Always keep in mind that auctions can be very rewarding, and they can be a lot of fun, but its best to come prepared so you feel confident and comfortable. Below are some answers to frequently asked questions about auctions.
If you have any other questions, or if you would like more detail on any part of the auction process, please click here to email me your query now.
1. How do I prepare?
2. Will all the bids be genuine?
3. What is vendor bidding?
4. What is the advantage of buying at auction?
5. What is the property worth?
6. How does the auction work?
7. Luck or strategy?
8. How can I feel comfortable about bidding?
9. Who can help me?
How do I prepare?
When it comes to buying property, there is no such thing as too much preparation. Speak to Bayleys marketing representatives who know the area, find out what similar properties have sold for and explore the neighbourhood thoroughly. That way, when the time comes to bid, you know what you are bidding for. Helpful sources of information include:
- Bayleys Research
- QVRP (Corporate Sales Statistics)
- Your Bayleys marketing representative
- An independent registered valuation
- A qualified building inspection
It is also a good idea to read through all the paperwork relating to the property beforehand. The Bayleys marketing representative will be able to provide you with:
- A full property information memorandum
- In most cases a Land Information Memorandum (LIM report)
- The particulars and conditions of sale
The particulars and conditions of sale will outline for you the chattels included in the sale, the settlement date and any other terms of the sale. If the chattels or the settlement date don't suit you, then talk to the marketing agent about what flexibility there may be. This will need to be discussed prior to the auction day. Settlement terms will also normally require you to pay a deposit of 10% of the purchase price if you are the successful bidder.
Will all the bids be genuine?
At Bayleys auctions you can be assured that all bids are entirely genuine and that our auctions are conducted with total transparency in compliance with the Real Estate Institute of New Zealand's Code of Practice. A code of practice is available from your Bayleys marketing representative and a copy will be displayed at the auction.
What is vendor bidding?
The auctioneer has the discretionary right to place bids on behalf of the vendor. This will only occur if you and the other bidders choose not to bid, and will only take place at a level clearly under a figure that Bayleys believes is fair market value or which the vendor is willing to accept - the "reserve" figure. The auctioneer is the only person able to bid on behalf of the vendor and will declare any such bid made on the vendor's behalf. All Bayleys' vendors have given a written undertaking that they will not bid or have another party bid on their behalf at the auction. So you can bid with total confidence.
What is the advantage of buying at auction?
If you're in the position to purchase on an unconditional basis, auction is the only buying environment where you're only competing with other unconditional purchasers. Before and during an auction and right up until a property is "passed in" or "set aside", you are not competing against conditonal purchasers. The other great advantage of an auction is that you can see exactly what other parties are offering for the property. This is not possible with other methods of sale.
What is the property worth?
It is important that you form your own opinion of value before the auction commences. Decide what the property is worth to you and possibly allow a margin of 5% to 10%.
How does the auction work?
You need to bid in order to buy. It is advisable for you to bid during the auction to indicate your interest in the property. Once a property has been declared "on the market" by the auctioneer it will be sold to the highest bidder unless someone else places a higher bid before the auctioneer calls "Sold".
If, however, the bidding does not reach the vendor's reserve price, the property will then be "passed in" or "set aside". In this instance, the open competition of the auction is lost and the highest bidder will have the first option to negotiate following the auction, to the exclusion of all other interested parties. This is done through Bayleys, for a fair and reasonable period determined by the auctioneer following the auction. You must be the highest bidder to retain superior position.
Luck or strategy?
Remember when bidding at auction, luck has nothing to do with the outcome. If you are the last one to bid, you win. You will often hear an auctioneer say, "One over is the place to be". How much you beat someone by doesn't matter, what is important is that you are the last person to bid. Another tactical move in an auction is to never stop on a round number, always go one over because it may make the difference between buying your dream property or missing out.
How can I feel comfortable about bidding?
If the bidding is increasing in larger denominations than you feel comfortable with, consider offering a lower denomination as your bid. Bear in mind, however, that the auctioneer does have the discretionary right to refuse the request. Alternatively, don't be afraid to try and increase the bidding with a "knock out" bid if your competition is showing signs of slowing down. This can often throw doubt into the mind of the other bidders and may stop them from bidding even though they have not yet got to their limit.
Who can help me?
Don't be afraid to ask your Bayleys representative, a friend or legal advisor to assist you with your bidding. Occasionally buyers may ask someone else to bid on their behalf, as another person may be more inclined to stick to a pre-determined limit. Having someone assist you with bidding on auction day can be helpful. However, if they are going to bid for you, you need to make sure that they have very clear instructions on what they can and can't do on your behalf. This will avoid any misunderstandings in the heat of the moment. They also need to be familiar with their obligations under the conditions of sale.