So, you’re thinking of buying a property at auction? Before you get excited and head out to buy your dream home, there are a number of things to consider.
Ash Costello from home.by holly says one of the most frequently asked questions by prospective new home buyers is how to buy at auction.
She says that while auctions are emotional, nerve-racking and exciting – and disappointing if you miss out – they are a great way to buy your dream home.
But the process can be complicated and daunting for first-timers.
“Even though I sell the majority of my properties at auction, when I was looking to buy my first home and had to bid at an auction, I was a nervous wreck,” says Ash.
She says preparation and carrying out due diligence is the important first step when people are thinking of buying at auction, and she has some important tips for all prospective buyers.
- Contact your broker to ensure you’re able to buy under auction conditions.
- Show your solicitor the contract and organise any amendments to the contract they suggest.
- Attend auctions to get a feel for different bidding and auctioneering strategies. In particular, attend auctions from the agency you’re hoping to buy from.
- Attend multiple open homes at the property you’re hoping to buy. It’s good to see a property at different times of the day as you’ll notice new things each time you inspect.
- Do your own research and set yourself a budget. Especially in a really competitive market, it is really important to know what your walk-away price is for each individual home. Have an accountability buddy with you on the day to help you stick to it.
- If you choose to put forward a pre-auction offer, it needs to be really attractive. A vendor will usually only accept a pre-auction offer if it’s too good to refuse. In the current market, it is likely a vendor will choose to go to auction. However, an agent must present any pre-auction offers to a vendor so it could be worth putting something forward. It at least opens up the conversation and gives you a better idea of the vendor’s expectations.
- If you want to keep your cards close to your chest, send the agent an email stating you are interested in the property and would like to be kept in the loop should the vendor decide to sell prior to auction.
- Organise a private viewing of the home and conduct a pre-exchange inspection. Your solicitor will be able to provide you with a checklist for the inspection.
- I really feel for buyers in this market. Properties are moving really quickly and, in most cases, are selling well beyond expectation. If you are feeling overwhelmed with the process of buying at auction, ask the agent to have one of their colleagues bid on your behalf. You can place bids over the phone all from the comfort of your own lounge room or local coffee shop.
Snedden Hall & Gallop property lawyer Rohail Azhar says it’s crucial for buyers to obtain pre-auction contract advice from a legal professional, and offers the following advice to assist buyers before they throw their hats into the auction ring.
- How are you financing your purchase? If you require a loan, ensure you have your financials in order. This includes your tax returns as this may delay the approval process. Allow sufficient time for the pre-approval process. Understanding the difference between pre-approval and unconditional approval will assist you in ensuring you have enough time to complete settlement on time and avoid any penalties if settlement is delayed.
- Get legal advice before the auction. The contract contains multiple terms and conditions, and must contain certain documents to be a compliant contract for sale. Once you sign that contract, you are essentially ‘locked in’ and are unlikely to be able to negotiate on any terms of the contract. An experienced lawyer and/or conveyancer is there to assist you to decipher the complexities of those terms and conditions, as well as advise you on the various reports included in the contract. Things to look out for are restrictions on title, easements on your land, and what this means to you.
- Completed your due diligence on the property? Review the building and pest inspection report carefully. Are there any unapproved items in the compliance report? If so, you need to consider the potential risks that will pass on to you if you are the successful bidder. This may also impact your finance.
- If purchasing a unit, inspect the body corporate records. Know who you’re ‘getting into bed with’.
- Set your budget and stick to it. Should you go over your maximum purchase price, this may affect your finance and delay settlement.
- Understand the associated costs of purchasing property, including bank fees, registration fees, insurance and legal fees.
- Are you having someone bid on your behalf? If so, do you have the appropriate authorities in place?
Once you’re prepared, it’s time to take a deep breath and take that exciting next step on auction day.
For information about upcoming auctions, contact home.by holly.
For pre-auction legal advice, contact Snedden Hall & Gallop Lawyers.
This is a sponsored article, though all opinions are the author’s own. For more information on paid content, see our sponsored content policy.