Buying by auction: 6 important steps you should take before attending an auction
We’re breaking down the auction process and highlighting what you need to have organised before attending an auction, so you can make sure you’re ready to make that house your home.
So, what is an auction?
An auction is one of the many ways to buy a house, but it can seem a bit daunting. An auction is a public sale where potential buyers bid against each other, which means you’ll know what everyone else is bidding. An auctioneer controls the bidding and doesn’t usually reveal what the reserve price is.
It’s important to do your homework, check out comparative sales and know both what you would like to pay for the property, and what your max offer is – it’s tempting to go past it in an auction with such emotion and energy in the room. The auctioneer’s job is to get the bidding up and past the price the sellers have specified (which is unknown at the time of auction). Once the price is above the reserve the property is officially announced as being ‘on the market’.
Each bid needs to be higher than the previous, and bidding will continue until there is only one buyer left. When the hammer drops, that person will be deemed the successful buyer.
What research should I do before auction day?
Find out as much as you can about the property before the auction:
Work out how much the property is worth
Review the title, council documents and check the LIM report
Arrange for a builder’s inspection
Have your lawyer look over the terms and conditions of sale
Confirm your finances, so you know how much you have available to spend before the auction starts. You’ll also need to make sure you have access to your deposit on the day of the auction, as this will need to be paid immediately.
Register your interest with the agent - It's important that you register with the agent as they then must inform you if a pre-auction offer is made on the property.
It may feel like a waste to spend money on these checks because you may not win the auction, but once the hammer falls the property is sold. Bids are considered unconditional offers, so if you win, you are legally required to purchase the property. You’ll also need to sign the sale and purchase agreement and pay the deposit on the day of the auction, which is why you should do your research before auction day.
What happens if the reserve isn’t met?
If the reserve isn’t reached, the property will be passed in and the highest bidder will be given the first chance to negotiate a sale. The seller may also lower the reserve and speak to the auctioneer mid-way through the bidding process to ensure the property sells.
Auctions are a little bit different to some of the other ways to buy a house. Let us know if the house you’re wanting to buy is for sale by Auction. We’ll help make sure your finances are all sorted, so when the hammer falls, you can call the house your home.