Property auctions are a popular method of purchasing and selling property in Australia, especially in the main cities such as Sydney, Melbourne and Brisbane. The auction process may appear frightening to the first-time buyers because of the competitive environment and the rapid nature of the process. Nevertheless, as with any other auction, attending a property auction can become an exciting experience of getting the house of your dream with proper preparation and knowledge.
This is a complete guide for property auctions in Australia explaining the process of property auctions with step-by-step information which will be helpful to first time property buyers.
What is a Property Auction?
A property auction is an open sale of a property to the highest bidder, subject to the bid being acceptable to the seller (that is, the bid must be at or above the seller reserve price the lowest price the seller will accept). Auctions are widely used in Australia as they provide transparent and competitive bidding environment which in most cases increase the sale price. They are specifically common in hot property markets that have high demands.
Auction is unlike the private treaty sales where bargaining is carried out in secret; it is a speedy process that compels buyers to make decisive actions. As a first-time buyer, the most important thing is to study the process and be prepared.
A Guide to Property Auctions in Australia
Learn about the process of property auctions in Australia with this valuable resource that will guide first-time property buyers on the major processes involved in property auction, the strategies and secrets that will help them succeed in the property auction process.
Step 1: Inspect the Property Thoroughly
The difference between a private sale and an auction is that the negotiations may involve conditions in a private sale but not in an auction. In case of your winning, the law obliges you to go through with the purchase. This implies that pre-auction due diligence is critical. Book inspections, general and building / pest, as far in advance as possible. Get a solicitor or conveyancer to look at the contract prior to the auction day to avoid any shocks.
Step 2: Secure Pre-Approval
Before you start thinking of bidding, you must have your finances in order. That entails being aware of how much you can borrow and being conditionally approved by your lender. Also note that in most states in Australia there is no cooling-off period with regards to auctions- should you be the highest bidder you sign the contract and pay the deposit on the spot.
To help them through the process of understanding the policies of the various lenders and to get pre-approved with terms that suit their circumstances, many first-time buyers find it useful to engage the services of the best mortgage broker Sydney has to offer. A broker will also be able to give you advice on what loan facility would be most suitable to an auction purchase.
Step 3: Understand the Auction Rules
There are somewhat different rules regarding property auctions in each state and territory of Australia, yet the principles remain identical:
- You will need to register to bid and be given a bidder number.
- The process is controlled by the auctioneer who makes decisions concerning the increments of bids.
- The vendor will normally have a reserve price, which is the lowest price they will accept.
You need to pay attention to what the auctioneer announces, as they will notify about any amendments to the contract or conditions prior to bidding.
Step 4: Know the Reserve Price
Bidders are not told the reserve price, but when bidding has reached or surpassed that figure the property is technically “on the market.” When the reserve is not reached the property can be passed in and private treaty negotiations are commenced with the highest bidder. There are cases where the seller may be willing to take a little less so it is always worth making a bid just in case you do not know what the reserve is.
Step 5: Set a Firm Budget Limit
Decide in advance just how much you are prepared and able to bid–then stop. It is very possible to be carried away by the occasion and spend more than you are comfortable with. Once again, the successful bid is legally binding and you will need to pay a deposit (normally 10%) there and then.
Step 6: Bidding Strategy Matters
You need not begin bidding at once. A lot of smart money traders observe the initial strength, and then make a decisive entry. Be confident and clear with your bids. Don’t hesitate, even when you feel nervous, a strong bid may be viewed as a sign of confidence, and it may scare away the competitors who are hesitating. Other buyers like the idea of their solicitor or a buyer agent bidding at their behalf particularly in heated markets.
Step 7: What Happens After You Win
When you are the successful bidder, you will sign the contract of sale and pay the deposit there and then. A settlement period is commenced- this is normally 30 to 60 days where your lender will complete your home loan and your solicitor will make final inspections.
At this stage there is no turning back without incurring some financial and legal implications, so you need to be very prepared before you auction.
Passed-In Properties and Negotiation
When there are no bids that reach the reserve and the property is passed in, the bidder who bid the most is normally given the first option of negotiating with the vendor. Sometimes this may actually net you a better deal – though you have to be prepared to pull the trigger rather swiftly and of course your finances must be in order as well.
Final Tips for First-Time Auction Buyers
- Get there early and look at how the auctioneer manages the crowd.
- Go to other auctions beforehand and become oriented with the process.
- There is no need to rush and start bidding unless, you are sure.
- Be ready with your deposit- some sellers ask you to bring a bank cheque or an electronic wire on the day.
- Make sure your solicitor or conveyancer is available at short notice to answer any last-minute questions about the contract.
Conclusion
Attending property auctions in Australia can be an exhilarating experience as you purchase your first house, but it needs lots of preparations and a well-defined plan. With a market research, financial security, due diligence and knowledge of the auction process, you will be ready to place a bid and feel good about it. Although the idea of the process might be frightening, with the right knowledge and discipline, first-time buyers might enter the auctioning arena and come out with their dream home.
To be absolutely sure that you know all the rules and conditions of the local auctions and the market itself, contact your nearest real estate agent or conveyancer or visit the state-based consumer affairs website to get all the necessary information. Happy bidding!
