Know your ‘walk away price’: How to make the most of a weak auction market

Auction clearance rates have fallen to similar levels as the 2022 downturn and property prices are falling, but buyers who aren’t ready to capitalise risk missing out.

Lower prices are on offer, Sydney auctioneer Damien Cooley said, and smart buyers could be at an advantage.

“There’s a window of opportunity right now for buyers to be buying property for less than what they may have otherwise bought them for two to three months ago,” he said.

But a buyer’s market comes with its own challenges. Including finances, bidding tactics and dealing with pass-ins, here are some tips to make the most of the current market at auction.

Loan Market Connect Victoria director Jacob Decru said before buyers even think about bidding at auction, they need to make sure their finances are pre-approved.

“See your mortgage broker and get a fully verified pre-approval,” he said. “That means that it’s been picked up and assessed by an assessor, not system-generated.”

He said buyers needed to make sure they could service the loan long term, including with potential rate rises. He suggested factoring in up to another 1 per cent over the current 4.35 per cent Reserve Bank cash rate.

“Work out … where you feel comfortable with a mortgage repayment, and then we can reverse-engineer it,” he said, rather than focusing on the maximum amount you can borrow.

Sydney buyer’s advocate Michelle May said she told every client “no property is worth eating baked beans for the rest of your life”.

It’s important to know that auctions are an unconditional sale, Emily Wallace of Melbourne-based Wallace Advocates said.

That means securing building and pest inspections before bidding and having any additional conditions – such as a reduced deposit or a shorter or longer settlement period – agreed to in writing in advance.

In Victoria, offers made three business days before or after the auction are also unconditional, Wallace noted.

“If it passes in and reverts to a negotiation, most agents will leverage the fact that it’s still under auction conditions,” she said.

May said it was also important to check conditions and restrictions that may not be obvious – she recently walked a first-home buyer away from a property she discovered was on a flood plain.

“I’ve read that people spend more time researching what car they are going to buy than their property,” she said. “Due diligence should reach a bit deeper than that.”

In NSW, buyers have to register before they can bid at an auction.

“You need to make sure that you have a form of ID that shows your name and address, to be able to register