How to buy it – Tips for buying at auction
Tips for buying at auction – Etiquette and sound preparation
Auction is probably one of the most efficient methods of buying and selling property. It’s quick, it’s certain and it doesn’t involve gazumping (phenomenon in traditional real estate sales where counter-offers often cancel out agreed sale prices) – once the gavel falls, the contract is made. It is entirely open and fair to all concerned. Leave your hand up for long enough in an auction room and there’s no greater certainty than that the property will be sold to you eventually. That said, homework is key. Remember that the onus is on the buyer to make all enquiries and preparations before the hammer falls – at this point there is a binding contract in law.
Auctions can be great fun to attend. You can get in on the bidding or just watch the action. But, before you start bidding, make sure you know how to get the best buy. Keep these tips in mind at your next auction.
1. Start by observing
One of the best ways to learn is by observation. Attend a couple of auctions with the intention to simply watch and learn. You’ll get the feel for how things work and be prepared to avoid costly mistakes.
2. Attend the previews
All our property advertisements clearly display viewing times and the contact details of the business development manager (BDM) assigned to that piece of business. Undertake to view the property prior to auction and use the expertise of the BDM to answer any conceivable questions on any aspect of the sale.
3. Be prepared
Know what you are looking at. Doing the legwork beforehand increases the likelihood that you will pay a fair price at auction. Not doing so, can lead to disaster.
4. Learn the terminology
There are a few terms that you need to understand so that you get the best buy at an auction.
- Pre-sale estimate – The auction house bases this price on their past experience. It is the price they expect the item to sell for.
- Provenance – It is the history of the piece detailing past owners. This information is not always available, but it can be a juicy tidbit depending on the owner.
- Start Price – This is the price at which the auction will begin.
- Reserve Price – This is a pre-set amount that the seller has agreed is the lowest amount he/she will accept. The reserve price is not disclosed at the start or close of bidding.
- Conditions of Sale – This refers to the terms and conditions of the sale including any warranties, special instructions etc.
- Lots – There are two meanings for lot at an auction. First, all items up for auction are assigned a number. This is referred to in the catalogue and described by the auctioneer as a lot. Second, a number of small items such as a collection of costume jewelry can be grouped together and sold as a lump sum. This, too, is referred to as a lot.
- Absentee Bid – Bidders do not have to physically be in the auction house at the time of the auction to bid. Bids can be placed by phone, fax or online. Arrangements must be made before hand to place an absentee bid.
5. Read the auction catalogue
Get the auction catalogue and read it thoroughly. It will list the lots in selling order.
6. Register to auction
To bid at an auction, you need to register before the auction begins. You give your details to our team members and a separate registration room at the auction venue is set aside for this critical purpose. You in turn receive a bidding card which is your ‘passport’ to participate.
7. Stay cool once the bidding begins
Before the bidding begins, decide what you want to bid on and what you want to pay for it. Stick to your plan.
Information courtesy of the Alliance Group Property Investor Guide, available at all Alliance Group offices nationwide. To find out more, call 0861 ALLIANCE, or visit www.alliancegroup.co.za to download an electronic version.