A property can be purchased either by buying it at a private sale or by acquiring it through an auction. Recently, buying a property through auction has become very popular with rise in real estate prices. Almost 20 per cent homes in Sydney are bought through auctions. Ergo, one needs to be aware of the market value of the property and the process involved, when buying a property at an auction.

BUYING A PROPERTY AT AN AUCTION

An auction is a process of buying and selling property where buyers bid against each other to purchase a property. The prospective buyers bid and the property is offered to the highest bidder. Any bid after the fall of the hammer is not accepted.

The highest bidder is required to sign the Contract of Sale (Contract) and make a formal offer to the seller to buy the property. The seller accepts the offer by signing the Contract and the sale is completed. The bidder has to pay the deposit specified in the Contract. The property is ‘passed in’ or the seller seeks more bids, if the highest bid fails to meet the seller’s reserve price.

In New South Wales and Victoria, only one bid is allowed to be made on behalf of the seller by the auctioneer. The seller’s bid can only be used if notice of the right to bid is notified in the conditions of sale. It must be clearly exhibited and be available for inspection before the beginning of the auction. The auctioneer must state that it is a ‘vendor bid’ when the seller’s bid is made by the auctioneer.

BUYING A PROPERTY THROUGH SALE

In the event a seller intends to sell a property, the property is generally advertised and the potential buyers are invited to make offers. A potential buyer is expected to negotiate with the seller on the sale price to reach to a consensus with the consideration amount.

Making an offer

If a person is interested in buying a property, he can either approach an agent or make an offer directly to the seller. An agent takes the offer of the potential buyer to the actual seller and if the seller is directly approached, he negotiates with the buyer as to the price and terms of Contract. The potential buyer may be required to pay an initial deposit to the seller to establish the fact that he has an interest to buy the property.

Contract of Sale

The sale of a property is complete when both the buyer and the seller put their sign and seal in the Contract of Sale. The Contract of Sale sets out the terms and conditions for the sale of the property, the details of the parties involved, deposit paid, the amount owing at the date of settlement and settlement period. The Contract of Sale will also include a copy of the title certificate, the planning and zoning certificate issued by the council and the drainage diagram.

Cooling off period

Cooling off period of three to five business days applies to sale of a residential and small rural property. It begins after the copies of the Contract of Sale are exchanged between the buyer and the seller. This time is utilised by the buyer for conducting searches and inspection of documents pertaining to the property and for obtaining various other reports.

Settlement

The settlement usually occurs within four to six weeks after the exchange of the Contract of Sale between the buyer and the seller. However, this time may vary. The buyer and seller need to agree as to the time period and make necessary amendments to the Contract of Sale before the settlement.

At settlement, the buyer pays the balance of the selling price to the seller and becomes the legal owner of the property.

DIFFERENCE BETWEEN BUYING A PROPERTY AT AUCTION AND SALE

The differences between buying a property through auction and sale are enumerated in the table below:

How can we help?


Fill out the form below and we’ll get in touch with you to discuss how we can help