Be prepared to be a cash buyer.
When buying at auction your are buying on cash unconditional terms. The auction agreement you'll sign agrees that you'll accept the vendors title, pay the deposit immediately, and settle on the agreed date. All your due diligence, such as a buiding inspection, must have been done prior to auction day.
To approve your finance, your bank will need a copy of:
the Auction Agreement,
the Title, and
the LIM.
They may also need:
a valuation, and
a building report.
The following tips will help at the auction.
1. Be the opening bidder
The auctioneer will open proceedings with a summary of the legal description of the property and the auction process. They'll usually describe some features of the property and then ask for opening bids.
Be the first to bid.
Bidding promptly and first shows strength and gives an emotional message to the other buyers. Auctioneers like buyers who open the bidding and you want to be the auctioneer's 'reference bidder' and be given every last opportunity to buy.
Make your first bid strong enough to knock your competition out of the race early. Start at your happy price or just below a fair price.
2. Double your opponents bid
If anyone else bids, double their bid. Be stronger than them. Early in the auction and before the auctioneer announces the property "on the market" you can do this without risk of paying too much. It sends a strong message to the other buyers though.
3. Be ready to bid again promptly
By bidding quickly you send a strong message to other buyers and the auctioneer that you're the serious buyer in the room. Buyers and auctioneers get frustrated by bidders who take a long time deciding to offer another small bid. If you can no longer double the other bids, this is the next best way to put pressure on the other buyers.
As soon as you've bid, be thinking about what your next bid will be if required. Don't wait to be asked for a bid and then start thinking...
Be prepared to go to your grumpy price early though. (Prolonged counter-bidding in $1,000 increments lets the other buyers think they can beat you.)
4. While others are thinking, bid on top of yourself
You'll see this early in the auction sometimes. While others thinking about how to bid, offering the auctioneer another bid on top of your own bid shows you're a serious buyer not willing to wait and let anyone else buy by bidding slowly.
5. Know your numbers.
Know your maximum buy price, but have a fighting fund of $1,500 - 2,500. When other bidders stop on a 10,000 increment, you might buy if you have that little extra $2,500. If the others stop at a round number such as $1,100,000 you’ll win if you’ve got $1,101,000 - 1,102,500
A finishing fund of an extra $2,500 could make all the difference
6. Show strength; be loud and clear!
If the auctioneer can hear your bid loud and clear without ambiguity, you'll look like the serious buyer. Bidders who can't be heard don't do well at auction, and auctioneers can miss your bid if you don't put your hand up clearly.
If the auctioneer asks for a $10,000 bid, call 'bid' or 'yes' clearly and you've bid $10,000. Putting your hand up does the same thing, if the auctioneer can see it. If you want to offer half that, call 'five' or 'half' clearly.
Likewise, if the auctioneer asks for a $10,000 bid and you want to bid $20,000, call 'double' or '20' loud and clear.
7. Go to several auctions before buying.
Get comfortable with the process. Ask your agent to go with you. If you've seen a few auctoins before you go to the one you want to buy at, it makes the process a whole lot more comfortable and less intimidating. You want to be the bidder intimidating the others.
8. Avoid the fight! Make a pre-auction offer.
A good strategy is to avoid the fight. Eliminate as many other buyers as you can, as soon as you can. Make a pre-auction offer as soon as you can after the property comes onto the market.
If your pre-auction offer is accepted, the auction will be brought forward to within (usually) a couple of days of acceptance. By doing this, you’ll eliminate those buyers who haven’t:
seen the property yet, and
had time to arrange finance or building inspections.
You don't have to bid against buyers that aren't at the auction.
9. Not at reserve yet? Be the negotiating buyer.
If the bidding hasn't reached the reserve price, your goal is to be the last one bidding so that you can negotiate directly with the auctioneer. Use your cash buyer status to your advantage and negotiate a deal. Take your time. At the conclusion of these negotiations, the auctioneer will confirm whether or not your offer is sufficient to buy the property.
Be prepared to face more bidding if the property is announced on the market. Have a bidding strategy worked out to respond to any new bidders quickly..:
doubling
prompt bidding
bidding on top of yourself
go grumpy early
Do not wait for the property to be passed in. You’ll be competing with all the other conditional buyers.
Make time for coffee
I like to sit down with my buyers over a coffee before going into their auction. It's an opportunity to go over this strategy.
Some buyers like to let their agent bid for them which can be very empowering. In this case the agent needs two numbers:
the opening bid,
the maximum bid beyond which each bid must be approved by you, and
the absolute maximum at which we're out (you needn't disclose this prior if you don't want to).