We’ve all seen the ads. The smug-looking family shakes the auctioneer’s hand, while the losing family trails away dejected. Auctions can be emotionally demanding and stressful experiences. It’s all too easy to miss out, or – far worse – end up overpaying for a property which turns out to have faulty foundations, termites and a new supermarket due to start construction over the back fence.
Do your homework, however, and an auction can reward you with the property of your dreams. So what are the three essential things you need to know before putting in a bid on auction day?
1. Factors influencing the property’s value
It’s your responsibility to study the title deeds of the property and run them past your conveyancer. Make sure you uncover any caveats, easements, zoning, covenants and restrictions on the property, and establish that they won’t cause you problems in the future.
- Measure up the land yourself, and be sure that it matches the measurements given in the deeds.
- Check if the property has heritage requirements, rights of way running across the site, or unwelcome planning developments in the vicinity.
- Ensure the property is being offered with vacant possession if you want to move straight in on settlement.
- Discuss the contract with your conveyancer or solicitor, and any conditions, additions or variations which may be needed.
- Don’t overpay at auction. Do your due diligence on prices around the neighbourhood, and compare the property’s advertised price range with recent sale prices of equivalent properties in the same street. It’s not uncommon to discover that the vendor is being way too optimistic.
- Don’t expect the estate agent or auctioneer to give you an honest appraisal of the property’s value – they are working for the vendor. It’s up to you to do your own homework, and set a firm price ceiling on the property beyond which you will not bid.
2. Secrets revealed by pre-purchase inspections
So you’ve established that this is the property for you. Now you need to check that you’re not buying a lemon. After all, you won’t enjoy the heritage façade very much if pests have demolished a good portion of your foundations.
Pest and building inspections are essential in helping you to look past the property’s attractions and dig out those invisible nasties, along with rotting wood, slipping stumps, crumbling brickwork and cracking. It’s worth every cent you spend on this peace-of-mind insurance policy. Know the worst before you make a huge investment of money and time, and if the flaws are relatively minor, you can factor them into the price you’re willing to pay for the property at auction.
Pre-purchase inspections can be expensive though, especially if you’re checking out a number of properties. With Compare Inspections, you can save money by choosing to re-sell any reports you have done. You can also check and see if an existing report is available for a property you’re interested in.
3. Whether your finance is watertight
If the hammer goes down in your favour, your finance must be ready to go. Contracts exchanged at auction are unconditional and, once signed, bind both parties to the deal. So a lot rides on doing things right. You won’t be able to bid at all if your finance is incomplete, or you are not properly registered.
- Some states require all bidders to be registered with the auctioneer before they can take part in an auction, and you may need to show personal ID on the day. So check the requirements beforehand. This tactic is aimed at stamping out the practice of planting dummy bidders to artificially inflate the property price.
- Ensure you have finance approval from your lending institution, confirming your borrowing power and price limit. You will generally need written loan approval before auction day, along with the deposit – usually 10% of the purchase price.
And whatever you do, keep a cool head, remember your limit, and don’t get into an auction war with the people bidding against you! Good luck on the day!
By Darel McBride
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