The process for buying a property at auction in NSW is unlike buying a property listed through a private treaty, i.e. listed for sale privately or through an agent. When buying by private treaty, you negotiate a purchase price and then proceed to conduct your due diligence to investigate the property before exchanging contracts that legally bind you to buy the property.
When buying at auction, it is necessary to do your homework and investigate the property prior to the date of the auction. Why is this? When you buy at auction, there is no cooling off period or opportunity to investigate the property, as contracts are exchanged at auction. On the fall of the hammer, you are legally bound to complete the purchase – there is no option to cancel from this point onwards.
So, here are our six essential tips for buying at auction:
1. Have your finances in order. Seek pre-approval from your bank or broker prior to auction. Lenders can usually give you an approval up to a certain dollar amount. It is important that you know your bidding limit prior to auction day. Also, ensure you have the ability to pay the 10% deposit immediately after auction if you are the successful bidder. This is the standard deposit payable on exchange of contracts. Speak to the agent about how the deposit can be paid and make the necessary arrangements prior to auction day.
2. Have a bidding limit and stick to it. Remember not to go overboard on the day and get caught up in the emotion of being the winner. If you go above your limit and your lender can’t support you, the contract can be cancelled, and you will forfeit your 10% deposit to the vendor as a penalty.
3. Review the marketing contract. Engage a conveyancer to review the marketing contract and provide advice about the purchase. Following their advice, you may wish to undertake some further enquiries, such as reviewing the council file for the property or reviewing strata records. Make sure you give yourself sufficient time to allow for this, and speak with your conveyancer as soon as possible.
When reviewing the contract with your conveyancer, consider whether there are certain requirements for you to purchase this property. For example, if you are moving town to start new work by a certain date and need to be in the property prior to that date. If so, speak to your conveyancer about amending these terms in the draft contract prior to auction.
4. Conduct your pre-exchange enquiries. At a minimum, this should include a pest and building inspection. A written report will be provided to you following the inspection setting out the current condition of the property. In NSW, you purchase property in its current condition and state of repair. The vendor is not required to advise you of the condition of the property, and properties are generally sold as is. There may be other inspections you wish to carry out, such as having an electrician check the wiring. It is up to you to make any enquiries you feel necessary to be confident you know what you are buying.
5. Consider making an offer prior to auction. It is often possible to submit an offer to purchase prior to auction day. It is not unusual for a property to be negotiated and sold prior to auction. The agent will be able to advise you whether the vendor is prepared to negotiate prior to auction or not.
6. Give yourself enough time to prepare. Make sure you have worked through all the items mentioned above and given yourself sufficient time to do so. Ideally, you should start planning about two weeks prior to the auction date.
Additionally, you might like to attend some property auctions to get a feel for how auctions work.
Don’t forget to register as a bidder with the agent prior to auction day for the property you are hoping to purchase.
Buying a property is a challenging time, let alone throwing in the stress of trying to buy a property at auction into the mix. The key to feeling confident on the day of the auction and giving yourself the best chance of success is the preparation and homework you do prior to auction day.
Still have questions? Call us today! (02) 6771 3686
Complete Conveyancing New England
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(02) 6771 3686 | www.completeconveyancingnewengland.com.au
