Buying at Auction
Buying a property at an auction is a good way to gauge the true market value of a property. Sale by auction is a competitive method of selling or purchasing a property. The highest bid after the reserve price has been reached will win the property. So before you decide to buy at auction, you need to consider a few things to give yourself a better chance of getting the property you want.
Before Auction Day
To attend an auction and bid with confidence you should get as much information as possible. For instance, research the area, analyse the sales of similar types of properties in the area, talk to agents, neighbours and friends who may know a lot about the area.
Buying at Auction means you will enter into an unconditional contract therefore an important part of your research should also include talking to your mortgage broker or lender to determine how much you can borrow.
As you are planning to bid at the auction, you need to ensure that you have your financial loan approved in writing from your mortgage broker or lender. It is important to know that if you are the successful bidder at the auction you are legally obliged to settle the contract and to pay the deposit on the day.
Inspect the Property.
It is very important that you inspect the property as many times as you can. During the inspection ask the selling agent as many questions…they are there to help.
We strongly recommend you arrange a professional building and pest inspection to be completed on the property before the auction. While this will require you to a pay a fee for this service, at least you are gaining comfort from knowing the state of the property prior to the auction day regardless if you make the winning bid or not.
If you like the property, seek legal advice early. You should obtain a copy of the contract of sale and have your lawyer review the contract prior to the day of the auction to check that the terms are satisfactory.
Make sure that you fully understand the content in all of the relevant documentation.
Go to Auctions
If you’ve never been to an auction, it’s a good idea to go to as many auctions as possible so that you get familiar with the process. While you attend different auctions observe how the auctioneer conducts their auction and watch how people bid on a property. By familiarising yourself with the environment at an auction you will feel more relaxed when you participate in the bidding for the property you want to purchase at auction.
Making an Offer before the Auction day
You can submit an offer to the vendor (property owner) to purchase the property before the auction. The vendor will assess your offer and will decide whether or not to accept your offer. It’s always good to let the agent selling the property know that you’re interested in the property.
Arrive early and inspect the property again and make sure you ask the agent any questions you may have about the property. This will be the last opportunity you have to ask questions before the bidding will start.
Before the bidding begins, the auctioneer will read the terms and conditions of the sale of the property. The auctioneer will also provide a general overview about the property.
When the auctioneer begins taking bids you can simply make a bid by making a gesture that grabs the attention of the auctioneer. You should bid in a manner that feels comfortable for you.
If the bidding does not reach the reserve price, the property will be passed in. At this point, negotiations may begin immediately with prospective purchasers. However, most vendors will be willing to negotiate with the highest bidders as a means of selling the property.
When the bidding reaches the reserve price, the auctioneer will announce that the property is for sale. The property will be sold at the highest bid. It is therefore important that you bid if it is the property you want to purchase.
Remember, if you are the successful bidder at the auction you are legally obliged to settle and to pay the deposit on the day.
For further information on purchasing property we recommend you visit the Consumer Affairs Victoria website via the link below and read the Due Diligence Check-List.