In a strong local property market, auction is becoming a popular means of selling property. Prior to attending an auction, it is important to be well prepared.
The primary reasons that vendors opt to sell their properties by way of auction instead of private treaty are to create a sense of urgency and competition between potential buyers in the marketplace. These vendors are typically motivated to sell within a short period of time.
When a property is listed for auction, prospective purchasers are still permitted to submit offers for the vendor’s consideration prior to the date of auction and the property can be sold prior to the auction date.
If the property does not sell prior to the date of auction, then the vendor’s real estate agent will attempt to sell the property on the day of the auction, to the person with the highest bid price, on the condition that the bid price is higher than the vendor’s reserve sale price for the property.
Here are our six legal tips for purchasing a property at auction:
-
Familiarise yourself with the auction process by discussing the process with your solicitor and, if possible, by attending other auctions in the area;
-
Inspect the property prior to the auction date and organise pre-purchase building and pest inspections, as required;
-
Contact your solicitor to review the proposed sale contract and negotiate any required amendments to the proposed sale contract prior to the auction date;
-
Obtain finance approval from your mortgage broker or lender prior to the auction date;
-
Deposit –if you are the successful bidder you will be required to provide a deposit of usually 10% of the purchase price immediately after the auction; and
-
Register as a bidder prior to the auction date and be sure to have your photo identification with you on the day of the auction.
When purchasing a property by private treaty, the purchaser is normally entitled to a cooling off period of 5 business days after the contract date. However, purchases by auction are unconditional, meaning that if you are successful in purchasing the property as a result of the auction, you should expect to be bound to purchase the property without a cooling off period. It is primarily for this reason that you should contact your solicitor to obtain legal advice prior to the auction date.
