Selling? Do you understand the key auction terms?

You may have heard many of terms below, but you many not know what they mean.

Here is an overview of the main auction phrases:

Opening bids & bidding

After the auctioneer has run through the property being auctioned, detailed the features and an overview of the what is included with the property one last time, they will invite the buyers to put in an opening bid – or in other words for someone to place the first bid on the property. Other interested parties will then bid on the property in increments until either the property is sold or it is passed in (not sold).

Vendor’s Bids

A vendor’s bid is used to encourage bidding from buyers. Think of it as a momentum bid…..a bid to keep buyers interested, to keep the process flowing. This is placed by the auctioneer on the vendor’s behalf to assist the property reaching its reserve price.

The amount of the bid needs to be below the reserve price and must be disclosed to all buyers in the interest of transparency.

Dummy Bids

A dummy bid on the other hand is a false bid made by a non-genuine buyer. All dummy bids are illegal and attract significant penalties for the vendor, the dummy bidder and in some cases the agent. Professional auctioneers will not engage in dummy bidding.

Bidding increments

This is the amount by which bids increase during an auction and is usually dictated by the auctioneer.

On the Market and Passed In

If the bidding does not reach the reserve price or a price the seller is happy with, the property may be passed in. In this case your agent will encourage interested parties to stay behind to negotiate a sale with the agent. Don’t panic, in my 12 years’ experience a sale is normally made soon after the auction.

If the bidding doesn’t reach the reserve price, the auctioneer will ask you if you are willing to adjust your reserve and sell the property for the highest price. If you are, the auctioneer will announce to the crowd that the property is on the market or in other words, that it will be sold to the highest bidder.

The final and usual scenario is when the bidding has reached the reserve price. The auctioneer will briefly stop the auction and confirm with the seller that they are happy to sell at that price. If they are the property will be sold to the highest bidder. We buy ugly houses Fort Lauderdale.

Pre-Auction Offers

When you list your property for sale by auction, you still have the ability to accept pre-auction offers before the auction day deadline. All pre-auction offers need to be submitted in writing to your agent who in turn will present it to you for consideration.

However, in order for this to be rewarding, the offer needs to be solid and stand out to catch your attention. Otherwise, it may be a good plan to allow your property to go to auction and see what the market will give you for your home.

To renovate or not to renovate when selling

Do you renovate before you sell, or just put it on the market as is? This is a big question and unfortunately the answer is maybe…it is not a simple yes or no. With so many variants at play, how do you calculate if you should put in the time, effort and dollars in to renovate before selling?

Must-do home improvements when selling

We have written many many times about the importance of having a well presented property when you are looking to sell, so I apologize for repeating this, but it is super important. The other way to look at this is if you don’t do at least these 6 jobs, you’ll be throwing money down the drain:

Treat it as a business decision

When deciding on whether you should renovate your property before putting it on the market – whether it’s your family home or an investment, you should look at it as a business decision. Will the renovations add value to your property immediately and will you be able to sell the property for more? You are not renovating your home so you can enjoy the end result, you are purely doing it to attract more buyers and add value. Don’t renovate with your heart or personal taste in mind. Think very carefully.

Real Estate expert Andrew Winter says “if your home is a genuine renovator it is probably better to leave as is. Tidy up and do the essentials, of course, but recognize that this is an entry level home that may even have buyers fighting over it.”

He also suggests that “significant renovations are not advisable on homes that have been adequately looked after and are in line with your demographics expectations of size and style.”

Avoid overcapitalization

A priority if you are looking to renovate to sell, is to ensure you don’t overcaptalise, which means to improve a property beyond its resale value so you are not able to recoup the money when you sell. An example would be if a home owner spent $200,000 on home renovations and then decided to sell the property, they may find that the renovations only added $100,000 to the value of their property meaning they have effectively lost $100,000 as a result of doing the renovation. They have over capitalised on their property by $100,000. And that isn’t good! You need to do your research and think very carefully before renovating to sell.

Understand the current market value of your property

You can’t determine how much value a renovation will add to your property if you don’t know how much your property is worth before you event start. The first step here is to get your home valued by a qualified real estate agent.

Understanding how much your property is worth in the current market, how much it has increased in value since you bought it and how much other properties are selling for in your immediate area is very important. Plus, talk to your agent about the value of similar renovated and un-renovated properties in your area. Keep in mind that each neighbourhood has a median sale price and an upper sale threshold and this can vary significantly even within one suburb as a result of the housing style, street scape and demographics of each area.

What do your potential buyers want?

It is tempting to want to put your own personal stamp on your property, but some features you love, might actually put potential buyers off. Talk to your local LJ Hooker agent about what your buyer demographic would deem valuable, what features are really selling homes in the area. This is all about following the crowd, playing it safe, not overspending and never allowing your personal tastes to dominate. It is about giving your buying audience what they want.

Agents, whilst they aren’t building experts, can give you a good insight into what are popular features for buyers in your area. Consider whether your property has these features?

How much should you spend?

Once you know how much your home is worth and what your buying audience would value you can determine how much you want to spend on any renovations (if anything). Professional renovator Cherie Barber, who has been renovating properties for more than 20 years says, if you are doing cosmetic renovations like painting, floor sanding, ripping up carpet and landscaping and are looking to sell your home in the near future or you are renovating an investment, allow 10% of your property value for your renovation budget. For example, if your home is valued at $700,000 a good budget to work with is $70,000*.

She has some valuable insights into how much you should spend on each room here which would be worth looking at to give you an idea of room by room budgets here. We buy houses Dallas

Renovating an investment property

If you are considering renovating an investment property you should consider things from a ‘need’ point of view; anything you do ‘needs’ to improve cash flow, rentability, or the value of the property.

You should ask questions like: Will it increase the rent? Will it increase the value? Am I better off without a renovation? It needs to be strictly a business decision.