Your guide to auctions
02 November 2015
Auctions can be pretty daunting for first home buyers, particularly with all the excitement and expectations about getting into your own home. Don’t stress – we’ve got some tips for you to consider, and help get you started before auction day.
If your bid wins at auction, you will be locked into a binding contract, so make sure your finances are pre-approved before auction day. This means you will be able to confidently set your bidding limit and stick to it. It’s also a good idea to obtain an independent valuation of the property, so you are assured of its value. This may take a few days to finalise.
Register your intentions
Arrive early and remember to bring identification in case you are required to register prior to the auction. A driver’s license should be sufficient. Registering does not mean you have to bid, so don’t feel pressured if you have a change of heart.
Seek professional advice
Before the auction, have your conveyancer check the sale contract to ensure everything is in order and that you have a clear understanding of the conditions. It is also important to obtain professional building and pest inspections (make sure you receive the reports).
Understand that you need to be 100% sure about the purchase. When buying at auction, you will be expected to sign the contract and pay the deposit (usually 10%) as soon as the auction concludes and you will not be entitled to a cooling off period. The deposit can be paid with a personal cheque, bank cheque or cash.
Don’t wear your heart on your sleeve
Make sure you don’t reveal your bidding intentions too soon. Prior to the auction, play your cards close to your chest and be as ambiguous as possible when it comes to your bidding limit. Revealing your plans to the agent prior to the auction could be used to drive the price up.
Know when to call it quits
It is very easy to get caught up in the excitement of bidding at an auction. Know your financial limit and do not exceed it. Although it is hard to watch someone outbid you on the property your heart was set on, it is better to miss out than be left with debt you cannot repay.
Keep your cool
If you don’t feel confident bidding you can use a proxy bidder. This includes hiring a professional purchasing agent or even using a family member or friend. The proxy bidder will need to provide a letter of authority from you, authorising them to bid on your behalf. The letter must include your name, address and proof of identity. Make sure the bidder understands the agent’s requirements and are well aware that if their bid is accepted, it is a legally binding contract.
Be realistic about price
Some agents will quote a lower than expected price for a property to draw in a greater number of bidders on auction day. Do your research by looking at similar properties in the area to understand the likely selling price.