Strategies From the Award Winning, #1 Buyer’s Agent In Australia to Help You Win Your Home at Auction
Buying a home in Australia, particularly in the competitive Sydney market, often means navigating the intense and unpredictable process of property auctions.
With high stakes and substantial emotional and financial investments, understanding the nuances of auction strategies is crucial for success.
I’ve curated this information piece to delve into the key strategies that can give you an edge in the auction room, backed by data and insights from CoreLogic, SQM Research, and the Australian Bureau of Statistics (amongst other data and research derivatives).
Understanding the Auction Landscape in Sydney
Sydney’s property market is known for its dynamism and intensity, with auctions playing a significant role in how properties are sold.
CoreLogic data shows that Sydney consistently has one of the highest auction clearance rates in Australia, often exceeding 70% during peak periods. This indicates a highly competitive environment where multiple serious bidders vie for limited housing stock, driving prices up.
This competitive pressure is especially pronounced in desirable suburbs, where properties often sell for well above their guided (and reserve) prices. It is typical to anticipate a sale price at auction between 10% and 35% higher than the auction guide price.
SQM Research highlights that the supply-demand imbalance in Sydney’s inner and middle-ring suburbs contributes to this phenomenon, making auctions a preferred method for sellers aiming to maximise their sale price.
For buyers, this means that a strategic approach is essential. Whether you’re working with a Buyers Agent Sydney or navigating the process independently, being prepared and informed can make all the difference.
Pre-Auction Preparation: Research and Due Diligence
I am often asked if my high win rate at auction (above 90%) is simply due to extracting a high budget from my clients. This is not the case at all.
The foundation of any successful auction strategy, and my own also, is thorough preparation. This involves not just understanding the property in a bespoke manner, but also the broader market conditions and the auction process itself.
Market Analysis: Start by analysing recent sales data for comparable properties in the area. CoreLogic and SQM Research provide detailed reports that can help you understand market trends, including median house prices, auction clearance rates, and the price growth trajectory in specific suburbs. This information is invaluable in setting realistic expectations for the auction.
The number of data points I take into account when analysing the market allows me to predict with a very low chance of error where the sale price will rest. It is typical that my error rate is 5% or less. It’s like having a crystal ball at your fingertips.
Property Appraisal: Obtain an independent current and realistic valuation of the property. This information will NOT be found through auto-valuations, publicly available online real estate portals, etc.
If you don’t start with a highly accurate appraisal range, then you’re likely to misjudge the final sale price at auction – and potentially miss out on winning your home. Alternatively, if you misjudge the true value of the property, you may end up overpaying – and get stuck with accessing a lower level of finance from your lender than you were hoping to obtain (e.g. 70% LVR instead of 80% LVR).
A Sydney-based Buyers Advocate can assist in this process, providing insights into how the property compares to others in the area.
But don’t fall for the fallacy that a local Buyers Agent in Sydney will know best – in this day and age of universal data, it is often the case that cutting-edge knowledge can be obtained broadly, and the smartest professional for your needs may not be a local with 30 years of experience—they may not be innovative enough for the fast-paced property market dynamics of cities such as Sydney.
Understanding the Reserve Price: While the reserve price is not disclosed until after the auction, if at all, you can often gauge a rough estimate by researching similar properties. Understanding where the reserve might sit allows you to plan your bidding strategy accordingly.
I’ll often determine the most likely reserve price a week before the auction, so as to provide my clients with the information they require to make informed decisions. My reserve pricing prediction is typically correct, at worst, out by <1%. This is crucial to accurate auction bidding techniques and winning your dream property!
Legal, Strata, and Building Inspections: Ensure that you’ve conducted all necessary legal and due diligence checks, including reviewing the contract of sale, conducting a building and pest inspection, and/or accessing a current strata report. These reports will assist in both determining an accurate appraisal for the property in question, and also in navigating how other bidders may be directed during the auction.
Engaging a Home Buyers Agent in Sydney can streamline this process, ensuring that all due diligence is completed well before auction day.
Setting a Winning Budget
One of the biggest challenges at auction is pre-determining your budget and sticking to it! The competitive nature of auctions can lead to emotional bidding, which often results in buyers exceeding their financial limits.
Below are top tips that I provide our clients to help them reach a bidding cut-off limit that they are comfortable with. This is always finalised BEFORE auction and does not change:
Determine Your Maximum Bid: Before the auction, decide on the absolute maximum you’re willing to pay for the property. This figure should be based on your financial situation, market research, and the property’s value, as well as a few factors that I consider my ‘secret recipe’.
Factor in Additional Costs: Remember to include stamp duty, legal fees, and any immediate renovation or repair costs in your budget. ABS data shows that these additional expenses can significantly impact your overall financial commitment, so they must be accounted for upfront.
Pre-Approval for Finance: Ensure that your finance is conditionally pre-approved and that you have a clear understanding of how much you can borrow. This not only gives you confidence on auction day but also positions you as a serious buyer in the eyes of the seller. Remember: you won’t get unconditional finance approval until after you have exchanged sales contracts on a property (e.g. until after you’ve won the auction).
Auction Day Tactics: Bidding Strategies
If you’ve read this far, it’s likely becoming obvious that high-level auction preparation is crucial to your success on auction day. But it is not everything. Your bidding strategy and tactics during the auction are the icing on the cake.
The way you bid can influence the outcome significantly. Here are some tactics to consider as an auction newbie:
Opening Bid Strategy: Starting with a strong, confident bid can set the tone for the auction. This approach signals to other bidders that you’re serious and can sometimes deter less committed buyers from participating. However, starting too high might give away your willingness to pay more, so it’s a delicate balance.
Incremental Bidding: Bidding in small increments can slow down the auction and discourage other bidders. However, be mindful that this strategy can also drag out the process and increase the likelihood of emotional bidding wars.
Bid Late and Decisively: Some buyers prefer to wait until the auction is nearing its conclusion before placing their first bids. This strategy can catch other bidders off guard and create a sense of urgency. When using this tactic, make sure your bids are decisive and substantial enough to show you mean business.
The Knock-Out Bid: A bold strategy involves making a single, large bid that exceeds the expected price range. This can shock other bidders and lead to a quick resolution, but it’s a high-risk approach that requires confidence in your budget and the property’s value.
Observe and Adapt: Pay attention to the behaviour of other bidders. If you notice someone hesitating or frequently conferring with their partner or agent, they might be near their limit. Use this to your advantage by applying pressure with quick, confident bids.
Work with a Buyers Advocate: If the auction process feels overwhelming, which is very normal, consider engaging a Buyers Agent Sydney. Choosing a credible and proven professional means you’ll engage a property pro who is experienced in auction dynamics and can bid on your behalf, removing the emotional element and ensuring that your strategy is executed flawlessly.
The Role of a Buyers Advocate
Shameless plug to follow—but also a very genuine testament to what I have achieved for clients that they couldn’t have done on their own.
A Buyers Advocate can be an invaluable asset in navigating the complexities of an auction. They offer expert advice, conduct thorough due diligence, and can represent you on auction day. This not only reduces stress but also increases your chances of success by leveraging their experience and insights.
For example, a Property Buyers Agent in Sydney will have a deep understanding of local market conditions, enabling them to provide accurate advice on property values and auction strategies specific to Sydney’s competitive environment. They can also assist in managing the auction process, from helping you set a budget to executing a bidding strategy that aligns with your goals.
Post-Auction Considerations
Winning at auction is a significant achievement, but the process doesn’t end when the hammer falls. There are several post-auction considerations to keep in mind:
Finalising the Contract: Upon winning the auction, you’ll need to sign the contract of sale and pay the deposit immediately. Ensure that you have your solicitor or conveyancer review the contract before the auction to avoid any surprises. Don’t forget to carry with you a printed copy of any contract amendments agreed between your conveyancer/solicitor and the seller’s.
Unconditional Finance Approval: Although you may have confirmed finance pre-approval, the lender will need to formally and unconditionally approve your loan based on the purchase price. Ensure that all necessary documentation is in place to expedite this process.
Settlement Period: The settlement period typically ranges from 30 to 90 days, during which time your solicitor or conveyancer will manage the transfer of title and ensure that all legal requirements are met. Be prepared for any last-minute negotiations or adjustments, such as rent-back agreements if the seller needs more time to vacate the property.
Case Study: Winning at Auction in Sydney
To illustrate the above strategies in action, let’s look at a case study of Kitty & Miles.
Recently, there was an auction in Sydney’s Inner West. A couple, keen to secure their first home, engaged the team at K&M to assist them in the process. The property, a two to three-bedroom terrace in Balmain, was highly sought after, with over 15 registered bidders and 70+ viewers in attendance.
As our clients’ trusted Buyers Advocate, I conducted extensive research, analysing CoreLogic, SQM Research, and additional high-level data to establish a realistic appraisal price range for this terrace.
Additional fine-tuned research and conversations around three potential outcome scenarios gave the couple confidence in setting their maximum bid.
On auction day, after assessing the room and understanding the likely psychology of other bidders, I executed a late bidding strategy, observing the other bidders carefully before entering the fray with a decisive bid that exceeded the psychological threshold of $2 million.
This strategy caught the other bidders off guard, and after a brief flurry of counterbids, the couple emerged victorious, securing the property for $2.025 million—just under their maximum budget of $2.05 million. I continued by handling the post-auction necessities, ensuring a smooth transition to settlement for this first-home buyer couple.
