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How to purchase a home at auction

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How to buy a house at auction

The best way to prepare for auction day.

Found a perfect home but have no idea how to navigate the auction? Don’t be discouraged – there are easy ways to get yourself ready.

  1. Before the big day 
  2. On the day 
  3. Bidding at auction
  4. After auction 

Before the big day

It’s important to be aware that there is no cooling off period with an auction. Once that hammer falls, the sale is final. That’s why if you’re planning on bidding for a property at auction, you must get your ducks in a row before auction day.

  1. Pre-approval:
    Securing your finance before the auction day not only gives you confidence as a bidder but also sets your bidding limit. Choosing to make a bid at auction without securing your finance is very risky and leaves you financially exposed if you are the highest bidder. Always begin your home buying process by seeking pre-approval
  2. Research similar sales:
    Make sure that you read up on the sales of similar properties in the area. This should give you a better idea of a realistic price for the property that you’re interested in. Use this research to determine if the home is within your budget, and if so, to set the highest reasonable price that you’ll be willing to pay. You can request a free suburb report and or speak to our team for a free property report to help.
  3. Pre-purchase inspections and reports:
    You should arrange building and pest inspections – and a strata search if you are bidding for an apartment – well before the auction day. This will give you time to arrange a builder or relevant tradesmen to come and inspect the property to advise you of potential costs to fix issues.
  4. Obtain a copy of the contract:
    As the sale of the property is final when the hammer falls, it’s imperative you have your solicitor or conveyancer review the contract for sale and give you the all clear. Without a cooling off period you will be stuck with any unexpected surprises.
  5. Register to bid:
    In some states you are required to register ahead of the auction day. The real estate agent will be able to guide you on the requirement for your state. If you are required to register, you will be given a bidding number to use on the day.

 

On the day

What to bring to an auction:

  1. Photo identification such as a driver’s license or passport. This is because you may need to register to bid when you first arrive at the auction rooms.
  2. Your deposit. If the hammer falls and you are the highest bidder, you must sign the contract and pay the deposit right there and then. This means you must be sure you are bidding on a property that you can buy. Normally, this is 5 - 10% of the purchase price but you should confirm with the selling agent, along with preferred method of payment (usually a cheque).
  3. Your bidding limits. Auctions are often action-packed and overwhelming. The temptation to get competitive can be high, so you need to be clear about your absolute limits and stick to them.

Before the auction starts, find somewhere prominent and close to the front to stand. Don’t hide at the back where you can’t see or hear what’s going on. A good tip for concealing any nerves you may have is to stand with your hands behind your back. This will stop you slouching or fidgeting which can put sellers off and hurt your chances of negotiating should the house fail to sell at auction.

Bidding at auction

The auctioneer will start the process by describing the house and auction number, and then inviting bidding to begin.

Remember, the auction is a game of strategy and emotion must be left at the door even if it really is your dream home.

There is no right strategy for bidding, but there are plenty of tactics you can try until you find one that fits you best:

Whatever strategy you opt for, strong, confident bidding scares off less-prepared competitors. Your similar sales research and pre-approval should have you feeling confident in your decisions and ability to counter-bid.

Stay calm, pay attention to the auctioneer, and most importantly, know when it’s time to stop.

After auction

There can be two outcomes to an auction. If the reserve price was not met, the property won’t sell. But if you were the highest bidder, you can still make a private offer to the selling agent to begin negotiations.

If you were the highest bidder and the property was declared ‘on the market’, congratulations! You are officially a home owner.

  1. Finalise your home loan:
    Let your lender know that you’ve purchased a property and require your pre-approval to be formalised into a home loan. Your lending specialist will be able to walk you through your options for choosing the right home loan product and go through all the relevant set-up requirements. Once your financial information has been verified and the property valuation conducted and accepted, you will receive formal approval of your application.
  2. Final walk through:
    During the final week of settlement, you will make a final inspection of the property. This allows you to make sure everything is in the same condition that you bought it in and aligns with the contract.
  3. Settlement date:
    This is the day you become the official owner of the property. The balance of the purchase price will be transferred to the seller. Your solicitor and lender will work together to handle the loan settlement. Then Registration of Titles occurs. This is when the title deeds and mortgages will be registered at the lands office. Your lender will pay stamp duty (if this hasn’t already been paid) and registration costs to the government on your behalf. 

Still have questions?

One of our home loan experts is happy to talk you through the home buying process.

Enquire now