Buying property in Melbourne by auction is nothing to be scared of
One of the most common ways to sell a property in Melbourne is by auction. When we sit down with a client who is looking to purchase though, we find many are intimidated by the auction process
Buying in such a public forum is akin to public speaking which is something many dread! Even though an auction might feel very daunting, we believe it to be the most transparent way to buy a property. Gone are the days when the auctioneer could take a bid from a tree or a signpost above the heads of the crowd, rules have been tightened to ensure only genuine bidders can contest the auction. The entire market is there outside the property, calling out the amount of their next bid in the open, for all to hear. If you are the winning bidder you can feel a degree of confidence that you bought that property for market value, after all, the market was there in attendance.
At Mortgage Broker Melbourne, we arrange a solid pre-approval which sees our clients ready to bid on the day. We will have a limit set, if the bidding goes above, our client is advised to bow out.
We eliminate as many loan approval conditions as possible well in advance of the auction day, leaving just standard conditions remaining that can only be satisfied once a purchase is made. One of those conditions is a valuation of the property.
Unfortunately, lenders can’t go out and value all the properties our clients are interested in before they buy them, the costs would be too great. Instead, the valuation is done after the contract is signed which sounds like a huge risk but, in my experience, only once has a valuer disagreed with an auction sale price and that wasn’t by enough to affect our finance in that instance. The valuer takes into account the fact the market decided the value.
I have seen a number more private sales fall through because the valuer believes too high a price has been paid. This can happen more easily in a private sale because you are in a closed room with a professional negotiator. There is no perspective on your offer, only the usual “other interested party who is making an offer but we can’t tell you how much for” ploy!
When a client is considering private sale, we always advise they make their offer subject to finance, even when they are pre-approved, because we still have the valuation to do and a result lower than the purchase price can sometimes derail our plans.
If a client is highly reluctant to attend an auction, we work closely with someone who can help. A Buyer Advocate or Buyer Agent can take all the stress away by attending the auction and doing the scary part while the client has a coffee down the road with their mobile phone close by. There is a cost of course but you might be surprised at how low that cost can be, especially for first home buyers. Contact us today and ask for a copy of our handbook which contains a section on tactics at auction.
Marc has been a professional lender for 28 years. After beginning his career in 1990 with a UK Building Society, he moved to Australia where he held several different retail banking roles. In 1999 it became clear to him that a mortgage broker would eventually become an obvious choice for someone looking for a home loan so he took the plunge and became an independent broker. He hasn’t looked back since!