Buy by negotiation, sell by auction

In a hot market, says David Whitburn, vice president of Auckland PIA, there's plenty of buyer demand for property and the auction process gives a lot of drive to lift prices.

"But competition is not so good for investors. Auctions are good for selling, not for buying."

He recently went to an auction attended by over 40 people with many registered bidders. "The home sold for around $60,000 above the CV and for $20,000 more than the registered valuation. That's not good from a buyer's perspective."

Another Auckland investor, Ian Rainey agrees. "There's increasing hype in the market at the moment. In auction situations, people tend to get very motivated and often pay more than they would otherwise. It's not a good environment in which to pick up a bargain."

Whitburn points out that when you buy at auction, the purchase is unconditional and you must sign a cheque on auction day. So you must have already completed all your checks and due diligence upfront.

Wellington investor and real estate agent, Adam Cockburn adds investors are only likely to buy at auction when they know they can get a good deal. In the current market where there's tight supply, tenders are working well for sellers, he says.

"At the moment you don't know what somebody is willing to pay. It's difficult to put a price on a property. So if you don't put a price on it, you're allowing the market to determine the price."

While Cockburn would normally be wary of tenders when buying, he believes if investors put in a reasonable offer at the moment, they can still get a good deal.

Real estate agent Stephanie Kelland of Megan Jaffe Ray White Remuera says she has seen properties for sale at a fixed price of $450,000 that haven't sold and then they've gone to auction and sold for $360,000.

"So, they can be a good way to pick up a bargain."