Most Australians are intimidated by the auction process and it’s easy to understand why. Auctions are very exciting events. I’ve been in real estate for 28 years and I still get that surge of adrenaline every time I bid on a property myself. It’s totally normal.

But if you avoid auctions because you’re uncomfortable with the process you’re going to miss a lot of good buying opportunities. It’s usually the best properties that are offered for sale via auction, particularly in Sydney and Melbourne where a culture of auctions is ingrained.

I have long advocated the auction process, as it is the fairest and most transparent way to buy property. Many buyers don’t see auctions this way: they perceive them as highly stressful events that lead to spur-of-the-moment decisions based on emotions rather than sensibility.

This only happens when people are unprepared. Many people forget that pretty much all of the tough choices, such as determining your maximum price, can be pre-planned – thereby reducing the auction itself to merely a forum for executing decisions already made.

The greatest benefits of the auction process for buyers are:

  • An immediate result – unconditional contracts are signed straight after the auction; or if the property passes in, the highest bidder usually get first right to negotiate.
  • You know what the competing offer is at all times, unlike private treaty negotiations.
  • You can see your competition and read their body language – watch closely to pick up signs they are close to their limit.
  • The price is benchmarked in public – it’s comforting to know others have valued the property similarly to you.

Preparing to buy via auction

You can make an offer prior to auction, but you risk paying more than you need to. Pre-sales usually occur where there is lacking interest or when one buyer is offering a lot more money than the others.

You can also authorise someone else to bid on your behalf. Choose someone you trust who has some auction experience or hire a buyer’s agent. You need to organise this before the auction – state laws vary so ask the agent or ring your state’s Real Estate Institute to find out what paperwork is required.

Alternatively, get ready to do the bidding yourself – here’s how:

Prior to the event

  • Use your research and budget to help you identify a ‘walk-away’ price. It’s in your interest to keep this a secret from the agent so they don’t use this information to help the vendor set their reserve.
  • Have your finance already in place and attend the auction ready to write a deposit cheque.
  • Attend some auctions beforehand to experience the atmosphere and observe different bidding strategies.
  • Organise any amendments to the contract, such as a longer settlement period, prior to the auction. Talk to the agent and get agreement from the vendors in writing.

On the day

  • If you’re going to start the bidding, start low.
  • Project confidence – make the other bidders think you have no limit.
  • Make your bids fast and assertive. Agonising over your next bid is a sign of weakness.
  • Call out your offer in full (that is, say $350,000 instead of the increments such as $5,000).
  • If it’s going to pass in, make sure you are the highest bidder, as this usually allows first right to negotiate (whether this is a legal right or courtesy varies between states).
  • Stick to your ‘walk-away’ price. It’s better to feel the short-lived disappointment of missing out on a property you love than the long-lasting remorse of paying too much.

In my experience, fate can play a hand in these things. I’ve seen many under bidders walk away miserable only to find a more suitable property just a few weeks later. If you miss a property at auction, accept that it wasn’t meant to be and look forward to finding something better soon.