Finding your dream home can be an incredibly exciting time. But saving enough for the deposit on a home loan and securing the property at sale are two entirely different concepts, particularly if you’re navigating the murky waters of auctions. Many buyers relish the competition and sense of intrigue that buying at auction lends – but for those less experienced with purchasing in this way, it can seem intimidating.
With auctions becoming an increasingly popular way of buying a home, it’s worth fine tuning your knowledge around the process. In 2014, there were 100,000 auctions across Australia’s capital cities – and in Sydney alone, 30.2 per cent of all sales went under the hammer, according to CoreLogic researcher Robert Larocca. Also Sydney has just recorded a record auction clearance rate of 88.3 per cent.
If you are unfamiliar with the ins and outs of proceeding at auction, keep this guide in mind.
What to do before the auction
Preparation is key in any aspect of the sales process, and this is equally the case with buying at auction. If you have never taken part in one before, it might be a good idea to attend a couple before you proceed. Taking the time to observe how they work can give you a clearer idea of what to expect.
Be aware that before the auction has even begun, the vendor would have decided on a reserve price – but you won’t have any idea of the figure. You might also want to ask your real estate agent about prices for similar properties in the surrounding area and explore the neighbourhood.
It’s also worth getting a copy of the sales contract prior to the day. Above all, you want to have the legal framework sorted before sign on the dotted line. The sales contract outlines the conditions you are buying under, so have your solicitor look through the document thoroughly. Police Bank has preferred conveyancing professionals who can assist with your legal requirements. This is also a perfect opportunity to get a pest and building inspection done. You can ask questions and take another look through at any point, but ensure you are aware of any faults and repairs that need doing well in advance.
What to do on the day
Under New South Wales law, you have to register to participate. Once you’ve documented your details, you will get a bidders number that identifies you when you place a bid. This can be done on the day or any time prior to the auction, but you will need to bring identification that shows your name and address, like your drivers license or passport, so have these ready to go.
This is where the excitement begins. Bidding continues until the reserve price is met – after this point, the individual who proposes the highest price will win. This is where it pays to be prepared. You’ll need to sign the sales contract and produce the deposit immediately and, unlike a private sale, there is no cooling off period. The property is not yours until this has been done – and you can face serious consequences if you don’t see this through to the very end.
It’s important to have your finances in order when this time comes, so speak to our team of home loan lending professionals at Police Bank prior to going to auction.