10 steps to buying at an auction
Buying a house at an auction is both an exciting and daunting time. Buying a house at an auction is different to other property purchases and we often get asked by our clients about the process of buying a property at an auction.
A key difference between buying a property at an auction and other property purchases through private treaty, is that if you are the highest bidder and the hammer falls, you will need to sign the contract and pay the deposit. This means that you must be ready to exchange contracts and complete the sale when bidding at an auction. This is important as if you are unable to complete the sale, you will lose your deposit and may be liable for damages suffered by the Vendor.
To assist with making the process of buying at an auction simpler, we have put together a list of 10 key steps to assist you to understand the process of buying a property at an auction.
- Finance Approval – The first step in buying at an auction is to obtain finance pre-approval. It is important to know how much you are able to borrow so that you know your borrowing capacity. This will assist you in setting a maximum purchase price to stick to when bidding. If you go over this when bidding, you may have to pay lenders mortgage insurance. This may affect your regular repayments.
- Start searching for your dream home.
- Obtain a valuation of the property.
- Review the contract with your solicitor. If you are the highest bidder you are usually bound to go through with the purchase, no matter how unfair the contract might be. This is why it is important to review the contract with a solicitor prior to bidding at an auction. Prior to the auction, your solicitor will be able to identify any terms in the contract that might not be in your favour and negotiate with the vendor’s solicitor to vary these terms.
- Obtain pre-purchase inspections i.e. pest, building and strata (if required).
- Register to bid at the auction. In order to bid an auction, you must register with the vendor’s agent.
- Bid at the auction.
- If you are successful, congratulations! You will now need to sign the contract for sale and pay your deposit. As there is no cooling off period, you will be bound by the terms of the contract.
- Advise your lender that you have been successful in your bid so that they can arrange to prepare loan documents for your purchase. You should sign these documents as soon as possible.
- Pre-Settlement – We will forward you a purchaser declaration to complete that will allow us to pay your stamp duty. We will prepare the settlement figures, calculate the available funds from your lender and provide you with the amount of additional funds (if any) are required from you to complete your purchase.
We hope these key 10 steps have been able to assist you to understand the process of buying at an auction.
If you have any questions, contact our office on 1300 444 529 and one of our solicitors will be able to assist you. Alternatively visit our website below to book an appointment: –