You’ve found a property you like and it’s being sold at auction. You’re super excited because you’ve been looking at houses for ages and finally(!) something ticks all the boxes. The problem is, you’re a little nervous because your previous experience with auctions consists entirely of ebay purchases….
But you really like the house, so it’s time to get up to speed with property auctions.
We’ve compiled a list of things to do before (and on) the day of Auction to help ease your stress and increase your chances of leaving the auction with a new house.
Your Pre-Auction Checklist
Do your research. Know the area and know what properties are selling for. It’s all well and good to know what your purchase limit is, but you still want to have an idea of what the property is worth, so you don’t end up paying more than you should.
Arrange a Pre-Approval with a lender. There’s no point in determining a ‘top bid price’ for a specific property if a lender won’t lend you the funds you need to actually complete the purchase. A Pre-Approval can help to set your maximum purchase price and give you confidence to bid at the Auction.
Inspect the property a couple of times if possible, so you are sure it’s one you want to bid on. This may seem like common-sense, but you may be surprised at the features or small details you notice the second time walking through the property. Also, inspecting the home at different times during the day will give you a better idea of which parts of the house get the best light. Find out as much as you can about the property and the reasons why the current owner is selling.
Read the building and pest inspection report. In the ACT, it’s mandatory for the seller to provide you with a copy of an independent building and inspection report. Take the time to read it as it may alert you to potential issues with the property.
Attend other auctions. If you’re hoping to secure property by auction, you really need to be comfortable with how things are going to work on the day. It’s also good to get an understanding of the emotion and excitement involved, which is only likely to be heightened when you’re the one bidding!
Seek legal advice. If you end up securing a property at auction, you will need to sign the contract and pay the deposit on the auction day. This means if there is anything you want to negotiate in terms of clauses you need to have these agreed upon BEFORE the big day. To ensure there’s enough time for your solicitor to negotiate terms with the seller (like paying a 5% deposit instead of 10%; or extending the settlement period from 30 days to 45 or 60 days, for example) you will need to engage your conveyancer before the Auction.
Set yourself a limit. Your bidding limit should be based on three things:
1) Your estimated value of the property
2) How much you want the property (are you prepared to pay a premium?)
3) How much a lender will let you borrow (i.e. your pre-approved loan amount)
Get your deposit ready. If you’re successful, you need to pay your deposit on the day you sign the contract – i.e. on Auction day. Some buyers arrange a bank cheque for a certain amount (paying anything required over the cheque amount via direct deposit on Auction Day). Others arrange to pay the deposit via EFT. Some agencies will accept a part payment of the deposit on Auction day, as long as they receive the remaining funds the next business day. It’s best to speak to the agent involved to ensure you’re clear on what they will accept.
Alternatively, if you don’t have cash available to pay your deposit on Auction day (maybe because you’re waiting on your home to sell before cash is available), a Deposit Bond can be another option. This is something we can help you with – but it needs to be arranged in advance of the auction. You will also need to flag it with the agent.
Letter of Authority. If you’re not confident to do the bidding yourself, you can appoint someone to bid on your behalf. Talk to the real estate agent if this is something you want to do – as this is something else you need to arrange beforehand.
Consider making an offer Pre-Auction. The vendor (seller) may not be open to pre-auction offers, but it’s at least worth considering. It helps to offer something the vendor wants – like a settlement time frame that fits in exactly with their plans (or an attractive price!). You need something that will entice the vendor to accept your offer today, rather than take a chance on an auction scheduled for two weeks time. Bear in mind that if you make a pre-auction offer and it’s not accepted, you’ve potentially “shown your cards” to the buyer (and agent) who now have an idea of what you may bid up to on auction day.
Your Auction-Day Checklist
So what about on the day of the Auction? How can you give yourself the best chance of walking away as a new home owner?
Here’s what we suggest:
Arrive early to take another look around the property. And maybe avoid getting that third coffee if you’re already feeling a little nervous.
Register as a bidder AND make sure you have 100pt ID that shows your correct legal name. You do not need to advise the agent in advance of the Auction that you’ll be registering as a bidder on Auction Day. However, if you have negotiated terms within the contract, the agent will already have an idea you’re interested in the property.
Remind yourself of the limit you have set and don’t get carried away by the atmosphere. If you’ve reached your limit, stay there. It might not feel like it, but there WILL be another property.
Bring some support – but only if it’s going to help you! Having family or friends attend the auction with you can be helpful, but sometimes it just increases your nerves and adds unnecessary pressure (and distraction).
Bid with confidence, knowing you’ve done all you can to be as ready as possible. Some bidders like to sit back, watch proceedings and then jump in at the last minute. Others like to be part of the action right from the start. Auctions can be won using either strategy, so just do what feels right for you. This is where attending other auctions can be helpful, as you can observe bidding strategies in action.
Don’t be discouraged if the auction ends and you’re not the highest bidder. It might take a few auctions before you secure the right property at the right price.
Oh, and good luck!
(And don’t forget to let us know ASAP when you’re successful at auction – that way we start work on upgrading your pre-approved loan.)
