Buying a House at an Auction
Organise your finances You need to know before you go to the auction how much you can spend. Remember that you cannot buy a property at auction subject to finance so if you are the winning bidder you need to be certain you can get the loan to buy the property. Make an appointment with a mortgage broker and they can help you get pre-approval so you know you are good to go. If you are the lucky winner then you need to pay a 10% deposit on the day so it is important to have that available.
Set your limit Because emotions can run high at an auction it is very easy to get caught up in the bidding process and end up paying more than you can afford. So before you go to the auction set a limit that you will not go over, no matter what. If you are concerned then take someone with you who can help you stick to the limit.
Research the property value Do some investigation on similar properties in the same area that have recently sold. This will give you a guide to what the property may sell for so you don’t end up paying too much for the home on auction day. Stick to your limit – see point 2 above.
If you are really serious about bidding then make sure you get a building and pest report before auction day. The reports can tell you if there are any serious issues with the house before you buy it. Remember that buying a house at auction means you can’t get out of it later due to problems arising from a building or pest report. The sale is unconditional.
Send copies of the Section 32 and contract to your solicitor or conveyance before the auction. A Section 32 or Vendors Statement is a document that discloses any information that could affect the land being sold in a property transaction. It discloses to the buyer information that could impact their decision to purchase the property. Your solicitor or conveyancer can identify any legal issues before the auction which could save you money or mean you do not bid on the property.
You can make an offer before the auction. If your offer is above the reserve price then the seller may choose to accept it. But unless it is an extraordinary offer the seller generally lets the market decide the price by going through with the auction.
You can always ask someone else to bid for you. Ask a friend who is experienced and level headed, and who you know will stick to your limit because if they make the winning bid you are still the one buying the property. Alternatively, you can appoint and pay a Buyers Advocate to bid for you. Their job is to stick to your limit and because they are professionals they won’t be intimidated by other bidding.