Last Kiwi Standing
Going Under the Hammer in the NZ House Auction Game
Home buyers in New Zealand are beginning to feel the pinch on their purchasing power as mortgage rate hikes, new lending criteria and price surges rock a housing market that has just recently emerged from an unprecedented period of low interest rates and competitive home loan terms being offered by the banks.
Sellers have cottoned on to the fact that the ball now lies firmly in their court and the rules of the game have been nudged ever so much in their favor – the result? Record asking prices and the auctioneers hammer slamming down on closing sales numbers that are shattering more than a few average Kiwi home seekers’ dreams.
That being said, New Zealand remains the land of the auction, with the majority of homes being sold under the gavel as opposed to the more traditional approach of paying a stated sale price. Whilst the likelihood of buyers walking away with an absolute steal is slim, and looks to be growing slimmer yet, if they play their cards right they might just walk away with a home within their affordability bracket.
Make Your Own Luck
The Roman philosopher Seneca might have had bidding at auction in mind when he stated ‘luck is where preparation meets opportunity’. Before you consider bidding on a home, it’s important that you do the groundwork first. Educate yourself about the rules and regulations pertaining to housing auctions – the REINZ (Real Estate Institute of New Zealand) website is a great place to start. Go over their Code of Practice and familiarize yourself with all the ins and outs regarding what is expected from you as well as the auctioneer. In short, learn the rules of the game before you play.
Once you’ve familiarized yourself with the way the auction game is played it’s always a good idea to carry out a few dry runs before going in to bid for real. Spend some time at a few other auctions to get a good feel of just what goes on there. This way you will have a much better idea of what to anticipate when it comes time to bid on the home you want.
Lastly, you’re going to need to get all of your financial and legal ducks in a row – get a property valuation, building inspection and your LIM (which is always advisable to go over with a lawyer) and lastly confirm your finance. You need to be sure before you walk into the auction hall that if yours is the last bid on which the hammer falls, you are able to meet the terms of the home loan your new purchase requires. Use a home loan calculator to help you determine just how much home you can afford.
Always save for a deposit and get pre-approval for a bank loan for an amount you are comfortable with before hitting the auction circuit. This way you can be confident that should the hammer drop on your bid, you’re within your means to follow through.
Strike Before the Hammer is Hot
Doing a little research, such as getting your hands on the comparative sales figures of other houses in the neighborhood and asking the agent what price the seller would be happy accepting will allow you to draft an attractive pre-auction offer. If your offer is accepted then you won’t have to go to auction at all. Even though New Zealand is now a seller’s market, there is still the chance of finding a home owner who would rather bank on the safe side and accept an agreeable pre-auction offer rather than risk getting less than they anticipated at auction should the bidding not go as high as they would like.
Be the Last Man Standing
Bidding is far more about emotion, personality and sport than it is about science and making careful, prudent and rational buying decisions. It is all too easy to get caught up in the controlled chaos that ensues once bidding begins, and many bidders have found themselves stupefied by just how far they strayed over their limit to secure their home in the heat of the moment – Remember, a winning bid instantly creates a legal and binding contract to buy that property. There are no second chances and no take backs – this game is for keeps.
Confidence is key once bidding starts. Bid in an assertive yet not aggressive way and always make eye contact with the auctioneer – it shows rival bidders that you mean business and that you have the wherewithal to take the process through to the bitter end should it come to that.
If you’re not comfortable with the rate the bidding amounts are advancing feel free to bid at a lower amount. Stay alert for signs that other bidders are reaching their thresholds, which usually occurs when the bidding amounts begin to drop. This is the ideal time, should your own limit allow for it, to strike a coup de grace and put in a big bid when everyone else is curtailing their own offers.
Set a Limit and Stick to It
Finally, whatever you do set a limit and regard it as a red line never to cross. Once bidding goes over that line you need to have the self-control to back down and walk away. If not you could find yourself in a position where you have overextended yourself financially by taking on more home than you can afford.