment loan is ready to go
After doing your research, it’s important to set a budget to ensure the auction scenario doesn’t drive you to overpay for your investment property. Importantly, you also need to know exactly how much you can afford to bid, so if you win under auction conditions, you’ll have the finances ready to go without delay. While participating in an auction without pre-approval from your lender is a very high-risk strategy, securing pre-approval will not only enable you to bid with confidence, but it will also help you set that all-important upper limit on your spending.
Bidding best practices
Keep in mind that in a competitive environment, there are a few bidding techniques that could help you secure that perfect investment opportunity at the right price. These might include watching other bidders in the room to determine their intentions before making your own initial offer, maintaining a non-emotional state so other bidders don’t know when you’re reaching your limit, bidding confidently and quickly, and bidding small amounts first before making stronger offers later to knock out the competition.
Consider a pre-auction offer
Auction sales can be stressful for both the seller and bidders alike, and quite often, auctions are used when sellers want to achieve the strongest sale price in the shortest time. For this reason, a seller may agree to sell a property ahead of the proposed auction date if an offer is received which is more enticing than the expense, stress, and unpredictability of the auction itself. If you think you have a strong offer in mind before attending the auction, contacting the agent with a pre-auction offer could be your pathway to securing that ideal investment at a fair price point.
Carry out your pre-checks and inspections
If your bid is successful at auction, the property will be yours, so it’s sensible to attend the auction knowing you’ve already done your checks and balances to ensure there will be no surprises later, such as unexpected repairs which might see your investment out of pocket. Arranging a building and pest inspection before the auction will enable you to get a clear idea of the true value of a property taking into consideration any necessary renovations or repairs – which you may be willing to undertake for the right price. At the same time, having a clear idea about the true state of a property will help you keep a level head during the auction as bids become increasingly competitive.
