Hidden costs of buying or not buying at auction

‘‘Coming in with a late bid can be very risky and you need nerves of steel.’’

Too little too late

Glucina agrees that while buying at auction is all about psychology, it doesn’t pay to try to be too smart.

You need to be holding the top bid if you want to negotiate with a vendor when a property fails to sell at reserve.

It is not uncommon for people to miss out because they think they will be able to negotiate later, but if they don’t hold the top bid that is unlikely to happen. Buyers have been known to call later offering more, hoping that maybe a postauction sale has not eventuated, only to find the deal has been done.

Glucina says there is a misconception that if a house fails to sell under the hammer, it will sit around and there will be plenty of time to do a deal. ‘‘The pendulum has swung back in favour of the vendors in sought-after areas.’’

In Auckland, properties around the milliondollar mark are especially competitive.

‘‘I had the first open home for a house in

Ma¯ ngere Bridge last week and I had 20 groups through in half an hour on a Wednesday night. I have never before had that number turn up for a first open home in the middle of the week.’’

Buying at auction may not suit everyone. If you are a first-home buyer you might find auctions extra tough financially. By the time auction day rolls around you will have already spent hundreds of dollars, if not more, on builder’s reports and lawyers (as will other buyers). And it’s possible the bank might want its own valuation, which will be an added cost.

That money is gone in a flash if you fail to secure the property.

One first-home buyer Stuff spoke to said she and her partner were spending $700 to ‘‘not buy’’ a house at auction, and decided to stop attending auctions because they couldn’t top the competition and their money was disappearing. Their bank accepted property valuations provided for each house, so at least they were saved that cost.

They have since bought their first home by negotiation and will be moving in next month.

But, with auctions an increasingly popular way to sell, there’s a strong likelihood that the ‘‘house of your dreams’’ will go under the hammer.

The REINZ says 14.1 per cent of all property sales last month were houses sold at auction, compared to just 2.5 per cent the year before. So, best be prepared.

The government provides a detailed checklist for auction buyers on settled.govt.nz