Purchasing a home at auction often brings about many daunting feelings of nerves and anxiety to the inexperienced buyer. Many feel reluctant to bid at auction due to the heavy competition and are under the impression that properties will always sell at a premium. Here are a few misconceptions that you can rectify to help relieve your buyers of their uncertainty come Auction Day.
Misconception #1: The ‘reserve price’ is the amount the house will sell for.
The vendor sets a reserve price in writing with their agent prior to the auction. This is the minimum sale price that the vendor will accept. However, many vendors actually view the reserve price as the worst-case scenario, and the bare minimum price they will (begrudgingly) accept. Of course, vendors always hope for a much higher offer! (Who wouldn’t?!) Being honest with your buyers is paramount. Providing them with a realistic opinion on potential price outcomes can build a strong foundation of trust in the client-agent relationship, and can ultimately result in a loyal, life-long customer.
Misconception #2: Auctioneers undersell.
Do not fall into the trap of under-pricing a property simply to attract buyers. Many experienced buyers recognise the tactic and the uneducated buyer will come along with too low a budget and be turned off the idea of auctions altogether. Make sure to quote properties on auction accurately.
Misconception #3: Auctions are unfair because there are ‘dummy bidders’ in the crowd.
A dummy bid is when a false bid is made by the auctioneer, or a bid is accepted by the auctioneer from a non-genuine bidder in the crowd. However, many buyers do not know that ALL dummy bids are illegal and attract significant penalties! Many are unaware that it is also against the law for buyers to hinder another bidder, or in any way intentionally disrupt an auction. Before bidding starts, remember to tell buyers that the auction will be conducted according to the auction rules. It is a good idea to remind your potential bidders to ensure that they are certain of their bid before they make it, and to be clear of their bidding limit. Building this relationship of trust with potential buyers could ensure they continue to source properties within your agency.
Misconception #4: I have to bring a 10% deposit with me when I attend auction days.
The thought of needing to have so much money ready on auction day often makes buyers feel uncomfortable. You should remind your buyers not to worry if they do not have a full deposit on the day of auction. In many cases, it is often decided that a change to the contract will be allowed for a partial deposit, with the remaining amount due on a specified date in the future. The successful bidder also has the option of organising an online bank transfer.
Misconception #5: Buying at auctions is more expensive than buying property privately
Competition is always a factor, regardless of whether you are buying at auction or purchasing property privately. Just because you cannot see the competition in a private sale, does not mean other bidders are not there!
Remind your buyers that even if they feel they are paying more than expected at auction, being the highest bidder also means they can negotiate at the vendor’s reserve.
At the end of the day, most buyers feel fondly towards having the opportunity to definitely secure a property in a specific time frame at auction.