The ‘snap auction’ trap that could cost you thousands

As if bidding at an auction isn't intimidating enough, now buyers could get drawn into a ‘snap auction’, which is a new phenomenon sweeping the world of real estate. With more buyers than properties out there, snap auctions (or instant auctions) are another way for vendors to take advantage of intense competition. They can cost buyers thousands of extra dollars or a lifetime of regret if not handled right. 

So, what are snap auctions? 

A typical auction campaign will run over four weeks with multiple open homes and an auction date set when the property hits the market. 

Snap auctions are when the agent brings the auction forward at short notice, often holding it just days after the first open home – or even hours. 

It's a reaction to the overwhelming demand that vendors are experiencing and a way for agents to strike while the iron is hot. What better time to get the bids going with people in the room who are emotionally attached to the property? 

The advantages of a snap auction

Where snap auctions do benefit buyers, is in the transparency. 

In times when the market favours the vendor, it’s not uncommon to see Dutch auctions. Dutch auctions take a single silent bid from each interested buyer. As a buyer, you don’t know who you’re up against, what others are willing to pay for the property, and only have one chance to hope your best and final offer is the winner. 

I was recently in a Dutch auction situation on behalf of a client. We put in our bid only to lose out to another buyer who bid $114,000 more than us. While we walked away content knowing we were never going to pay that much for the property, the winning bidder walked away overpaying by $113,000! 

So, when it comes to snap auctions, going face-to-face with other buyers in an open and transparent process definitely helps. 

The disadvantages of a snap auction 

Where snap auctions let buyers down, however, is in the time crunch. If an auction is called the day of the first open home, there’s no time for due diligence. You might struggle to have a conveyancer check the contract or do a building and pest inspection. Or even ensure the bank will loan you the total amount you’ll need to secure the property. 

That's not to say it's impossible. Earlier this year, I viewed a property with a client when a snap auction was called for that evening. We completed our due diligence, but it took the expertise of four of my team members and the great relationship we have with our conveyancer to be ready in time. 

The emotion of buying real estate, coupled with the rush to get to auction and FOMO (fear of missing out), is the perfect storm for buyers overpaying at a snap auction or committing to a property that doesn’t tick all of their boxes.

What should you do if you find yourself in a snap auction? 

 Don't be afraid to push for more time. It's essential to do your due diligence and enter into any auction with all the facts and a clear, logical mindset. Purchasing property is a huge investment and not one to rush. 

Realistically, you need to ask for help. Snap auctions are designed to favour the vendor, so having a professional on your side is the best way forward.

As buyer’s agent, we have the resources to move quickly, know the questions to ask and will interpret the information given by the vendor's agent. We take the stress and emotion out of the equation to help you secure your dream property for a fair price or pass up on opportunities that are a nightmare waiting to happen. 

If you’d like to find out how a buyer’s agent will help you avoid common property mistakes, please get in touch with our team for a chat.