Buying a property can often be an intimidating process, especially at auction where you are 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.
There are many things that need to be done before the auction to ensure that your interests are protected and that you are fully informed about the property you are intending to buy. Our top tips are outlined below.
- Have the Contract reviewed by your lawyer
The most important thing to do is to provide the contract of sale to your lawyer so that they can review it, provide you with advice and write to the vendor’s solicitor to request any necessary amendments.
Some of these amendments might include a longer settlement period, payment of a reduced deposit and the deletion of unnecessary special conditions.
Your lawyer will also assist you with arranging any pre-auction inspections that should be carried out such as building and pest inspections or strata reports.
If you are the successful bidder at the auction the reviewed contract can be signed with confidence.
At Nolan Lawyers, we offer the first contract review free of charge.
- Arrange finance approval
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 and/or broker 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 sufficient funds available to complete the purchase within the timeframe stipulated in the contract.
If you need assistance with your finance, let us know and we can put you in touch with a mortgage broker.
- 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’ i.e. in its present state of condition and repair.
- Reserve price
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.
- 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, either when you inspect the property, or on the day itself.
To register you must provide ID, a card or document issued by government or a financial institution showing your name and address, for example:
- driver’s licence
- vehicle registration paper
- council rates notice
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 would like assistance with bidding at auction, let us know and we can put you in touch with a Buyer’s Agent, who can assist you on the day for a ‘one-off’ fee.
- Successful Bidder
If you are the highest bidder, immediately following the auction, you will be asked to:
- provide our contact details to the Agent for the front page of the contract;
- 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.
If you are the successful bidder you will be required to pay the deposit by way of a cheque or deposit bond (usually 10% of the purchase price unless otherwise agreed) immediately following signing of the contract.
If you or someone you know is looking to purchase a property at auction and needs help or advice, please contact us on (02) 8014 5885 or email firstname.lastname@example.org. Remember, we offer the first contract review free of charge and we can put you in touch with professionals such as Mortgage Brokers and Buyer’s Agents who can assist you in securing the property.