10 tips to help you from blowing your budget at a property auction

According to CoreLogic, a record number of properties are listed for auction across Australian capital cities when the market is competitive.

In a competitive market, real estate agents actively encourage sellers to take advantage of the sellers' market in order to maximise their possible sale price, it's no surprise sellers want to capitalise on bidder competition.

For buyers who have never bid at a property auction, the pressure on the day can be very daunting, especially if there's significant competition from other determined bidders.

The worst thing a buyer can do is let FOMO get to them as this will only lead to them blowing their budget. To win at property auctions without blowing your budget, consider these tips.

1. If you are bidding for the first time at an auction, attend at least five other auctions as a spectator before participating in one. This will allow you to learn the process and get the feel of what bidding on a house is like;

2. Before the auction day, inspect the house personally and arrange for building/pest inspections because once a house is sold at the auction, it's final;

3. Get a copy of the contract of sale for the property from the selling agent. This contract stipulates what you are buying and how you are required to pay for it, so read it carefully, and ask any questions you may have before auction day;

4. When buying at an auction, there are no 'subject to finance' clauses so ensure you have the conditional finance in place before bidding.

5. If you are using loansHub to finance your purchase, use our free pre-auction valuation service. This will give you an idea of what the market value of the property is and help you set a budget.

6. Make sure that you have the deposit ready, for if you happen to win the auction, you will be required to pay a deposit after the auction closes. You will need sufficient funds to cover the initial deposit amount stated in the contract of sale;

7. Use your approved conditional finance as your bid limit. In a competitive market, bidding wars can get sparked, the last thing you want is to pay too much for the property;

8. If you are unsure about any aspect of the auction, ask one of the agents or auctioneers for clarification before the day of the auction;

9. If you do not feel comfortable bidding yourself, get a professional or experienced bidder as your proxy and they can bid on your behalf to your set budget;

10. Ask the agent if sellers are accepting offers before auction. If they are, make an offer, the worst thing that can happen is the vendor rejects it. One advantage of making a pre-auction offer, there is no auction day pressure, and the other advantage, you will find out the sellers' price expectations.

In a competitive property market, buyers potentially end up paying 10 – 15 percent above what a seller would have got had they sold by private treaty.

For this reason, we suggest all buyers have a pre-auction valuation done on the property. Not only, will it give you a price to set your top bid at, but it will also prevent you from starting with negative equity on purchase.