Buying at Auction: What you need to know
You have found your dream home, but the listing is by Auction! What now?
With the right planning and advice, purchasing at auction can save you thousands of dollars.
Do your homework!
The first rule of purchasing property was never more true than when buying at auction: Do your homework! When the hammer falls on your winning bid the property is yours.
Inspect the property. Complete your property searches, including building and pest reports and inspect the property again.
Get a formal valuation and talk to your bank. Your finance must be securely in place!
The seller will make the Contract of Sale available to read before the auction. Make sure your solicitor reviews this contract. Contracts of sale can still be negotiated before the auction.
On the day of auction, make sure you arrive early and that you register your intention to bid.
Sellers will generally have a reserve price – that is the minimum amount at which they will sell the property. The auctioneer can tell you if there is a reserve price, but they cannot tell you what the amount is. When the bidding begins and the reserve price is met, the auctioneer will announce that the property is ‘on the market’. Every bid made from this point on is a potentially winning bid.
If the reserve price is not reached, the property will generally be ‘passed in’, meaning it will not be sold.
The reserve price has been met and you have made the final and highest bid, the auctioneer calls it and the hammer falls – Congratulations! You have just purchased a house!
You will need to sign an unconditional contract of sale, and immediately provide a 10% deposit. Settlement times vary, but usually occur within 14 days.
If you are unable to complete the purchase, there can be significant consequences, including paying the cost of relisting the property for auction and any shortfall between your bid and any subsequent bid.
Cooling off period
Sale by Auction contracts are not subject to the usual cooling off periods.
It is also important to note, that where the property is initially passed in and you were a registered bidder at the auction, if you enter into a contract of sale within two days of the auction, your Contract of Sale will also not be subject to the standard cooling off period.
Auctions can be exciting and very rewarding. Seek advice, go prepared and stick to your budget. Happy Bidding!