Avoiding auction nightmares!
All you need for a property to sell for a silly price at auction is to have two poorly researched, emotional buyers who get carried away with their bidding and I suggest that you don’t be one of them.
Unfortunately this scenario happens all too often. As soon as searching for a property becomes a major chore people tend to start cutting corners on the research that’s needed just to get the process over and done with. If you do this then you are likely to overpay.”
You should be asking yourself well before auction day “Have I inspected enough properties and compiled enough comparable research to know what the fair value of the property is?”
If the answer is not a confident yes then you have more research to do.
Researching 100 properties may sound like a lot of work but it’s really only 10-12 properties a week over a ten week period.
Given that this work will save you tens if not hundreds of thousands of dollars I would think it’s a very worthwhile investment of your time.
Here are four common mistakes to be aware of:
Getting carried away
Everyone wants to be a winner and unfortunately auctions can turn into an expensive game or an ego play for inexperienced and highly emotional bidders. If you’re the type of person who could get carried away in the moment then engage a trusted friend or family member or a professional buyers’ agent to bid at the auction on your behalf.
Forgetting the selling agents’ role
You need to always keep in mind that the selling agent is acting in the best interest of the seller not the buyer. On auction day, don’t let the selling agent pressure you into increasing your bid if the auction stalls. If you’re the highest bidder and the property isn’t on the market, then allow the property to be passed in and start your negotiations in the post auction environment.
Follow my 20-25-20 rule which is a 20% deposit and no more than 25% of your income in repayments over a 20 year loan. When purchasing a home or investment property you should always aim to put down at least a 20 percent deposit so that you avoid paying mortgage insurance and have some equity in your property. I call this “the ability to sleep peacefully at night buffer”. That way you know that you and your family can cope if unexpected financial challenges arise.
Ignoring property inspections
You’ve already paid for pest and building inspections on two previous properties that you’ve missed out on buying. You’ve found another property and you’ve convince yourself that you don’t need the checks on this one. You start thinking these inspections aren’t really necessary. Wrong! You absolutely need to know what you’re buying into. The property may be termite infested, the construction may be shoddy or the wiring and plumbing may be faulty. Any of these major faults will costs significant dollars to fix and this expense should be factored into the equation when working out your maximum bid figure prior to auction.
Courtesy of EPS