By John McGrath
Many more homeowners in Sydney are choosing to sell via auction in today’s booming market – and why wouldn’t they with clearance rates consistently above 80% throughout much of 2015.
So as a buyer, you need to be ready to buy at auction – especially if you’re in Sydney. Unfortunately many people struggle with this, with a St George Bank survey of 1,000 prospective buyers showing:
Buying a property is a huge financial decision and once you add in the inevitable stress and excitement of buying at auction, the odds are you’ll make mistakes if you’re not prepared. You’ll pay too much or even worse, you’ll lose your nerve and walk away knowing you could have stretched a little further and bought it. And now you’re back to attending opens every Saturday to find a suitable property.
Here are my tips for addressing the main issues highlighted by St George’s research.
Preparing for auction day
The most critical thing you need to do is establish your walk-away price. This figure is not just what the bank will lend you plus your savings. You need to ask yourself, what else am I willing to do if I need to stretch my budget to secure this home? For example, Could mum and dad lend you $5,000? What if you scrapped or delayed your next holiday? Could you buy a less expensive car? Whatever you do, don’t push your boundaries so hard that you end up in financial difficulty. But do consider your priorities and ask yourself, will I be happy walking away from this property if an extra few thousand could have bought it? Get comfortable with a number and stick to it.
Strategy to win
Fear of ‘overpaying’
In a rising market, ‘overpaying’ today often ends up being ‘good value’ tomorrow, especially when stock is low. In Sydney, people who paid 10% above what they considered market value in 2013 are laughing all the way to the bank, because the market is now up more than 30% on 2013 prices. Even in markets that aren’t booming, if you’re in it for the long term and you really want that particular property, don’t be afraid to overpay a little. In 10 years’ time, the extra $20,000 you paid on auction day simply won’t matter.
Final word on buying at auction
In my experience, fate can play a hand in you finding the right home and you should go with it. Certainly, create a plan to bid and win but also accept that if it’s not meant to be, it’s not meant to be.
If you really don’t think you can handle the stress of bidding on the day, hire a buyers’ agent or ask a confident friend or colleague to do it for you. Just check with the agent as to what you need to do to officially to authorise your nominated person to act on your behalf.
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