Auctions a tricky bid for ownership
As Auckland’s property market soars, many wonder if they will ever get on the home ownership ladder. Throw in the auction process and the stakes are raised further. Julian Raethel reports.
When Jess Fountain entered the auction room she wasn’t really expecting to walk out a first-time homeowner.
It was the 23-year-old’s first experience as a bidder and she thought the threebedroom, brick-and-tile house in Onehunga would be out of her price range.
But the hammer fell at $590,000 on February 4 with no competing bids and after plenty of negotiation with the vendor, it was hers.
‘‘We were expecting it to go for $620,000,’’ Fountain says.
‘‘I’m stoked about buying in Onehunga, I’ve lived my whole life in Royal Oak.’’
In a red-hot market, auctions are an attractive option for vendors.
According to Barfoot & Thompson, the median Auckland house price in January was $700,000.
Almost 40 per cent of all Auckland dwelling sales in December went by auction, Real Estate Institute of New Zealand data shows.
Transactions in Auckland also dominated the national auction market in December, accounting for almost 75 per cent of New Zealand’s auction sales.
Fountain’s introduction to the auction process was swift and luck was on her side.
She only viewed the house three days prior and, with the help of family contacts in the property and building industries, was able to do her due diligence at no cost.
‘‘We worked out all the stuff with the lawyer and the banks in two days.
‘‘I went halves with Mum [on the 20 per cent deposit]. I doubt there are many people my age who have money in the bank to buy a house.’’
Auction night was held at the real estate company’s offices and attracted 80 people. Fountain went with her father who agreed to do the bidding for her.
‘‘Actually I wasn’t that nervous prior, which is odd, my Dad was more nervous than I was.
‘‘The first sale was a onebedroom unit in Mission Bay that sold for $500,000,’’ she says. ‘‘I started thinking: ‘What have I got myself into?’’’
The Fountains’ tactic was to place a bid at the last minute but it soon became clear they were the only players in the game.
Fountain settles on March 12 and will service the mortgage by getting tenants in, while she lives with her parents. Buying at auction can be a daunting process for any novice in the market.
Satisfying your lender’s demands with LIM reports, building inspections and valuations can be an expensive process.
And it may be only a matter of days before the auction rolls around.
Crockers Property Group sales manager Peter Holmes says this is the reason not many first-home buyers actually purchase at auctions.
‘‘There’s a huge amount of expense prior – before they know it they may spend $1000 and then may miss out,’’ he says.
‘‘It’s best to go along and see some auctions to see how the process works.’’
Margaret Johnston from Barfoot & Thompson says it is tough for some.
‘‘A lady I knew went to eight auctions and missed out every time.
‘‘After that she started to know what to look for.’’
Keeping a clear head is important, that extra $5000 or $10,000 bid could leave you with some explaining to do to your lender.
Mark Sumich from Sumich Estate Agents and Auctioneers says it’s important not to get too caught up in the rush.
‘‘The reality is you either have the access to the money or you haven’t.
‘‘It pays to have a few figures in your mind – bidders actually do more research than the agents,’’ he says.
On auction day it’s good to have a strategy in mind. Will you go in strong? Bid consistently? Or throw your hat in at the last minute?
Keep in mind that just because there’s a big crowd that doesn’t necessarily mean there will be a lot of bidders.
Sumich says auction day can bring out a bit of everything.
‘‘The man in the gumboots is just as likely to bid as the guy in the suit.
‘‘Buyers are getting more used to the auction system, we’re seeing more emotional buyers who wait to see what happens.
‘‘New Zealanders are perfectly suited to the [auction] style of buying.
‘‘Being more clever than the person standing next to you ... the gamesmanship,’’ he says.
Don’t be afraid to take some control during the process, he says.
‘‘Interruptions are gold at an auction,’’ Sumich says. ‘‘It breaks it up and makes it more human.
‘‘You can say: ‘Excuse me Mr Auctioneer, can you just give me a moment please’. It gives you some time to contemplate where it’s going.’’
After all, you are bidding on what could be the greatest investment you’ll ever own.
Tall order: The barriers to home buying can seem immense, particularly at an auction.