Learn the step-by-step process of buying a house at auction in Australia, including essential tips.
In our previous lesson, we explored the different methods of buying a property such as using a buyer agent. Today, we’ll delve into the details of purchasing a property through an auction, a popular but often intense way to secure a home in Australia.
Learning Objectives:
Learn how auctions work.
Prepare for the auction day.
What is a House Auction?
A house auction is a public sale where potential buyers bid on a property, with the highest bidder winning the purchase. Auctions are usually conducted by a licensed auctioneer and can take place either on-site at the property or online. This method is often used for selling homes in high-demand areas, where competition among buyers is fierce.
How the Auction Process Works
The auction process is highly structured, and understanding each step is crucial to participating effectively:
Pre-Auction Preparation:
Contact your broker
Contact your broker and tell them the property and date of the auction. We can ensure you're ready to bid and that the property meets the bank's requirements.
Research and Inspection
Before the auction, it’s important to thoroughly inspect the property and conduct any necessary due diligence, such as building and pest inspections.
Legal Review
Have your solicitor review the contract of sale, as auctions don’t allow for a cooling-off period.
Set Your Budget
Determine your maximum bid based on your pre-approval and stick to it.
Auction Day:
Registration
To participate, you must register with the auctioneer, providing identification and any required documentation.
Bidding
The auctioneer will start the bidding at a lower price, and participants will place bids in increments. Bidding continues until no higher offers are made.
Hammer Falls
If your bid is the highest when the auctioneer calls “going, going, gone,” the hammer falls, and you’ve won the auction.
Immediate Payment
A deposit, typically 10% of the purchase price, is required immediately after winning the auction.
Post-Auction:
Finalise the Contract
You’ll need to sign the contract of sale immediately after the auction. Settlement typically occurs 30 to 60 days later, depending on the agreement.
Tips for Auction Day
Set a firm budget
Auctions can be highly competitive and emotionally charged. To avoid 'auction fever', make a commitment to stick to your pre-set limit. Factor in all associated costs such as stamp duty, conveyancing fees, potential repairs etc into your pre-set limit.
Attend a few auctions as a spectator first
Watching how experienced bidders handle the auction can provide insights into effective strategies, such as when to make your move. It will also be helpful to observe the auctioneers techniques and assess your competition to see how competitive the market is.
Be ready with your pre-approval and deposit
Have a copy of your pre-approval on hand and prepare to pay deposit immediately – usually 10% of the purchase price. Make sure that the funds are easily accessible.
Have your solicitor or conveyancer on standby
While you’ll sign the contract immediately after the auction, it’s a good idea to have your solicitor or conveyancer review the contract before the auction day. They can advise you on any potential issues and ensure you’re fully prepared to sign if you’re the successful bidder.
If you’re eager to dive deeper into the entire course, feel free to explore all the lessons on our blog here.
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Want to learn more?
If you want to learn more about the auction process, contact us today. We’re here to help you weigh your options and make the best decision for your lifestyle and financial goals.
Call us at (02) 8313-8400 or request a call back.
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