Auctions are becoming an increasingly popular method for selling homes but the auction process can be an intimidating one, even for seasoned home buyers. That’s why we’ve put together everything you need to know about going to an auction.
Research is one of the most important factors in any auction and being well prepared will definitely work in your favour come auction day. The first thing that you should do is decide on an area that you wish to buy in and then research that area thoroughly. Find out what the general selling prices of houses in that area are, so that you know what a reasonable bidding price would be. Decide on the type of property that you want and then visit as many of those types of properties as you can. You will then gain an idea of which properties are better than others and how to assign value to the property that you plan to bid on.
It is also a great idea to attend auctions in your buying area as well. This way, you will see how the auction process goes, the type of people that are likely to attend your auction and how they bid.
Once you have decided on the property that you wish to bid for at auction there are some things that you will need to do before auction day. You should firstly let the real estate agent in charge of selling the property know that you are interested. They will provide you with a Contract of Sale. You should take this to your solicitor to ensure that everything is above board. Also read all documentation and paperwork yourself so that you understand the conditions of sale, the settlement terms and so forth.
Also make sure that you get the relevant inspections such as the building and pest inspection done before the auction day. This is because you cannot buy a property at auction on the condition that the inspection reports are OK. Auction sales are legally binding on the day, and there is no cooling off period.
Finally, make sure that you have your finances in order. Visit the bank to find out how much money you can borrow and ensure that you set a bidding limit before you go to auction. Remember to allow for the additional costs such as stamp duty, legal costs and so forth. When setting a limit, ensure that you can still afford the repayments on your property even if the interest rates should rise in the future. This will ensure that you don’t get caught out in the future.
On the day of the auction, the first thing that you should do is to double check your Contract of Sale. It should not have changed in any way. When it comes time to bid for the property, make sure that you are in a spot where the auctioneer can easily see you. Make your bid clear to the auctioneer and be confident. During the actual bidding process, you should keep yourself under control. Do not let your emotions take over your head so that you end up bidding more than you can afford. If things are moving faster than you are comfortable with, try bidding at a lower rate. The auctioneer may refuse to take the lower bid amount but you are perfectly within your rights to give it a go. When the seller is happy with the price offered, the auctioneer will say that the property is on the market. This is the official indication that the property will definitely be sold. If the reserve price – the minimum price that the seller would be happy with – is not met, the highest bidder on the day has the right to enter into negotiations with the seller.
If you are the highest bidder on the day, be aware that you will need to sign the Contract of Sale and pay the required deposit on the spot.
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