Deposit saved, house found, it’s hammer time! For many people, buying a house at auction is an intimidating and nerve-wracking experience, but it doesn’t have to be. We’ve put together some helpful tips to make sure you’re ready and prepared for auction day.
Do your research
A few weekends before the big day, head out to other auctions to get a feel for how it works and what to expect. This way you can decide on a suitable bidding strategy and you won’t feel overwhelmed when your turn comes. It’s also helpful to research the sale prices of recently sold properties in the area you’re interested in. This will help ensure you don’t pay too much for what you want. Plus you’ll also know when you’re onto a bargain!
Get your finances in order
When buying at auction, the contract is not subject to finance, which means you need to be certain you will have the money and approval from a financial institution to bid for the home. This is where pre-approval comes in play; having pre-approval gives you confidence that you’ll be able to buy the property if the hammer falls in your favour.
Know your limit
Depending on how much you have saved and your research of the area, you should decide on how much you are willing and able to pay for the home. Remember, if you’re the highest bidder at the end of the auction and the reserve price has been met, there is no turning back – the property is yours. If you over commit and realise you can’t actually afford the home, you could potentially lose your deposit and be sued for the difference in sale price if it sells for less. With emotions running high it’s easy to get caught up in the excitement of the auction - so no matter how much you love the home, think with your head and not your heart.
Ask for the details
A week before auction day, ask the agent for a copy of the contract and legal documents. These items tell you everything you need to know about the property. Send the documents to your solicitor or conveyancer to check for any anomalies. Make sure to also ask the real estate agent what the preferred payment method and minimum deposit is so that you can make sure you’re ready to pay on the day.
If the minimum deposit and settlement date don’t suit your needs, for example you prefer a 60 day settlement instead of 30 days; make sure you get written consent from the real estate agent before the day of the auction. If the owners don’t agree to your variations and you aren’t able to meet their requirements, then you might not be able to bid for the property.
Make an early offer
If you’d prefer not to bid at the auction all together, you can always make an early offer, keeping in mind auction conditions still apply. Make sure you’ve done adequate research of the market and the property before doing this. By not being able to hear other bidder’s prices, it’s hard to know if you’ve offered too much or too little.
At the end of the day, you can never be too prepared when it comes to buying your biggest asset. Speak to your friends and family who have bought through auction before for any additional tips and tricks and also make sure to ask any questions you may have about the process to your Home Loan Adviser, real estate agent and conveyancer.
This article is for information only and is not intended to constitute financial advice. Any views expressed are the views of People’s Choice Credit Union solely. This information must not be relied on as a substitute for financial planning, legal, tax or other professional advice.