Your Guide to Buying at Auction
Never have the words all sales are final' been more meaningful than when buying a house at auction! There's no doubt that buying at auction can be a nerve-wracking process, but with our expert tips and advice, you can minimise the stress.
The first thing to note when buying at auction is that the rules are very different than when buying via a standard treaty sale. There is no cooling-off period when you buy at auction, so you need to have all of your ducks in a row well before the big day.
This means you will need to have done the following:
- Have your conveyancer examine the sale contract before the auction, to make sure everything is in order
- Arrange for finance approval with your bank or lender
- Have access to a minimum 10% deposit, usually in the form of a bank cheque, to bring with you on auction day (confirm this amount with the real estate agent)
- Inspect the property fully and note any areas of concern
- Have any pre-purchase building and pest inspections completed prior to the auction
- Arrange for any engineers, surveyors or builders to view the property, if you're planning on renovating/extending
How auctions work
Before auction day, the vendor will nominate their own reserve price, which is the lowest amount that they are willing to accept.
When the auction begins, bidders will bid on the property, with the price increasing in increments of $500100,000, depending on the overall value of the property and the pace of the auction.
When there is only one bidder remaining, if their highest bid is above the reserve, then the property is sold at the fall of the hammer. If you are this successful buyer, then you must sign the sale contract and immediately pay the deposit.
If the highest bid is below this reserve the property will be passed in'. The vendor will then either attempt to negotiate a sale price with interested bidders, or they'll list the property back on the market.
Tips for success
The NSW Department of Fair Trading suggests that you attend a few auctions as a spectator. If bidding at auction makes you feel uneasy, then attend lots of them to get used to the process, says Melbourne-based buyer's agent Lisa Parker. Watch for tactics used by successful bidders, and mistakes made by nervous bidders.
Make an offer
Just because a property is being advertised for sale by auction, that doesn't mean the vendor won't be willing to sell beforehand. People often think an auction campaign automatically means the property will definitely go to auction, Parker says. But buyers should always ask the question, because some owners prefer to take a firm offer rather than wait for auction day.
Ascertain the property's value
Take the time to find out how much properties in the area have sold for, so you have an understanding of the market value of the home you're looking at. If you're really serious about the property, consider contacting a registered valuer for an accurate and unbiased opinion, suggests property author and consumer advocate Neil Jenman. The money spent on a valuation is well worth the risk.
Consult a good lawyer
There is no cooling off period when buying at auction, so once the hammer goes down, the sale is final. A home costs hundreds of thousands, while a lawyer only costs hundreds, Jenman says. Some lawyers will even accompany you to the auction. Good lawyers are great value when buying a home.