Auction is a method in which many people
buy property, and it should not be dismissed as being only for expensive properties
or those that are a little unusual. Auction is for everybody!
This guide has been put together to help
all potential “bidders” understand auction facts and details, what is required
to get ready before auction day, and how to be the winning bidder!
Arrange your finances
Before you start looking at any property, you need to have your finances organised. You should know how much you have to spend or can borrow, and be pre-approved with a lending institution. Make sure you allow for the extra costs that will be incurred such as legal fees, stamp duty and finance fees.
Do your research
Ok, so you found a property that is exactly what you are looking for - it’s in the area you want, is likely within your price range, however it’s selling by auction. What do you do? First you should do some research and find out what similar properties have recently sold for, to be surer of approximate market value. If after researching you find the property is still within your price range, keep reading. If not, keep house hunting!
Advise the agent of your interest
Next you should advise the selling real estate agent if you are interested in the property and gain a Contract of Sale. The agent will advise you if the seller would consider a sale prior to auction, give you a guide on price, and whether any offers have been received prior to auction day.
Check the paperwork
Then you should have your Solicitor go through the Contract of Sale. It is a good idea for you to also carefully look through the paperwork and clarify and negotiate any other requirements such as changed settlement terms, deposit amount or method, and clarify included items before auction day.
You will need to get building and pest inspections done on the property before auction day. Your bank may also organise a property valuation prior to Auction as part of your pre-loan approval. Remember, there is no cooling-off period with an auction. It is an unconditional sale.
Establish your bidding limit
It is important that you set your own bidding limit. Decide what the property is worth to you based on current market values and what you can afford.
Register to bid
By law you need to register to bid on a residential or rural property. The easiest way to register is with a driver’s license or current passport.
Check the contract for sale
On auction day you should check that your copy of the Contract of Sale is the same as the Auction Contract – just to ensure that there have been no late changes.
The Reserve Price
The Reserve Price is set by the seller. It is the minimum amount they are willing to sell the property for. Once bidding reaches the Reserve Price the Auctioneer may announce that the property is “on the market” or is “selling”. Alternatively, many Auctioneers sell the property without this annoucement. So it’s critical that you bid to make sure you don’t miss out.
You should make sure you are in clear sight of the Auctioneer and bid clearly and confidently. People often have one of two strategies in bidding. They either start bidding dominantly and counter-bid continuously, or they wait until bidding slows and then place a strong bid in an attempt to excude and intimidate the competition. Whatever your auction strategy, make sure by the end of the auction that your voice has been heard. If you haven’t put your best offer forth and property is “passed in”, meaning the reserve price has NOT been met, the highest bidder has first option in negotiating with the seller to purchase the property.
Keep control of your bidding
If the bidding is increasing in larger jumps than you are comfortable with, consider offering less as your bid. The Auctioneer does have the right to refuse it, but it’s worth a shot!
Paying a deposit
If you are the final winning bidder, you are required to sign the Contract of Sale and pay the 10% deposit (or the previously agreed deposit). This can be paid by Personal or Bank Cheque, or with prior approval from the agent by Deposit Guarantee Bond.
You now have 42 days, or the agreed settlement term, to pay the outstanding amount to the seller, and the property is yours!