Understanding Auction Terms

If you are new to the auction process, you may come across several terms that confuse you, which is the last thing you want in the middle of a bidding war. Here are some common terms to be aware of.

Bidders Guide

The bidder’s guide is a document that must be provided to bidders by the selling agent before an auction. It gives information on how to register for auction and what paperwork needs to be filled out, the relevant privacy laws and the rules and regulations of the auction. Make sure to get one of these before you start to seriously plan out your bidding! Sell my house in Salem

Inspection

Usually beginning about half an hour before an auction, the inspection period is important for anyone seriously considering getting in on a property at auction. It isn’t just a final chance to see the property up close, it is also an opportunity to get a final look at the relevant documents for the home, such as the terms of settlement – as Consumer Affairs Victoria (CAV) says, you won’t be able to change these if you win the auction.

Vendor & Dummy Bids

It’s important to understand the term vendor bid and the difference between it and dummy bids.

Vendor bids are a single bid or bids made by the auctioneer on behalf of the seller. The purpose of this bid is to help the property achieve its reserve price.

The auctioneer is entitled to bid once on behalf of the seller or in some states as many times as they like. If this bid is to be made during the auction, the arrangements for making the bid must be set out in the rule displayed before the auctions starts and the intention to make a bid should be announced by the auctioneer at the start of the auction.

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 (up to $20,000 in SA and up to $55,000 in NSW), the dummy bidder and in some cases the agent if it can be proved they solicited the bid.

Rises and advances

This is the amount by which bids increase during an auction and is usually dictated by the auctioneer. They could be $500 or $5000, and do not necessarily have to be adhered to – but the auctioneer can reject your bid if they think you have not advanced the bidding by enough.

Reserve

One of the most crucial terms, the reserve is effectively the point at which the auction becomes “live”. If bidding does not go over the reserve then a negotiation by the highest bidder and seller may take place. This may continue for hours or days but usually a contract on the property is executed reasonable soon after the auction itself. However, once bidding goes over a reserve price the property is on the market and a winning bid is binding, so make sure you don’t over-extend your budget or get carried away in the heat of the moment.

On The Market & Passed In

During the course of the auction, the auctioneer may stop the proceedings and say they are seeking advice or instruction from the vendor. This gives the auctioneer time to discuss the progress of bidding with the vendor.

If the bidding has reached the reserve price, or is close, the auctioneer will ask the seller if they are willing to adjust their reserve and sell the property for the highest price. If they are, the auctioneer will announce to the crowd that the property is on the market or rather that it will be sold to the highest bidder.

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 the highest bidder may be given the first opportunity to negotiate a sale with the seller however this is not legislation in most states.

Best Value Add Renovations

Adding Value One Room at a Time

We’ve had a look at some very specific renovations that can add value to your property when the time comes to sell, which can cut down on energy bills and improve the practicality of a home. But what about doing over an entire room? Obviously fixing up a kitchen is a completely different beast from making over the master bedroom, with different costs involved and different amounts added to your bottom line.

So without further delay, let’s see what you should do to some of the key rooms in the home – and if it will put many extra zeroes on your sale price.

Keeping it in the Kitchen

Historically, a kitchen renovation is the go-to task to add value to your home. However, it’s also one of the most expensive undertakings. According to 2015 Improvenet research, the average cost of a kitchen remodel is a little over $22,000 in Australian dollars. Given that the rule of thumb is you shouldn’t spend more than 5 per cent of the value of your home on renovations, this should be within reach of many home owners.

Moreover, the work that needs doing will vary from home to home. For example, a basic IKEA kitchen setup for small areas can cost as little as a few hundred dollars, if you’re replacing cabinet fronts and splashbacks. Budget full kitchen kits can also be found for less than $5,000.

But for a full do-over, you’re looking at spending at least $10,000 – up to $25,000 for simple kitchens, and up to $75,000 for a true luxury do-over. This includes flooring, walls, countertops, sinks, plumbing, appliances – you name it, it’s covered.

While this might seem extensive, if it’s within your budget it can be very much worth it. According to finder.com.au, depending on your suburb, all costs can be recouped when you sell. Moreover, some vendors like IKEA provide guarantees that last up to 25 years, ensuring peace of mind that it will last.

Make sure it stays with the theme of the home though – an ultra-modern kitchen in an older cottage could ruin the home’s aesthetic and put people off!

Bulking up the Bathroom

The same principles as the kitchen apply here – it can be done cheaply, but it depends on how much luxury you want to add. According to HGTV, it’s possible to renovate a bathroom for $100 per square metre. For small areas that can mean less than $5,000 without heavy customisation.

Brian Johnson from Collaborative Design Architects also told HGTV that it’s important to add a 30 per cent allowance to your budget, as sometimes things go awry, and costs can blow out. Adding a new toilet, bath or shower can make this an expensive task, numbering in the tens of thousands of dollars.

And as for returns? Gary Caulfield from Construction Cost Consultants told Westpac NZ that bathrooms can give you a return of up to $1.50 for every dollar spent on it. Gauge the suburb and likely buyers you will be getting – do they want luxury or practicality? Working this out with an agent and a professional remodeler can always be a good idea.

Adding a New Bedroom

Found yourself in the enviable position of having two lounges, or perhaps a basement or attic that could be converted into a new bedroom? You might just have hit a goldmine. Mr Caulfield also told Westpac that you can double your return when you turn a three bedroom home into a four bedroom one.

But what about the cost? In a 2010 Domain article, it was estimated that adding a 20 square metre bedroom would cost anywhere between $50,000 and $70,000. This will be significantly less if you already have space in your house – Graeme Bell from GDB architecture converted a loft into a room for a mere $10,000!

You’re unlikely to get this cheap a renovation going unless you are an architect yourself, but it shows how it can be done on a small budget. Given the rising real estate prices in many of our cities, you could be in for significant profits too.

According to Real Estate Institute of Victoria figures, four bedroom homes in certain suburbs were the largest capital gains earners in Melbourne at the end of last year. Making your home join this category through renovation could be profitable indeed!

Don’t Go Overboard

Crucially though, you have to keep a cool head. Engage professionals for quotes, and get a set budget from several different firms – if they vary wildly, you need to be careful you’re not getting ripped off. On top of this, make it comfortable! If you don’t enjoy using these rooms while you live there, how can you be sure potential buyers will?