Auction Strategy

[Donna L]

Need urgent help. Block for auction in our favourite retirement prospect. Ballpark from agent is the upper limit for us. Prices going crazy down there and worried about being priced out. Should we make an offer at the top of our limit and hope they take it.... do we go in lower..... or do we have to go in slightly higher hoping they will take it off the auction roster? How do we play this?

Would really love this block. However, went to an auction on weekend further down and a weatherboard cottage 5 mins walk to beach was expecting around $500 k . Reserve was obviously around $460k Went for 765k. The local were shaking their heads.

All you auction veterans - please help us out?

 

[Sunstone]

Dear Donna,

Is it for investment or for retirement?

If you are focussed on it for retirement then you will make an emotional decision and will inevitably pay too much for the property. On the other hand if it is for investment then it MUST be non-emotional and you can walk away from it.

Something worth reading with regards to Auctions:
http://www.somersoft.com/forums/showthread.php?s=&threadid=5617

The last IP I purchased was supposed to go to auction. I had put a contract on a property in the same street and then this one came up. It was a superior property and had far better development potential. However waiting a full month for the auction was not practical. I leveraged the owner to not to go auction through throwing into play the fact that I had put a contract on another similar property and would not go ahead with both properties.

This gave myself some leverage to achieve my desired outcomes, one of which was to stop the property going to auction. However if he would not play ball I would have simply continued with the other property in the same street.

Find some way to have leverage. ALWAYS have an alternative and be prepared to walk away, otherwise you will always pay too much.

Run your figures, sign a contract at a reasonable offer and go up to your walkaway point in negotiations. It then becomes comparatively black and white and removes more of the grey areas.

Cheers,

Sunstone.

 

[Tibor]

Donna,

You sound far too deperate "I will miss out on it and never ever ever ever will be another property like this for this price".

In the vast majority of the cases it comes along once a month. When people a paying silly prices for properties, I rather sit back and wait until some of them will have to force sell, then if I am cashed up, can buy easily for the right price.

Even if it is a HOME (family or retirement) does it worth to throw away $50,000 or $100,000 or more just you have it NOW????

That money can go a long way towards your financial freedom or betterment of lifestyle before or in retirement!!

Try look at trhis property just as another investment property (allow max 5% for emotional factors). Would you buy it as an investment? I know sometimes it is hard so use cool head and not pumping heart, but 5 minutes excitement may cause long term suffering. Even when an area is tightly held, there will be properties there up for sale.

I am not an auction person ( I think auctions are only good for agents, not for the vendors or buyers), esecially as in the heat of the moment people can go much further on an emotional basis than they can afford on a financial.

Up to your limit you might try a tactic which could work. Lets say property's real worth / your rational limit is $550,000. Auction starts a $480,00. Put in a single "killer bid" of $545,000 at the beginning, then be ready to walk away if someone ups it.. Just make sure it is a real person not a dummy bidder.

This is the best I can offer, I hope it might helps.

Tibor

 

[Homer J Simpson]

I think you need to do more home work at what is the land value of that block you are so 'eager' to purchase. The price that the agent is giving you is the current market price. How would you feel if the market falls? Thre are plenty of deals out there don't lose your head on just one.

 

[Jamie]

I personally think the best auction strategy is not to buy at auction

Jamie.