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Misconceptions about Property Auctions

Many buyers don’t love auctions because they believe properties will always sell at a premium with competition.

Others head in armed with strategies; holding off on bidding until the last second or when the property is declared on the market.

Agents say there are several misconceptions about auctions, from the vendors’ reserve to the requirement of a 10 per cent deposit on the day.

A vendor’s reserve is not a price they’re ‘happy’ to sell it for

The role of the reserve price is a misconception from vendors and buyers, Nelson Alexander’s Arch Staver says.

Buyers believe it’s what the owners want, and vendors sometimes think it should be the price that gives them reason to celebrate – it’s actually not, he says.

The reserve price is often “the worst case scenario”, Mr Staver says, and what vendors are not prepared to sell their properties less than.

You don’t ‘need’ to pay a full 10 per cent deposit on auction day

Buyers will need to check with the agent or vendor before the auction if they can’t pay the full deposit on the day.

RT Edgar’s Joanne Royston says buyers may be able to do a small transfer on the day, with the balance transferred over the weekend or on Monday to make up that 10 per cent.

Buyers may also alternatively call their bank and organise a large transfer over the internet if they win the keys on the day.

Don’t count on buying on the scheduled auction date

It is possible vendors will accept a pre-auction offer, and several acceptable offers may trigger a boardroom auction a week or fortnight before its scheduled date.

Auctioneer Damien Cooley says more than 30 per cent of their listings are selling before auction.

“These things can all change; it all depends on the owner’s motivation to sell and the buyer’s motivation to try and secure the property,” he says.

Some agents are also more inclined to sell properties before auction, Mr Cooley adds.

Holding back from bidding does not guarantee you will buy it for cheaper

Some people hold back and don’t bid until later in the auction because they believe the price will be pushed higher if there are five people bidding it up early on, Drakos Real Estate’s Chris Kazonis says.

“But it doesn’t happen that way because a lot of people wait until it’s on the market – others don’t,” he says.

Mr Kazonis believes a good, strong bid can knock out several competitors.

Ultimately there is a reserve, he adds, and, if the property passes in, in many cases the vendor doesn’t have to sell.

You will always pay more at auctions

Buying a property privately as opposed to at an auction does not necessarily mean there is no competition.

“You may put an offer in to the agent and there still may be multiple buyers from a private sales perspective,” Ms Royston says.

“But it’s not transparent or out in the open, it’s not in the public forum for you to see the other buyer and see that participation and get a feel for it yourself.”

Some buyers may end up paying more than they like, but being the highest bidder also means you can negotiate at the vendor’s reserve.