Buying a Property at Auction - Things you NEED to know BEFORE the auction day!
Buying a property can often be an intimidating process, especially when the property is sold at auction where you may be competing with other buyers and there is no cooling off period.
Many properties are sold at auction, particularly in a rising market, so it is important for buyers to understand the processes involved so they can bid confidently on the auction day.
Set out below are some of the tasks that ought to be attended to before the auction to ensure that your interests are protected and that you are fully informed about the property you are intending to buy.
The most important action for you to take is to ask your lawyer to review the contract of sale before the auction date.
Your lawyer will review the contract, advise you of any risks and help to protect your interests by identifying any terms that might need to be negotiated on your behalf or that you wish to have altered. For example, longer settlement periods, reduced deposits and/or additional terms and conditions.
Your lawyer will also be able to check whether you are buying exactly what you believe you intend to buy and that the property is in the condition it is advertised to be by arranging any pre auction inspections that should be carried out such as building and pest inspections.
If you are the successful bidder at the auction, the reviewed contract can be signed with confidence.
Inspect the Property
You should thoroughly inspect the property before the auction day and satisfy yourself that all inclusions are in proper working order and that the gas, water and electricity are functioning properly.
If you are successful on the auction day, you will be buying the property ‘as is’.
Thoroughly research the area and surrounding suburbs before the auction day, so that you are comfortable about the amount you are prepared to pay for the property, and can bid confidently.
Make sure that you have your finance in order before making an offer. If you are obtaining mortgage finance, you should have your finance unconditionally approved (not just pre-approved). Confirm with your lender the maximum amount you can borrow.
Pre-approval is not confirmation of how much the lender is willing to provide you, it is an indication of what you might be able to borrow depending on the value of the property, determined by a formal valuation after the auction.
It is important to ensure that you have adequate funds available to complete the purchase within the timeframe stipulated in the contract.
If you are the successful bidder, you will be required to pay a deposit cheque or deposit bond (usually 10% of the purchase price) immediately following signing of the contract.
Register to Bid
To participate or bid at an auction, buyers must register with the selling agent and be given a bidder’s number. You can register with the selling agent at any time prior to the auction, such as when you inspect the property, or on the day itself.
To register you must provide your ID, a card or document issued by government or a financial institution showing your name and address, for example:
- driver’s licence or learner’s permit;
- vehicle registration paper;
- council rates notice.
If you do not have this kind of proof of identity you can use two documents that together show your name and address.
Before auctioning a property, the seller will nominate a reserve price, which is usually not advertised. If the bidding continues beyond the reserve price, the property is sold at the fall of the hammer.
Make sure you have a strategy going into the auction and that you set yourself a maximum purchase price. Stick to that maximum price. If you feel as though you may be too emotionally attached to bid at the auction yourself, then organise with the Agent to have someone bid on your behalf. If you elect to do so, you must provide a written signed authority to the Agent authorising the person to bid on your behalf.
If you are the highest bidder, immediately following the auction, you will be asked to:
- provide your lawyer’s contact details to the Agent;
- sign the contract of sale; and
- pay the deposit.
You will be entering into an unconditional and legally binding contract, there is no cooling-off period.
The signed contract will then be delivered to your lawyer’s office and they will contact you to discuss the next steps.
Getting the right advice, being fully informed and prepared before the auction day is a critical part of ensuring that the purchase of your next (or first) property runs smoothly.
Our expert team can help minimise the stresses involved with the purchase of a property, at auction or otherwise, and guide you through the process and make sure your interests are protected.
If you would like to buy the property prior to auction we can also assist you with pre- auction strategies and framing a pre-auction offer to the vendor.
If you or someone you know is looking to purchase a property at auction and needs help or advice, please contact us on 61 2 9212 1099 or email firstname.lastname@example.org.