Beating the auction hammer
“Compare apples with apples” says property expert Arjun Paliwal, when it comes to purchasing at auction. Image – Canva
  • Buyers will have to adjust to hot market conditions, says Arjun Paliwal
  • Auction volumes increasing in non-traditional areas such as Brisbane and Adelaide
  • Monitor prices, attend auctions, and set a cut-off range amongst top tips

With the latest data confirming the busiest auction week since March, sellers are turning to selling their homes under the hammer to take advantage of the hot market.

Award-winning property expert and The Property Tribune contributor, Arjun Paliwal, says Australian buyers must adapt to buying under the hammer to land a property in current market conditions.

The founder and Head of Research of InvestorKit has shared his top tips for beating the hammer to secure your win at auction.

“Those looking to buy will need to be open – and thoroughly prepared – with the idea of auction if they intend to buy in the next quarter, particularly for properties selling for $750K and above.” 

Arjun Paliwal, InvestorKit Head of Research

“While buyers in Melbourne and Sydney tend to be familiar with auctions, the market heat in recent times has added more pressure, so they need to come armed with the latest market research and a strong strategy to understand comparable sales,” Mr Paliwal said.

He added that areas not traditionally seen in the auction market, such as Brisbane and Adelaide, are experiencing increasing numbers of properties gone to auction due to improved vendor confidence.

“Many won’t be used to this style of buying nor the environment of heat,” Mr Paliwal said.

Eight tips for auctions

1. Shortlist several properties

Mr Paliwal encourages those in the market to avoid putting all their eggs in one basket, and instead have several properties of interest to fall back on.

He acknowledges that  auctions are fast-paced and buyers enter in with a level of emotional investment, which can lead to overpaying.

Having multiple properties on the list can ensure buyers aren’t making a regrettable purchase, or facing too much disappointment.

2. Observe property sales up until day of auction

According to Mr Paliwal, buyers are still reliant on the outdated method of analysing property sale prices from the last three to six months of sales.

With the fast-moving nature of the current market, figures from months ago become antiquated.

Instead, Mr Paliwal advises buyers to continue monitoring the most recent sale prices up until auction day to get a realistic price guide.

3. Consider comparability between property prices

“Compare apples with apples when looking at comparable sales,” said Mr Paliwal.

Remember to consider the features of each property when monitoring sale prices to avoid an inaccurate price guide.

Certain features such as flood or bushfire-proneness, a pool, or a bus stop can all impact the price.

Ensure that you are only comparing properties with similar features for the most accurate insight.

4. Set a cut-off range, rather than price

Mr Paliwal advocates for buyers to set a cut-off range, the price range they would be willing to pay within, rather than a maximum price.

The bottom of the range is referred by Mr Paliwal as a ‘fair value’ and said setting a range will serve as a reality check to avoid post-purchase regret by paying at or above maximum price.

5. Do your own recon

Attend home opens and auctions to get a feel for the environment.

You can observe things such as amount of interest in a property, or typical number of bidders, so you can be best prepared for when it comes time to bid.

6. Follow trend reports by property professionals

Mr Paliwal encourages buyers to take advantage of market analysis reports, such as those produced by CoreLogic, SQM Research and the InvestorKit monthly whitepapers.

He said the key to gauging a realistic idea of price is in looking at the percentage difference between a property’s predicted sale price, and the price it went for at auction.

7. Consider placing a strong opening bid

Opening with a strong bid can reduce auction heat by deterring competition, and slowing the pace the bid will rise at.

Auctions can heighten competitive spirits and result in bids rising quickly but a competitive opening bid can discourage this.

“If you’re thinking of a starting bid and you’re willing to go up to say $1.5 million on a property – and based on your research, you think this could be the end price – consider making an opening bid of $1.25 million+ to scare off competition.”

Arjun Paliwal, InvestorKit Head of Research

“You’ll likely wipe out two-thirds of bidders who didn’t do their homework well,” Mr Paliwal added.

8. Consider placing small or odd-numbered bids to slow the pace as cut-off nears

As the bids rise close to your cut-off maximum, Mr Paliwal said placing smaller or odd-numbered bids can reduce the auction heat.

He said buyers should use this tactic when approximately $200-500K from their end price, by bidding in increments of one, five or ten thousand or by using odd numbers.

The auctioneer and bidders will be forced to slow and reconsider their bids, cooling off the rapid rise in bids.

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