Buying at Auction

So, you’ve found your dream home or that ideal investment and it is going to auction, don’t believe the negative publicity, buying “under the hammer” can be really simple… Here’s some simple tips to help you through the process

Let us know you’re interested…

By letting the agent know you are interested, we can keep you informed of any changes that may occur along the way, or if there is an opportunity to purchase the property before auction

Inspect the property as often as you can

From a buyer’s point of view, open houses and inspections by appointment are the best time to make enquiries, get a copy of the contract of sale, take a good look around the house and clarify small particulars (such as is the dishwasher included in the sale, and in the case of a rental property, do fittings such as curtains belong to the tenant or the landlord?)

Consider a building inspection

It is also the time when building and pest inspections should be conducted. A reminder though, inspections can only be held at the permission of the current owners and are done so at the buyer’s own cost. Although inspections are an additional cost, the real estate institute of queensland (REIQ) recommends buyers seriously consider obtaining inspection reports, as properties sold under the hammer are unconditional.

Set a budget and stick to it

It is important that you know your highest price range before the auction starts and not to get carried away in the moment. The maximum price you set should be the price that you would not regret, even if you were to lose the property for just $1,000, for example. This is your “walk away” price.

Arrange finance

Make sure that your financing is in order and that you are comfortable that your maximum purchase price is in line with the market. The auction sale is unconditional and you will be contractually obligated to come up with the full purchase price even if your lender withdraws financing or comes in with a valuation lower than the auction sale price.

This may sound basic, but have a personal cheque book ready if you intend to bid. If you win an auction, you will be expected to pay the deposit (usually 10% of sales price) immediately.

If you want to buy, register

In queensland legislation requires that all people bidding at an auction must provide their names, addresses and proof of identity to the auctioneer prior to the auction in order for their bids to be accepted. You can register at any time prior to the auction. This can be at an open for inspection, or when visiting the listing agency prior to the auction. Registering early will save you the trouble of registering on auction day.

On the day

You will need to provide the auctioneer with your name and address and some photo identification– e.g. drivers licence or passport. The auctioneer will record these details in a bidders register and provide you with a bidder number. This number must be displayed by you when making a bid during the course of the auction.

The auction will begin with the auctioneer reading the details of the property contained in the contract of sale and will also read the conditions of sale by auction.

In queensland, auctioneers are allowed to accept ‘vendor’ bids up to the reserve price. Vendor bids must be announced in the conditions of sale at the beginning of the auction. It is illegal for auctioneers to partake in dummy bidding or take false bids once the property is on the market. Any bid where there is no genuine bidder is a false bid. The auctioneer reserves the right to bid on behalf of, or accept, bids from the owners of the property.

The auctioneer then will call for bids.

A good tip is to stand where you have a good view of other bidders and the auctioneer. Ideally you should hold up your bidder number and call out your bid in a clear audible voice. You can call out an exact amount – e.g. $260,000 or indicate the amount you wish to increase the previous bid by the increment suggested by the auctioneer – e.g. “another $10,000”.

If you are there to buy … bid.

Many buyers sit back and wait but more often than not, it is the bidder that bids with confidence and without hesitation that walks away with the keys to their new home. Only one person can be the highest bidder… If you want to be the new owner, the highest bidder needs to be you.

The reserve

Before the auction, the seller sets a ‘reserve’ – this is the lowest price they will accept. If the reserve is not met you may be approached by an agent and asked to increase your bid. You are not bidding against yourself, you are simply not a level that the seller will accept and are being given the opportunity to increase your bid and buy.

If bidding does not reach the reserve the seller can choose to reduce their reserve and sell, or pass the property in. Whilst this is not a right of law, in most cases the highest bidder will have the first opportunity to negotiate with the seller at the reserve price.

“When bidding at an auction, remember that if you are the successful bidder you are required to sign the contract of sale and pay a deposit on the spot. There is no cooling off period when you buy at auction. “indeed, there is a reason why many auctioneers often call out “we’re playing for keeps” when bidding for the property has passed the reserve price. Once the hammer falls, and you are the successful bidder, the property is yours.”

You won, what happens next…

To make signing easier, you should bring to the auction your deposit or cheque book; the name, firm, address, email and phone number of your solicitor; and details of any changes to the contract that have been agreed upon. From here your solicitor will attend to all the final searches and will liaise with you to make sure your finance is all arranged. They will also take you through the process of finalising the sale, paying stamp duty etc.

Don’t be afraid of auctions, they are not as daunting as they may seem but if you have any more questions we’d love to help, call us on (07) 4125 1088 or email admin@mrhb.com.au

Good luck and we look forward to seeing you on auction day.

References: reiq (real estate institute of queensland)