Adrien Gidaro, 34, and his partner want to upsize from a one-bedroom apartment in Annandale in Sydney’s inner west, but they haven’t had any luck yet.
Gidaro’s latest auction attempt was this month when he opened bidding on an apartment in nearby Camperdown at $1.1 million. The place sold to a downsizer for $1.27 million.
Gidaro, an account manager for a sustainability consulting business is trying not to be disheartened. “The other party was an older gentleman and we just hit a point where we knew I wasn’t outbidding him,” he says.
This weekend, such stories will play out across the country as capital cities experience their busiest auction week since April, with 2377 homes to go under the hammer. AFR Weekend spoke to brokers and buyer’s agents about how to increase one’s chances of success.
Understand the price guide
The problem is that price guides can be misleading. Buyer’s agent Kellie Landrey of Scoutable in Sydney says real estate agents technically use the guide to indicate the lower 10 per cent range of what the vendor would accept. So, buyers should add 10 per cent to the price guide of an auction property, and supposedly, that’s where the reserve ought to be.
But agents tend to increase the guide during the campaign because they want to get more people to the auction to increase competition. “They want to have five or six people who potentially have a budget at that 10 per cent range, but they’re trying to capture those two or three people who have 20 to 30 per cent above the range.”
What that means is buyers with smaller budgets are essentially used as fuel to spur those with higher budgets to bid more. It means that, in cities such as Sydney, most properties will go for anywhere between 10 per cent to 30 per cent above the guide. Pure Finance managing director Brendan Dixon says potential buyers can use property websites such as Domain and Realestate.com to help.
Although the properties listed for sale will have a price guide, looking at homes with similar qualities sold in the same area can offer a better insight into what’s actually going on, he says.
Get cosy with the agents
Another way to get around slippery price guides, or at least understand how hot the competition is, is to get as much information from the agents as possible.
“Before you get to the auction, what is really important to do is to have multiple conversations with the agent,” Landrey says.
Buyers should find out how many people are coming to the auction, and if the agent is cagey, try asking them how many building report downloads, strata report downloads and how many contract changes have taken place. “The people who have spent money on due diligence materials are usually serious about the properties,” Landrey says.
Suss out the competition
When auction day arrives get there early to register, Landrey suggests. Then, hover around the registration table and keep a note of how many people have registered, and who they are.
Justin Nickerson, director of Apollo Auctions, says that if bidders pick up their paddle but put it in their pocket, it’s a sign they’re unlikely to bid. The same goes for putting it in a handbag. “The worst sign of all is if they get a paddle, and they give it to their kids. They are never bidding,” Nickerson says. “They’re going to need that paddle to participate, and I know that if they want something valuable, the last person I’m going to give it to is my three-year-old.”
He also notes that many bidders want paddle number eight, as it’s considered a lucky number in some Asian cultures.
Next, position yourself where you can see the auctioneer and the other bidders, but, if possible, where you aren’t in prime line of sight. “The important thing at an auction is you want to try and read the body language of the other buyers,” Landrey says.
“So, as people are bidding, you want to see if they’re starting to make the signs that they’re coming to the end of the budget. Maybe they’re having a conversation with their support person or their partner, hesitating, changing the amount of bids or the incremental bid they’re doing – they’re pausing, maybe the agent is coming over to talk to them. Those are signs they’re coming towards the end of their limit.”
Go hard, go early, or become a silent assassin
Landrey and Dixon say there are two main strategies go big, go early and psych out the rest of the competition, or bide your time and wait until the bids are slowing to strike. Dixon describes this as the “silent assassin” approach.
If you can see the bids are slowing and the increments are reducing, there’s a good chance that, provided you have the budget, you could blow everyone else out of the water by striking with a bid that’s well above the increments being added, Landrey says.
She says maintaining your game face is critical for both strategies.
“Have your sunglasses on, don’t let people see you. Don’t talk to your partner, don’t talk to your parents, don’t talk to anyone. Be super assertive and make your bid.
“What you want is to make everyone feel like you’re not going to stop and everyone else will go, I’m going to walk away from this situation. I’m at my limit and they’re not going to stop.”
Nickerson agrees. As an auctioneer, he says coincidence is key, and so is having a strategy. “A lot of buyers we meet go in with a strategy of waiting and seeing, but that’s not a strategy, that’s just a hope,” he says.
It’s for this reason that Nickerson also suggests buyers get in early with their bids. From what he’s seen, at the vast majority of auctions, the person who launches the opening bid walks away with the property.
Using ultra-fast bids can also scare the competition.
“If you have a bidder who’s bidding against you, and they’re bidding really quickly, that’s sending a message of… We’re just going to keep going,” he says.
“We call it ‘running to the cliff. If your budget is $1.2 million, you want to be bidding really confidently until you stop.”
Nickerson has also seen some kooky behaviour but doesn’t recommend it. At one auction, a bidder stood next to him and ‘eyeballed’ the competition as they bid.
“They’re basically trying to intimidate people by their behaviour, but that doesn’t really work.”
He’s also seen bidders attempt to psych out the competition by using “quirky” numbers, that require fellow bidders to do the maths to figure out the next increment.
Avoid bidding round numbers, Landrey says. She remembers winning at an auction when the other bidder dropped out at $2 million. The property ended up selling for $2,001,000. Instead ask yourself the point where, if you were to buy, the price would have you feeling regretful on a Sunday morning and work backwards.
Know the lingo
Nickerson and Landrey suggest that buyers first check out a few auctions they don’t have a stake in to understand the rhythm of, as the process can move very quickly. Understanding the flow is critical, Nickerson says.
Auctioneers will often use “trial closes” – as in, “going once, going twice” to drum up extra competition. And they’ll do this quickly to try to force a decision.
Keep an eye on the terminology: if an auctioneer is saying things like, “We’re playing for keeps” or “This buyer holds the keys” or “Make no mistake, we’re selling today”, that’s a good sign the home has met the vendor’s reserve price and will sell, Landrey says.
If they’re not using those words, there’s a chance it could be passed in. you then want to be the bidder with the highest offer because you will have the first right to negotiate.
Real estate agents will often try to put pressure on buyers, but if you’re at the highest bid and it hasn’t me the reserve price and the agent is approaching you directly to convince you to offer more, be cautious.
“If you make another bid, then someone else can go and make another bid. But if they pass it in to you, then you have the first rights to negotiate. You’ve got a calmer environment to negotiate with the agent and the vendor to try to close the gap.”
Get pre-approval, and keep an eye on the time
Pre-approval will typically last for about three months, but within one or two weeks of the expiry date, you should be getting your documents ready to apply to roll over the pre-approval for a subsequent 90-day period.
If interest rates have changed during the 90 days of your pre-approval, this can also significantly alter your borrowing capacity. Generally speaking, buyers should have at least five or six business days before the pre-approval expires.
“If you win the auction, you have to let the bank know that you’ve bought and then tick off the final pre-approval conditions, and then your approval goes from pre-approved to unconditionally approved. That usually takes two to five business days. If you buy on the 89th day, you’re giving the bank no time,” Dixon says.
Do your research
“The other part of it is doing your due diligence on the property,” Dixon continues.
When you’re looking to buy, there is a contract of sale that you need to sign if you win, and then pay the deposit.
“What you want to do is have that contract read by a professional – a conveyancer or a lawyer.” They may then give you advice on terms that they suggest need to be changed. So, if you win, the amended contract is the one you sign. The person who reviews the contract is usually the same person who’ll help you organise a strata report or a building and pest report, Dixon says.
“You want to make sure that it doesn’t have termites or anything.”
Finally, you want to have the funds required for a deposit ready to go.