Buying a house at auction can be an overwhelming process but at the same time very exciting. However, before you turn up on auction day, there are some things you need to do beforehand. Our guide below will ensure that you make an informed choice and will help make the process run more smoothly.
- Get your finances in order
Before you even start looking at properties, you need to get your finances in order. Typically, when you successfully purchase a property at auction you are required to pay a deposit on the day. This is usually 10% of the selling price (confirm this though before you make your bids).
Therefore, you need to have access to this amount of money before you start bidding. Speak to your bank to discuss options and what you need do to be able to pay the deposit.
- Conduct necessary inspections
No major purchase should ever be made without doing the proper research, and this includes purchasing a house. While the property may sound good on paper, accompanied by staged photographs, you need to see it for yourself to be sure.
Inspect the property at least once to get a better sense of the space and area. If you’re still interested in the property, you then need to organise an official building inspection. A professional inspector will closely look at the house, assessing its condition and noting any potential concerns, existing problems and any other important information.
Use the building inspector’s report to help you decide if you are still interested in the property. For instance, it may reveal that extensive repairs are required, which will need to be considered in relation to your budget and available finances.
If for whatever reason it is not possible to have an inspection completed prior to the auction, ensure that if you do make a successful bid that there is a clause in the contract that the sale is subject to a building and pest inspection. This can save you from purchasing a property that could be a potential nightmare.
- Give yourself a strict price limit
As you get closer to auction day, it’s important to set a strict price limit for yourself. In the heat of the moment, it can be very easy to bid more than you have or are willing to pay for a property.
Remember, that when you buy a property at auction there is no cooling-off period, and you need to pay the deposit on the day. You may like to have a friend or family member with you to support you and remind you not to bid more than you can afford.
- Research market and attend other auctions
Prepare yourself for the auction by researching the property market in the area where you are considering buying. This will help give you an idea of the price the property is likely to go for.
Additionally, attend any auctions in the area as well. You can then see how the auction process works, particularly in that area. For instance, there may be lots of people but few bids, or the bidding may go up quickly.
- Look over the due diligence checklist
On the day of the auction or in the lead-up, the sellers or real estate agent will have a due diligence checklist available. This checklist will list any important issues that buyers need to be aware of, like whether the property is at risk of flood or fire, or if there is currently an insurance period for any recent work done to the property.
Make sure you read over this checklist carefully. There may be an item listed that changes your mind about whether you want to purchase the property.
- Consider putting in a pre-auction offer
Some sellers are open to pre-auction offers. This can be a way to avoid the stress of an auction. You can also negotiate a price — you will have more leverage to do so if you cite information from the building inspection report. You also have to check that the building inspection report is prepared by an experienced & reputed building or home inspector.
If the seller accepts your pre-auction offer, it will go forward like any other private sale, rather than an auction.
Final thoughts
Buying a property at auction can seem intimidating but you can use this guide to help you feel prepared. Remember that it’s all about assessing if the property is suitable before the auction and make sure that you can afford it.
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