Buying a House at An Auction
With more and more properties available at auctions, it has become popular for buyers to purchase property at property auctions. If you’re well prepared, you may be able to get a good deal when you purchase a property at auction.
Before the Auction
When a seller puts a property up for auction, he will set a reserve price for the auction. This is the minimum price that the seller is willing to sell his property for. The reserve price is usually kept private so as a buyer, you don’t know what price the seller has in mind. If you’re the highest bidder and your bid doesn’t meet the seller’s reserve price, the seller doesn’t have to sell the property to you.
When buying a property at auction, there is no cooling off period. This means that if you’re the highest bidder of an auction, you’re committed to go through with the purchase. Therefore, it’s important for you to make sure that the property is exactly what you want to buy. You should also arrange for pre-purchase inspections, including building, pest and strata inspections, to ensure that the property has no major defects.
Once the property inspections are conducted, you should review the contract for sale with your solicitor or conveyancer. The contract contains information such as the settlement date, penalty for missing the settlement date, as well as other important terms and conditions. If you think the terms are unfair, you may ask your solicitor to negotiate with the seller.
If you need to take out a loan on the property, you should talk to your lenders to arrange for financing before the auction. You’ll need to have the funds to pay for a deposit when you win the auction. In addition, research the value of properties in the neighbourhood before the auction, so that you won’t pay more than what the property is worth.
Some sellers may accept offers from potential buyers before auction date. If you’re really interested in a property, you may check with the seller to see if he or she is interested in a pre-auction sale.
On the Day of the Auction
If you’re considering of buying a property at auction in NSW, you need to register in order to bid at an auction. Once registered, the auctioneer will review the state laws with you and provide you with all the relevant information about the property.
Bidding at auctions can be exciting and intense. If you’re new to buying property at auction, it’s a good idea for you to attend several auctions to get familiar with the procedure.
There are many tactics for bidding at property auctions. Here are some tips that may be helpful to you:
- Don’t bid too soon. Until the property reaches its reserve price, it’s not for sale so there’s no point in bidding on it. Wait until the property reaches its reserve price before you place your first bid.
- Beware of dummy bids. Although it’s illegal, sometimes auction agents may plant dummy bidders in an auction to get the bid up from the opening bid, which is usually low. Sellers may also place “the vendor’s bid” on their own properties provided that the auctioneer declares this.
- Break down your bids. Auctions can be very fast paced. You can slow down the pace by breaking down your bids. For example, if the auctioneer asks for $3,000 bids, you can offer $1,000 or $2,000 bids to slow the auction down.
- Set a limit. It’s easy to get emotional at an auction. Know what you can afford and stick to your budget.
- Don’t reveal your highest price. It’s possible that you can win an auction with a bid lower than your highest price. Therefore, don’t place your highest price unless it’s necessary. For example, if your highest price is $350,000 and the current bid is only $330,000, place a bid of $331,000.
When you win an auction, you’ll need to sign the contract for sale and pay a deposit to secure the property. You’ll need to pay the balance on the settlement day, which is usually 42 days after the auction.
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