Veronica Morgan is Residential Property Expert and Buyers Agent, as well as the Co-founder of the Home Buyer Academy, a course built to provide first home buyers with affordable access to expert advice. You may remember her from her recent appearance on our podcast, in the episode ‘The biggest mistakes first home-buyers make and how to avoid them‘.
In this episode, Veronica is demystifying a process that scares a lot of people: auctions. She’ll break down everything you should do before the auction to be in the best place possible on the big day. She’ll explore everything from the due diligence you have to have, to the extra useful research you can conduct. Plus, Veronica shares an important tip for buyers about registering to bid that could help win you your dream property.
Veronica also has a special deal for listeners of The Home Run on her book, “Auction Ready”. For more tips and tricks on getting ready for auction, go to www.getauctionready.com.au and use code ‘homerun30’ at checkout for 30% off plus free postage.
Get in touch with Veronica Morgan
Founder and Principal of Good Deeds Property Buyers
Co-host of the popular series “Location Location Location Australia” and also “Relocation Relocation Australia” on Foxtel’s The Lifestyle Channel Australia
Co-hosts “The Elephant in the Room” property podcast
Author of “Auction Ready: how to buy property at auction even though you’re scared s#!tless!”
0:00 Michael Nasser
The information contained in this podcast is general in nature and is not to be taken as financial or personal advice.
Michael Nasser 0:06
It does not consider your objectives, financial situation or needs.
Michael Nasser 0:10
You should consider whether this information is suitable for you and your personal circumstances before acting on it.
Michael Nasser 0:17
Hi and welcome to the home, run your guide to buying your first home in Australia on the show, I’ll walk you through the home buying process from every angle.
Michael Nasser 0:24
We cover the steps to take the pitfalls to avoid and the answers to all your questions you’ve been dying to ask no matter what stage you’re at, you’ll learn everything you need to know about buying your first home.
Michael Nasser 0:35
I’m your host, Michael Nasasser and I’m a mortgage broker at Lendstreet and I really love helping people buy their first home in today’s episode.
Michael Nasser 0:46
I’m happy to have Veronica Morgan as our guest again.
Michael Nasser 0:49
She’s been helping property buyers in Australia for years.
Michael Nasser 0:52
You might remember her from her last time on the show where she shared some great tips on how to avoid the biggest mistake that first home buyers make in today’s episode.
Michael Nasser 1:01
We’re talking about a subject that scares a lot of people.
Michael Nasser 1:04
Michael Nasser 1:05
Veronica has written a book called Auction Ready, which aims to give a step-by-step guide on how to master the buying process.
Michael Nasser 1:12
She knows everything about auctions and how to win them.
Michael Nasser 1:15
Today, we hear about all the things you should do before Auction day.
Michael Nasser 1:19
Veronica will teach you how to bid like a winner and she’ll share some tips on how to keep calm when the bid gets fast and furious.
Michael Nasser 1:27
Alright, let’s get into it.
Michael Nasser 1:32
Veronica, welcome back to the show.
Good to be back.
Michael Nasser 1:37
Second time around.
Michael Nasser 1:38
So yeah, appreciate your time.
Michael Nasser 1:40
So, as your second appearance, obviously, one thing we want to be clear is you’re one of the most prolific people in the Australian property landscape.
Michael Nasser 1:47
So before we dive into today’s topic, I’m curious to know and this is a little bit of, I guess of a side question if you could live anywhere else in the world other than Australia, where would you live?
Oh, God, that’s a good question.
It’s a bit sad.
The only reason I say this is because my sister lives there and I miss her a lot and that’s Italy and it’s a beautiful place to be, but it’s quite a difficult country to live in, like bureaucracy wise.
So I would say half the year there and half the year here, but then I will get and I’ll think, oh, no, I need to go to Asia.
I don’t think I could actually pick somewhere a bit of everywhere.
Michael Nasser 2:22
So the subject of today’s chat is auctions.
Michael Nasser 2:25
It’s a big scary one.
Michael Nasser 2:26
Even for people who have been there before, you’ve written a book about Auctions called Auction Ready.
Michael Nasser 2:31
Why are you so passionate about this type of topic?
I find auctions fascinating and mainly because I find human behavior fascinating.
So therefore, for me, auctions is bringing to a head, a whole bunch of stuff because obviously I understand intimately the sales process and the purchasing process.
So I’m sort of watching everything play out.
So either I’m bidding for a client or I’m there as an observer, either way, I’m reading things and seeing things that most people aren’t even noticing.
And I just find it fascinating.
Michael Nasser 3:03
And what’s one of the biggest things you noticed?
Michael Nasser 3:05
I mean, there was just to be one real quick one to start it off with like, what’s the biggest observation that you have when you’re at auctions?
My biggest observation at auction is really that people when they get there and they think they are ready, they think they’re prepared.
Some may even know that they’re not, but those that think they are and they are so ill-equipped and then it’s like under the pressure of an auction, you see what’s really going on.
For example, quite often, I’ll see somebody you might have an alpha male there that’s being really confidently and you’re thinking, wow, they’re good.
They’ve got poker face, they’re really confident, they know what their limit is.
They don’t, their due diligence.
You know, you could read them in that way and think they know they are just formidable and then as soon as they hit their limit, they’ll give it away, they’ll absolutely give the game away.
They hit their limit.
Now, it’s going to be interesting to see whether they push themselves beyond their limit or not, whether they, you know what I mean?
Like they just give all the signs away.
So it’s just funny and I’ve seen this happen so often.
That’s why I can talk about it.
It’s not a rare occurrence that these people think they’re prepped and then it’s like, ok, gloves are off.
Michael Nasser 4:09
Now, this is the real show and you can see it happen in front of your eyes and it seems to happen quite a bit by the sounds of it.
happens a lot, a lot.
Michael Nasser 4:17
Michael Nasser 4:17
The way that we want to structure today’s chat is kind of before the auction day and some final thoughts.
Michael Nasser 4:22
So I guess before the auction, a lot of people would assume that being successful at auction is all about what happens on the day.
Michael Nasser 4:29
But in reality, the things that you do before the auction are probably just as important, if not more important.
Michael Nasser 4:33
So let’s go through the things that someone should do before auction day.
Michael Nasser 4:37
Can you walk me through what that prep work needs to look like if it’s an auction that you’re attending as a method of sale for a property.
And you’re spot on.
I mean, a lot of people do they think?
Oh, it’s the person with the deepest pockets that wins the day or it’s the person who is the most confident that wins the day.
And I know people that go and get their mate or their cousin or their uncle or whatever to bid for them because they feel nervous and it’s like everybody is nervous and some people when they are nervous come out really bulky as well.
So it’s like everyone sort of, I guess reveals the nervousness in different ways.
But being prepared is the best way to assuage those nerves, right?
And when I say being prepared, there’s so much that goes into that first and foremost, what most people think the due diligence that they need to do on a property is just the tip of the iceberg.
Most people think say it’s a house.
They go, oh, I’ve had my building pest inspection done.
I went to the mortgage broker and I got my pre-approval and I’ve had the contract looked at.
Now, let me tell you some people don’t even get the contract looked at.
But anyway, that’s nuts.
But those three things are nowhere near everything that needs to be done.
Michael Nasser 5:45
Well, I mean, you’d assume that that would be it.
Michael Nasser 5:47
Michael Nasser 5:47
So there’s more to that.
Well, that’s it.
People say I did all the due diligence and they, like, tell me, what did you do?
And they go, I had my contract reviewed.
I had the building pest and I went and my mortgage broker and I went, oh, that’s good that you did that.
So you can tick that one tiny box.
What about what the neighbors are about to do?
Could they build, could they block your view or your light or your privacy or whatever?
Like what have you checked that?
What do you mean?
Well, it’s all discoverable.
You know, it can be found out.
What about if the house has been renovated?
Have you checked whether it’s been improved?
You know, that the works that have been done have been approved?
Have you looked into that?
What about if you want to renovate?
Have you looked into whether you can do what you think you’re gonna be able to do?
Have you checked that out?
And we haven’t even got to the price yet.
This is the biggie.
This is the thing where people set their limit in crazy ways and often they don’t properly understand what that property is worth.
And there’s two things here, there’s two aspects to this.
You got to understand what it’s worth in the general marketplace and you got to understand what it’s worth to you.
And so what too many people do?
They go to auction and they’re deciding what the property is worth based on what other people are doing.
So it could be because of what the agents quoting or it could be because of what they see other buyers doing and they’re basing their decisions based on what those people are doing.
And yet you take one second to think about this.
What makes you think they know any more than you do?
Like, they’ve probably done a little prep work as you have.
You know, and yet I see it all the time and I will ask people, I love talking to people after auction two if they bid, particularly if they didn’t buy it and say, how did you arrive at your limit?
Oh, well, I just added 10% to what the Asian was guiding.
And then I looked around and I saw other people were bidding.
I thought it must be worth it.
Michael Nasser 7:28
It’s sort of like that social proof almost.
It’s like there’s no other logic than the fact that if they’re doing it well, then it must be the right thing to do.
Michael Nasser 7:35
So let’s continue.
And you could argue.
Well, that’s what market value is.
Yes, you could argue that.
But, you know, there are other times when I see people get locked into a competition and they pay way over because they got competitive and totally lost sight of what the property was worth.
They were just focused on winning, you know, And so I think what people fail to do that probably the biggest thing.
So, yes, you’ve got to do all that due diligence.
Some of those things I just mentioned a few of them.
If you don’t do that and you go to buy any property, you’re a nut.
You know, you’re a total nut, especially at auction because there’s no cooling off, period.
You’re committed on the fall of the hammer if you’re the highest bidder over a reserve, but to set your limit to work out exactly what you should pay for that property to, if you go to auction and their limit is what they’d like to pay, what they’d feel good about paying.
Not about what they will pay under pressure if they have to.
And the problem is by setting that beforehand, they obviously often don’t even just go down that path.
But if they don’t set it beforehand, when they’re in the middle of the auction, when the pressure is on, they will make silly decisions, they’ll either pay too much or they’ll pull out too quickly and they’ll panic and they’ll stop bidding when they should continue to bid.
But they don’t have the backup of that certainty around A, what it’s worth in the marketplace ,and B what it’s worth for them.
And it’s so important.
Michael Nasser 8:53
Something I want to pick up on there is you mentioned a few times the pressure of the auction.
Michael Nasser 8:57
What does that look like?
Michael Nasser 8:59
I mean, I guess for you it’s different because I guess maybe you don’t feel the pressure because it’s something you do so often.
Michael Nasser 9:04
But knowing, say what a first home buyer might be going through or someone that is not used to going to auctions, how does that pressure manifest?
It manifests in a number of ways for starters you wanna win.
There’s actually a, a behavioral bias called loss aversion.
The pain of losing or, or that fear of the pain of losing is greater than the anticipation of the pleasure you’ll get from winning.
So that is running through your vain.
When you’re at an auction, you don’t want to lose.
You wanna win.
Your rational mind is not really necessarily running the sheep when you’ve got emotions running rampant like that.
And also that whole auction set up the way an auctioneer runs an auction is about pressure.
They raise the hammer, they call it going once, going twice, going three times, even before it hits reserve.
You know, all of this is designed to basically get people acting and jumping in.
I’ve seen people bidding against themselves when they’re the highest bidder because they’re so panicked.
And also the fact is that if you take your family along, you’ve got a whole cast of thousands there supporting you and egging you on, you feel the pressure of performance as well.
So that’s just a handful of the pressures that you could be feeling during an auction
Michael Nasser 10:11
and I guess that’s what the agents are relying on and that pressure leads to that emotion.
Michael Nasser 10:20
And I guess when the emotion is at play, then that logical factors that should contribute probably aren’t contributing as much as they should be.
And that’s where things can happen.
So it’s pretty easy to get emotionally attached when you find a property as well.
Michael Nasser 10:32
So you might, you know, love it and there’s that sort of emotion too attached to it.
Michael Nasser 10:36
How do you put these emotions aside or what should you do to ensure that they don’t make it a situation that is not ideal for you A – from the point of view of making sure you get what’s best for you and making sure you’re not buying, say a bad property.
Yeah, the first and foremost, I think we have to accept that there is emotion involved in buying property, even for investors.
They like to pretend there’s no emotion.
Oh, I just make decisions based on the numbers, you know, and it’s like, yes, sure you do, even using the numbers as a crotch is, it’s a way of dealing with fear and it is a lot of money and, or a lot of borrowing one or the other, you’re coughing up a lot of money or you’re committing to a big loan and there’s risk involved with that.
And there’s also that idea that you’re paying off a mortgage for 30 years.
It’s a bit daunting.
So try to pretend that you’re going to be able to do it without emotion, you’re setting yourself up to fail.
So accept that there is emotion, give yourself permission to have that emotion.
But that’s why it’s really important to do all the logical work and set boundaries for yourself.
And really pressure test your own limits and all the rest of it and do all that due diligence and know what the pros and cons of that property are.
And you sort of have to force yourself to trust your rational self when you’re feeling emotion to say, I know I’m feeling emotional.
I know when this is all over, I don’t want to do anything.
I’m going to regret and it’s like self-talk, so I don’t want to regret it.
So therefore, I have to trust that I did the assessment of this property first in a way that is serving me best.
And I have to trust that I priced it properly.
And I have to trust that I put in a buffer.
That’s right for me in terms of what I’m prepared to pay for that property.
And I have to trust that I did all that when I was feeling rational and now I’m not feeling rational.
And so you just have to give yourself permission to be emotional, but just trust yourself when you weren’t emotional, it’s a discipline and it’s hard, but it will pay off dividends,
Michael Nasser 12:33
especially if you’re not seasoned at doing auctions or you’re going to your first or your second one?
Michael Nasser 12:33
And I imagine it takes a lot of practice to be able to master that control of the emotion.
Michael Nasser 12:37
And obviously acknowledgement is a critical factor to begin with when you’re looking at a property that’s being sold by auction.
Michael Nasser 12:43
Are there any red flags that people should look out for that can sort of work towards the logical side of what you should or shouldn’t be doing?
Michael Nasser 12:52
Are there any red flags that people should be looking for in this type of scenario?
Totally, let me just also say that even when I’m at auction bidding, I feel that emotion, even though it’s not my money, it’s not the property I’ll be buying.
It is a hotbed environment.
And so as I said, I enjoy auctions.
I understand them.
I’ve been doing them selling or buying at them for over 20 years now.
Even I can feel emotional.
So it’s a very difficult thing to overcome.
I wouldn’t say I have, I’ve harness it and I know how to actually work it and I’m calm and I’m rational, but I, I’m aware of that emotional.
And also I feel that pull too if we’re like $1000 off and I’ve exceeded or at my client’s limit.
If I was to continue the bidding, I would be exceeding the client’s limit.
Even with me, there’s a dialogue I go through with my clients is to make sure that there’s nothing left in the tank for them.
So we don’t turn to them at that critical point during bidding as well because that gives the game away for everyone.
So we don’t want to do that right even then I feel the temptation to turn to them.
Do you want to give one more?
You know, I mean, I know that feeling, I know that pull, I don’t recommend doing that.
Do you want to go one more is not a good idea.
That’s why you should pressure test it before the red flags.
You asked about the way in which an agent runs a campaign hides a lot of little red flags, green flags, red flags, right?
One of them is if they are trying to encourage offers from you at any stage, you have to wonder why.
So the agent is trying to encourage you to put in an offer in an auction campaign.
You have to be thinking, ok, this is because usually, they’ll have all sorts of reasons for it.
They’ll have all sorts of dialogue for this and we hear the same dialogue over and over again from lots of different agents.
But if they’re encouraging an offer, it’s probably because they don’t have enough competition.
They’re not confident in the day when it’s transparent because a lot of buyers are fearful of auction and think, oh yeah, they’ll jump at the idea of making a pre-auction offer.
So the idea there is that if they are encouraging you, you think, hang on a minute, they’re not that confident the auction is going to run as well as they think as a buyer, I’m probably better to go to auction.
Now.You’re not always going to have that option because if they’re good at their job, they’re going to find someone who will make an offer.
And if you’re the only buyer, let it not be you corner,
Michael Nasser 15:05
I guess, then it’s a whole another sort of field there.
Michael Nasser 15:13
And that’s a good red flag there, I think is a simple one.
Michael Nasser 15:15
If there is an offer being encouraged from that agent.
Michael Nasser 15:18
And it’s like, well, why is that happening?
Michael Nasser 15:19
It doesn’t make sense when it’s an auction.
Michael Nasser 15:21
So from your experience, what do you generally find that?
Michael Nasser 15:24
Why would they be asking for an offer if it’s an auction campaign?
As I said, a lot of buyers don’t like auction.
They feel that they don’t like the pressure and let’s face it.
And it’s also, it’s like public performance.
So yes, street theater, they don’t like that, right?
So buyers like to avoid an auction.
But what buyers often fail to recognize this is one big benefit to buyers in buying at auction.
And that is the transparency.
So whenever you make an offer prior, it’s not transparent, it’s opaque.
So when the agent comes back to you saying, oh, that another buyer come in and they’ve offered X or they may not even tell you what that other buyer’s offered.
They just say, oh, you have to now be over this amount of money.
If you want to buy the property.
Now, you don’t know whether they’re bluffing or not.
And if they’re bluffing, you got to be prepared to lose the property if you’re gonna call their bluff.
It’s another reason why you have to be very clear on what your work walk-away price is and what you think the property is worth.
But they will try to bluff you if they’ve got nobody else on it and they want to try to ratchet your pricing up.
I mean, that’s a very common thing that will happen and you won’t know
like a lot of things when it comes to buying at auction, research is obviously critical before you’re attending the auction.
Michael Nasser 16:36
Michael Nasser 16:37
And we’ve already discussed a few, what are the types of things?
Michael Nasser 16:39
Should a first home buyer research before going to auction?
Michael Nasser 16:42
If there’s anything in particular that we haven’t already mentioned?
Yeah, Look, I just think as you know, I’ve got a course for first home buyers called Home Buyer Academy or it’s called your first home buyer guide.
So we’ve got a podcast and a course.
So we teach first home buyers every step in the process to get to the point of being ready to buy a property, whether you’re buying it by negotiation, a private treaty, or whether you’re going to auction there is a lot involved way more than I can cover off in a 32nd answer.
So definitely though, you do want to, as I mentioned before, you want to get that contract reviewed and if you’re not in New South Wales, it could be whatever the.
So I’m talking about New South Wales, we have contracts for sale here in Queensland.
It’s very different.
You need to get additional due diligence because vendors don’t have to disclose the same information say in Queensland and in other states in Victoria, it’s quite similar to New South Wales.
So you need to know what does the vendor and the agent have to give you and what do you need to find out yourself.
And also what information do you need from a lawyer or a conveyance beforehand.
And I always recommend talking to a specialist, a property specialist.
So none of these budget price conveyancers.
You need to get someone who’s really will guide you on the conditions and all sorts of things you need to know before you make an offer before you go to auction.
And likewise in New South Wales where you’ve got a contract to sell or in Victoria where you’ve got a contract and also section 32, I think it’s called, which is the vendor disclosure.
So you need to get all that stuff looked at beforehand and advised on some budget conveyancers would just look at it and go.
Oh yeah, that’s fine.
And then afterwards they ask all those questions, you know, you really want someone who’s going to advise you beforehand and also all the due diligence that you need to be doing on a property, the pricing research.
So you need to be keeping tabs on recent sales and understanding why this property might sell for a certain price or not.
And so there’s a lot of work that goes into all that sort of background stuff to get you ready to go to auction.
And obviously, the finance side of things, as I’m sure you can talk to and how are you going to pay a deposit?
And that’s another one.
People wait till the last minute and then they go, oh, I’ve got to pay a 10% deposit, you know, and also if they want to negotiate changes beforehand, like a diff different settlement period or, or a 5% deposit rather than 10%.
Michael Nasser 18:55
With the conveyancers, I mean, do you think it’s important that the conveyance is from the area?
Michael Nasser 18:58
What relevance would you have or put to that?
That’s a really good question.
I do actually think that having conveyances or lawyers that are familiar with that property in that area is really important.
I’ll give you an example, you know when I was first selling a property back in the early two thousands and the noughties, I remember I had this three-story terrace house in Annandale, which was on a tiny block of land 74 square meters.
I can’t believe I remember that.
But anyway, and the purchasers had a solicitor that was based out, I think in Cherry Brook or somewhere like that.
So right out in the Hills District and this solicitor looked at the sewerage diagram and said, oh, no, you can’t buy that house because there’s four houses all sharing the same sewage connection and oh, you can’t buy that.
And I’m like, you’d be hard put finding a house in Annandale that doesn’t have something similar.
And the reason being, of course, that when these houses were built, all these rows of terraces, there was no such thing as sewerage, there was no such thing as a sewer line.
Yeah, the Dunny Lane.
So they’re all retrofitted, right.
So you’ve got this solicitor who’s used to looking at plans up in Cherry Brook where it was, you know, the big subdivision, it’s all planned, trying to advise on, on something that’s completely, is completely unfamiliar with.
And so these people ended up buying it, but not without quite a lot of Argy Bargy because they got advice that wasn’t relevant.
So I think that’s a good example of why people might need that local advice here.
Michael Nasser 20:21
Yeah, cool, So let’s say you’ve done all the right things.
Michael Nasser 20:23
You’ve looked for the red flags.
Michael Nasser 20:24
You know, you’ve done your research, you’ve looked at pricing, you’re familiar, you’re confident with that.
Michael Nasser 20:28
You obviously are now going to attend the auction with the aim of securing the property.
Michael Nasser 20:31
What steps, what tips do you have to prepare for the auction?
Michael Nasser 20:34
And for auction day?
Don’t go out in the town the night before.
Do not be hungover.
I can’t tell you the amount of people that when I was a sales agent as soon as someone rocked up hungover, I like bingo.
You are buying this property.
Your defenses are down, the logic is out of the window down.
Don’t take your kids.
Like if you got little kids get someone to look after your kids, don’t take your parents and your friends and your cousins and the whole lava, don’t take them.
Just you and your partner, whoever is involved in buying the property really go, then you got to be calm and focused.
You don’t want to be distracted by all that sort of stuff.
And so yeah, so not hungover, you know, have your coffee, take a deep breath, do your meditation, whatever you need to do to be nice and calm.
And when you’re there also, particularly if you’re buying a property in an area where bidders have to register before the auction.
Now this doesn’t apply in all states and territories, but it does in New South Wales and it does not in Victoria, for example.
So if you get there early in New South Wales or Queensland or South Australia, for example, you can get there early and watch people register before the auction now, I can’t tell you how many people don’t do that.
Even buyers agents, honestly, very rarely do we see anybody else rock up to an auction beforehand and watch the registrations.
It’s such a small percentage of times.
It’s not funny.
And yet the information you can get by just knowing how many other people are registered.
You know, I’ve heard stories and I’ve seen this happen where somebody is rocked up late trying to play it cool.
All they’re doing is denying themselves a bit of intel.
So they get there, they’re trying to play it cool.
And I’ve watched this one woman.
I could not believe this.
She’s rocked up.
She’s trying to play it cool.
Nobody else registered.
She’s the only person that registered, but she did not know that.
And then the auctioneer did all the noise and bluff and bluster, blah, blah, blah.
They do an indoor bid.
The agent goes up to her and encourages her to make a bid.
And then the next thing she’s bought it against herself.
It was a dog of a property.
Honestly, she obviously hadn’t done her due diligence because it looked really lovely.
But a school, a four-story school was approved to be built over the back fence which blocked all the natural light
Michael Nasser 22:44
Oh No, and the school bells
and she could have known that and yet she didn’t know that and she also didn’t know that nobody else was registered to bid.
So that’s a really, really simple hack that anybody can do.
Michael Nasser 22:50
prepared arrive early.
Don’t be hungover.
You can definitely see how all those could help you when it comes to the actual auction itself.
Thanks for listening to part one of our two part series.
Join us next time for the conclusion.
Michael Nasser 23:10
You’ve been listening to the home, run your guide for buying your first home in Australia.
This podcast was produced by Lensdtreet.
Lendstreet is a mortgage broker and home loan specialist that helps first-home buyers find the right loan to meet their needs.
We know applying for a loan can be overwhelming and complex.
So we help guide and support first home buyers through the process from start to finish to find out more.
Head to our website lendstreet.com.au
We’ve also put a link in the show notes to make sure you don’t miss an episode of the Home Run.
Be sure to subscribe to or follow the show in your podcast app.
And while you’re there, please leave us a five-star review.
Michael Nasser 23:46
It really helps others find the show.
Michael Nasser 23:49
I’m Michael Nasser and we’ll be back next episode covering another step on the journey to owning your first home.