BUYING A HOUSE AT AUCTION
With the current surge in the property market and houses being sold well beyond vendor’s expectations, many vendors are choosing to sell their property by auction as a means of maximising the sale price.
If you are looking to purchase a property at auction, there are a number of important considerations that buyers need to be aware of since the process of buying a property at auction is different to purchasing a property by private treaty.
One of the notable differences is that when buying a property at auction, you are required to exchange Contracts on the day of the auction and pay your 10% deposit. Unlike purchasing a property by private treaty, there is no cooling off period and it therefore is imperative that buyers undertake their due diligence in respect of the property in the period leading up to the auction date. This usually involves:-
- Securing finance from your lender. Buyers are strongly advised to have unconditional loan approval prior to the auction. This means that the lender has approved you for the amount needed to purchase the property as well as being satisfied as to the value of the property you are intending to buy. Often banks will perform a valuation on the property and the process of obtaining unconditional loan approval can often take a number of weeks. It is therefore important that you speak with your lender well before the auction date.
- Meeting with your Solicitor/Conveyancer to review the Contract for Sale. A Contract can be readily obtained from the real estate agent. It is important that you review the Contract with your Solicitor prior to the auction to ensure that you satisfy yourself as to the legal issues concerning the purchase and that any changes to the Contract can be requested prior to the auction date. The vendor is unlikely to agree to any changes to the Contract after the auction date given you have already committed to the purchase of the property and have paid the 10% deposit.
- Carrying out inspections as to the condition of the property. You will usually have had the benefit of carrying out your own visual inspection of the property well before the auction date. Prospective purchasers will also generally engage suitably qualified building and pest inspectors to prepare expert reports on the condition of the property. Obviously these reports provide a more in-depth examination of the property which will alert you to any issues concerning the structural soundness of the property and whether it has been affected by pest infestation. It may also be necessary to carry out further investigations including obtaining a survey of the property and possibly applying to Council for a Building Certificate in the event that there have been additional works carried out to the property which require Council approval. Your Solicitor is able to assist you with engaging the appropriate consultants and making any relevant applications to Council. Once again, it is important to ensure that you give yourself enough time for these things to be performed prior to the auction.
- Obtaining a strata report if the property is strata title. When purchasing a property that is strata title, it is recommended that a report be obtained to examine the strata roll which will provide important information about the strata including the financial position, whether there are any current or proposed special levies and if the strata is involved in any legal proceedings. Once again, your Solicitor is able to assist in organising a strata report.
- On the auction day, it is important that you attend the auction and be prepared to complete the exchange in the event that you are the successful bidder. This will require you to pay the deposit straightaway which is usually 10% of the purchase price. It is therefore important that you have the means of paying this deposit, which is usually by way of a cheque or transfer of funds. On the day of the auction, it is important that you have given yourself a limit in terms of your bidding on the property and that you do not let your emotions take over. Many people will not have had any experience at an auction before and it is therefore important that you familiarise yourself with this process beforehand. Many people will also engage a third party to perform the bidding on their behalf. This person usually has the ability to be objective and will be able to walk away once you have reached your maximum bid. A third party can be a friend or a buyer’s agent.
The staff at Cox West Lawyers have vast experience in conveyancing matters and assisting people through the process of purchasing a property. We offer expert advice on reviewing and advising on the Contract for Sale and we are able to easily guide you through each step, thereby making the whole process less stressful for you. We invite you to contact our office should you be purchasing a property, whether it be at auction or private treaty.
Good luck and happy bidding.