Buying your home at an auction can be thrilling. It is critical that you are, firstly, well prepared for the auction and then understand the bidding process.
Arrange loan pre-approval
Making a bid at auction without the certainty of loan finance is a very high-risk strategy. It makes more sense to secure loan pre-approval as this will give you confidence as a bidder and set an all-important limit on your bidding.
Ask your solicitor to check the contract
Do not bid on a property until your solicitor has given you the all-clear. Contracts for the sale of property are complex and without the benefit of a cooling-off period. You’ll have to live with any nasty surprises about the property if you’re the highest bidder.
Undertake pre-purchase inspections
Organise a pest and building inspection report long before auction day. If the report identifies key faults, ask the selling agent if you can take your builder for an inspection of the property to get an idea of likely repair costs.
Set a limit and stick to it
With loan pre-approval you should have a good idea about how much you can afford to pay for a property. But you should only pay what you think the property is worth based on similar homes in the area. Paying more could mean waiting years for your home to grow in value.
Get your cheque book ready
If you’re the winning bidder on the day, you’ll be required to pay a deposit of 5-10% of the purchase price on the spot.
Participating in a real estate auction as a buyer is an exciting experience. But, before you show up and start bidding, there are some rules of the event you need to understand and stick to.
Register to bid
Check if you need to register to bid. This is a requirement of some state governments, and where it applies you will be given a bidding number to use. You may also want to consider using a friend or buyers’ agent to bid for you.
The bidding conditions
These rules are displayed at auction and it is important for you to take the time to become familiar with the general terms of the sale before bidding.
Bidding conditions are drawn up by an estate agent. While these conditions vary slightly for each property, there are some standard bidding conditions attached to nearly every property at auction, including:
- Reserve prices on the property will dictate the minimum amount that must be bid in order for the property to transfer ownership. If you do not meet this reserve price during the bidding process, you will not own the property.
- The auctioneer may start the bidding process by calling out a price. You are not allowed to bid lower than this starting price.
- While you may not be bound to a final sale if the bidding does not meet the reserve price during an auction, it’s important to understand that one of the conditions of an auction is that bids cannot be retracted.
- Vendor bids – the seller is allowed to make one bid on their property. It is also a requirement for all bids from the seller to be announced as vendor bids.
- The person who holds the highest bid is determined to be the winning buyer once the bidding has closed.
- Contracts must be signed and the deposit is to be paid shortly after the close of the auction.