Buying property at an auction can be an an exciting, yet anxious time – the stakes are high and most people are incredibly outside of their comfort zone. However, there is no reason to be under-prepared for your first auction experience. Here are some helpful tips on how you can prepare for your first auction, and what to do if you win – or lose!
Before the Auction
Do your research
It is important to research the area and market in which you are looking to purchase – there are a number of key factors to look out for that can impact a property’s long-term value. These range from amenities such as public transport, shopping centres and educational facilities, as well as geographical location factors such as noise and the surrounding aspect of the property.
Pre-Auction Due Diligence
With auctions, a good rule of thumb is ‘believe nothing and check everything’ – this applies to the property as well.
Equally as important as to the location of the property, is to ensure you are financially prepared for a win. Prior to arriving at the auction, make sure you have a pre-approved home loan – as this puts you in a much better and financially secure position when you bid – as you will already know your limit.
If you are successful at the auction, you will need to pay a deposit on the property – usually at least 10% of the purchase price. This is also why it is important to be prepared financially.
Prior to your actual auction, it is a good idea to attend other auctions in the area to get a feel for the process and to experience the atmosphere and observe other bidding techniques. In particular, we would advise you to pay close attention to the auctioneer who is selling the property – and observe the language and technique that they use.
At the Auction
Arrival & Registration
We always recommend arriving at the auction well in advance. This allows you plenty of time to register and also gives you the advantage to not only meet the auctioneer, but to scope out others who are looking to bid on the property.
In order to register to bid at an auction, you must have some form of identification – either a driver’s licence or a valid passport. While you can register during the auction, it is recommended to do so well in advance. Also, it is important to note that even if you register, it doesn’t mean that you are obligated to bid on the property.
In a strong auction climate (which, if you are bidding anywhere in Sydney, it will be) a strong confident stance can give you a psychological advantage.
There are a number of different opinions on whether to start strong and bid high, or to hold back and observe how the bidding plans out. However, there is one point that is universally agreed upon and that is that you must stick to an action (bidding early and high or holding back and waiting) and commit to it.
It is also important to know when to walk away. It is crucial to stick to your limit and be prepared to miss out. It is all too easy for auctioneers to tempt you to increase your bidding with small ($500) incremental increases, but you must avoid this trap, otherwise you will find yourself with a property you cannot afford. If you enter into the auction willing to walk away and live to fight another day, that is a much better outcome than over-committing to a property you’ve become emotionally and financially binded too.
What happens after the auction
If you are the successful bidder, you must sign the sale contract and pay a deposit on the spot, which in NSW is usually 10% of the purchase price. It is important to be aware that there is no cooling-off period when you buy at auction.
After the contracts have been exchanged, your solicitor or conveyencer will carry out various searches of the property. Your solicitor and the seller’s legal representative will then arrange for settlement at which time you must pay the remaining balance of the purchase price.
In the event that you are looking to purchase property at an auction, it is important to have an informed and experienced solicitor. Please contact the offices of Owen Hodge Lawyers, as we are always happy in assisting clients in understanding the full ramifications of any and all of their legal needs. Please feel free to contact us at your earliest convenience to schedule a consultation at 1800 770 780.