A BUYER’S GUIDE TO AUCTIONS
Walking into the auction room armed with a strategy is good, but don’t back yourself into a corner, warns
Wherever in the country you live, it’s likely that the number of home auctions happening in your neighbourhood has risen this year.
More than a third (34 per cent) of all properties were sold by auction in March around the country, according to the Real Estate Institute of New Zealand (REINZ), the highest per cent of auctions ever seen.
Auctions at Ray White New Zealand were up nearly 89 per cent in the period July 2020 to March 31. Ray White, which claims to be Australasia’s largest real estate company, says auctions as a method of sale are stronger in New Zealand than Australia at present.
Aaron Davis, national auction manager at Harcourts, says auctions in Hawke’s Bay are up 60 per cent, and in Whanga¯ rei by 43 per cent. ‘‘Auctions are like deadline sales or tenders on steroids,’’ says Davis.
And they’re here to stay. Acting REINZ chief executive, Wendy Alexander, says Kiwis are becoming more comfortable with the auction process.
‘‘The rationale behind this is that auctions are a good way of finding the market value of a property when the market is moving at pace, and from a purchaser’s perspective, they are completely transparent,’’ she says.
Is it worth making an offer early?
Making a pre-auction offer sounds good, but can backfire for a keen buyer.
You are narrowing the field because not everyone is in a position to attend an early auction, but you have also shown your hand to the competition.
And those with a bigger budget will also benefit from the smaller pool of buyers at the auction.
Auction room etiquette
Daniel Coulson, chief operating officer at Ray White and an auctioneer, says preparing for an auction with a strategy is good, but warns against going in too strapped into a plan.
No matter how much preparation you do, no auction is the same, he says.
‘‘When [buyers] overstrategise, they have such a clear picture in their mind of what they’ll do that if something happens that throws their strategy, they’re frozen,’’ he says.
His advice: ‘‘Remain open to what will unfold.
‘‘Establish yourself as a credible bidder at the beginning which reaffirms to buyers that they’ll be competing against you.’’
Be open minded about your limit
Don’t have regrets about what you could have bid, he says. Be open-minded.
So many people say, ‘‘we won’t pay a cent more,’’ but when asked afterwards if they might have paid a thousand or two more to make the open homes stop and to get the home of their dreams, many said they would actually pay a bit more.
‘‘Some people pin themselves into a position where they have so strongly stated their limit that it doesn’t allow them to change their mind,’’ says Coulson.
Consider engaging an agent
You can have an agent bidding for you, whether you’re at the auction or on the phone, says Coulson. ‘‘Agents do it every day, they’re not afraid of changing the increments and asking the auctioneer something.’’
Sarah, an Auckland buyer, was recently successful buying a home at auction.
Her agent, UP Real Estate’s Jennifer Temm Munns, did the bidding with Sarah on the phone, as partner Ben was tied up at work and the couple has a young baby.
Sarah had been to an auction before, with a friend – and bid $60,000 over their limit before her friend told her, firmly, to put her hand down.
So she found it better giving her bids to Temm Munns down the phone.
‘‘It was much clearer, I get distracted very easily,’’ says Sarah. The couple had briefly seen the house at a busy open home and then again on the day of the auction, which had been brought forward with a preauction offer.
The new auction date meant Sarah and Ben didn’t have time to get a building inspection done – they relied on the other buyer having done that.
‘‘It was honestly so last minute,’’ she says. ‘‘I have looked longer at a pair of jeans than the time I looked at the house,’’ she jokes.
The open homes had been very busy, so they thought the home would be out of their reach. It wasn’t until the starting bid was revealed at the auction that Sarah knew they had a chance.
The other bidder started bidding in $1000 increments, but they had more to go. ‘‘They started going up in 1000, then I threw out another $5000,’’ says Sarah.
Her advice to others would be to just be ready to go with the finances before they start attending auctions. ‘‘We feel very lucky,’’ she says.
The city where auctions don’t thrive
There is a saying among real estate agents that ‘‘Wellington is tender town and Auckland is auction town’’.
The capital has not traditionally been an area where auctions thrive, says Craig Lowe, managing director of Lowe & Co Realty. He believes that just as good prices are coming out of Wellington’s tender process as are coming out of other cities’ auction rooms.
‘‘Both tenders and auctions work really well in a market like this, as is evidenced by Wellington’s outperformance in the market,’’ he says.
Tenders are ‘‘incredible tools’’ for generating the same kind of intense competition and good outcomes for sellers as auctions, he says.
One difference with tenders is there can be wild disparity in bids, depending on the value buyers see in the home.
‘‘You do get the same reaction of, ‘I can’t believe that just happened,’’’ he says. ‘‘It’s the same thing, it’s just more visible in an auction, whereas it’s just the agents and the owner who see it at tender. ‘‘