So, the property you have found to buy is being sold at Auction; Now you need to know what this means to you as a prospective purchaser?
What do you need to have prepared before you attend the Auction and start to bid?
Firstly, you need to do your research on the property; make sure you are comfortable with what you are about to purchase. Many people do not know that the conditions at Auction are not the same as putting in and having an offer accepted through an Agent. If you are successful at the auction then you have no right to change your mind, no ‘cooling off’ no ‘subject to conditions’. This is when it is absolutely essential to ensure you have found and spoken to your Conveyancer prior to Auction. In the current market most properties are going to Auction (87% at the moment); we have been told by clients that even if on the rare occasion an offer is accepted ‘prior to Auction’ the conditions of purchasing at Auction will be the same; if you are unsure of anything this is when you would talk to your conveyancer prior to signing on the dotted line.
Here are just a few of the things we have put together that you can have in place prior to the auction:
Make sure your finance is ready, this means you are pre-approved for the amount you need to borrow because you cannot buy at auction with any conditions. An auction purchase is unconditional and as we previously stated there is no cooling off period so it is important that you are sure you can borrow what you need in order to be able to settle. Regardless of what you purchase the property for your bank may value it differently. Make sure you have the funds available if this happens, as you may need more than you initially thought. Make sure you have a buffer just in case!
Inspect the property at as many opens as you feel comfortable with. If you want a building inspection, have this carried out in the days prior to the auction and again note anything that you might have to fix or pay for yourself after settlement. If you do not have or know a qualified Building Inspector your conveyancer will advise you of someone they trust and have dealt with before. You do not have the right to add a special condition for the vendor to fix anything prior to settlement. Maybe take a builder with you on an open. If there are items that are of concern ensure that your highest bid allows for that expense. It is easy to get carried away with bidding!
3. CONTRACT, FORM 1 AND SEARCHES
Read through the property paperwork which will be on display at the real estate agents office for 3 days and for 30 minutes at the property prior to the auction. The agent can email that through to you if you request. It will also be in your best interest to get your conveyancer to check these before the auction as they will be able to go through and discuss any issues with the property and can check if the relevant council approvals have been provided for any additions, extensions or building works, encumbrances or anything else you should be aware of .
4. KEEP EVERYONE INFORMED
Let the agent know that you are interested so that if the vendor decides to accept an offer prior to the auction you can be kept informed and the agent can contact you in case you want to make a counter offer. Let your bank and conveyancer know that you are looking to purchase at auction and advise them immediately if you are successful so that the process can get underway immediately.
If you do intend to bid at the auction then you should request any change of settlement dates if you require anything different to the standard 30 days and also request approval for the amount of the deposit you are prepared to pay; 10% on the day is standard so you need to discuss with the agent if you require a different amount. A key tip is to call your bank prior to attending the Auction and ask them for a raise in your transfer limit so that you can transfer the required 10% – in figures if you are buying a property that goes under the hammer at $500,000 you could be transferring $50,000 on the day. Make sure you have this amount in your account to transfer – often savings accounts are not accounts that you can instantly transfer from.
5. AUCTION DAY
On the day of auction, you must register as a bidder and will be given a number to display each time you place a bid. Make sure you have some current photographic ID with you as it will be sighted when you are registering. At this time you should also make sure that the settlement date and amount of deposit that has been agreed upon is noted on the registration.
Some tips that were made to us by an experienced agent were that you should carefully position yourself where you can see the auctioneer and the Auctioneer can see you. Don’t be coy about bidding. If you are there to buy the property have a plan in mind – have your limit set; it is tempting to over bid in the heat of the moment. On the other hand the more confident you appear the more fear you will strike in any other bidders. You should give the impression that there is no upper limit, even though you might be quaking inside. Once you reach your limit realise this is not the property for you. Do not get emotionally attached to a property that is not yet yours.
Ask the agent prior to the auction as to what method of payment they will accept and how they require the deposit to be paid it is usually an immediate bank transfer these days.
Importantly, after you are successful; make sure you put in a call to your Insurance company to organise a temporary cover note over the property so make sure you have their number(s) saved on your phone prior to the Auction. You are now the proud owner of your new home but ownership comes with some responsibilities, and one of them is that your precious new purchase is at your risk from the fall of the hammer; here is a true instance from our archives – a client bought a property and did the right thing by taking out the appropriate insurance – during the 30 days settlement period the water system broke and the client had to organise it to be replaced from their insurance!
All we need to say now is Good luck on the day!
The team at McKay Business Services are all members of the AICSA and are proud Adelaide conveyancers