Purchase by Auction
Going once, going twice, we’re all done?…. no further bids…. Sold!
If you are attending an auction then there are a few points to understand before you start waving your bidding paddle around. Here are a few pointers:
1. No cooling off period
In New South Wales there is no cooling off period if you buy a property at auction, or on the same day as the property goes to auction. This means that once the hammer falls your cannot back out. Because of this bidders need to be prepared in case they are successful. If the property is passed in but negotiations continue well into the evening then remember – there is no cooling off period, even if the auctioneer has long departed from the building.
2. Get your finance in order
The biggest risk of buying a property is not being able to pay for it. Make this mistake and the deposit, usually 10% of the purchase price forfeited to the vendor. This can occur in as little as 8 weeks after the date of the auction. For those who have not purchased a property before, or are borrowing a high percentage of the property’s value, then obtaining unconditional loan approval can be more difficult than you may suspect.
Difficulty can arise when a bank has issued ‘pre-approval’ to a buyer prior to the auction with conditions which require the property to be valued, guarantees to be in place, or the provision of certain financial documents (such as tax returns) which are not available. In those circumstances, a pre-approval may not eventuate to a full loan approval at all, or not within the time required by the contract.
To avoid complications with finance speak with your personal bank manager to ensure either an unconditional approval is issued prior to the auction (up to a certain value), or the terms of the ‘pre-approval’ are capable of being met shortly after the auction.
3. Have your lawyer read over the contract
We strongly suggest all purchasers obtain legal advice prior to attendance at any auction. We can negotiate the terms of the contract prior to the auction – the contract cannot be amended after the fall of the hammer.
The contract must be with the real estate agent at the time of listing the property for sale. The contract will include terms and conditions specific to the transaction, and documents which will disclose information about the property.
It is no good bidding on a property only to find out that the property will be tenanted for the next 12 months, there is a term of the contract which means the owner will be removing the brand new kitchen appliances you thought were staying, or that the property is affected by an easement preventing the construction of the swimming pool.
4. Buyer Beware
If you are the highest bidder then you purchase the property with all defects. If you do not wish to become the owner of a house full of termites you will need to obtain the pest and building reports prior to an auction. It is an unfortunate expense but a needed one. Often the vendor will have obtained an independent pest and building report for prospective bidders, so check with the agent if there is a current report.
The same goes for any issues as to the boundaries of the property, or the legality of the structures within. Speak with us so that you are fully informed as to the content of any vendor reports and of your rights and the risks if you fail to properly investigate the condition of the property.
5. Get in early
If you can avoid buying at auction then do so. This can be achieved by negotiating with the vendor prior to the auction date or contacting local real estate agents in your area to obtain the inside knowledge as to which properties are in the stages of being listed for sale. The closer the auction date the less likely the vendor will sell without proceeding to auction.
If you are thinking of bidding at an auction get in touch with Phil or Emily and have the contract reviewed and be advised on what action to take prior to attendance on the day.
There is no fee or obligation for us to advise you.
Call us to discuss the specific property you are considering buying.