Buying a home: How to buy at auction

Buying-at-auction-can-be-a-nervewracking-experience-_157_6004350_0_14093153_300There are many pathways for purchasing a property, each one with its own distinct set of considerations. Buying a house at auction is just one.

Because there are rules that are unique to the auction process and don’t necessarily apply to direct purchases, it is important to be as prepared as possible. Even if you are an experienced bidder or a first time auction-goer, preparation is key to avoiding any unexpected problems. This brief guide will outline some common issues in the auction process.

How do I prepare?

Auctions can be an exhilarating but nerve-racking experience, so it is very important to be across all your rights and responsibilities. Agents are required by law to supply all prospective bidders with the Bidder’s Guide before the auction, which contains all the important information you will need when buying a property, but it is also a good idea to attend a few auctions beforehand.

Familiarising yourself with the process can even prevent you from making a decision you could later regret. Unlike a direct purchase, there is no cooling-off period at auction. With this in mind, have your solicitor go through the sale contract before the auction, prearrange all your finances and make sure any inspections are completed before the day. This will put you in the best position to quickly secure the property.

Do I need to register?

You can not place a bid at an auction unless you have registered. You can register for the auction at any point before the auction, whether this be during inspection or on the day. In any case, this involves supplying the seller’s agent with your name, address and proof of identity, which will then be recorded in the Bidder’s Record. If you pre-registered, you will still need to show proof of identity on the day – only then will you be given a bidder’s number.

Registering does not mean you have to bid – it simply gives you the right to do so.

What happens if I place the highest bid?

Before you place a bid it’s a good idea to get advice from your real estate agent on what prices properties have sold for in the surrounding area. This will serve as a guide for the property’s market value and even help you set a limit for how much you are willing to pay.

If you are successful, you have to be prepared to sign the sale contract and pay the deposit – usually 10 per cent of the purchase price – then and there.

Bear in mind that the seller will set a reserve price that they generally will not disclose to potential buyers. Even if you place the highest bid, if it is below this price the property will be passed in. Once bidding passes the reserve price the property will be sold at the fall of the auctioneer’s hammer.

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