How To Prepare For A Property Auction 101
Most people go into property auctions hoping for a once in a lifetime bargain. Given the high level of competition for premium homes in Sydney, often the opposite is the case. So it pays to properly prepare for a property auction.
Property auctions are carried out under a set of strict rules that you will have to understand beforehand, among other things.
Here are some critical elements that you must be aware of before you start bidding.
Doing your “home” work
Some bidders fall prey to winning a property and ending up not liking it at all. Therefore, do your research to better prepare for a property auction.
One important thing to do is to inspect not just the home but also the surrounding area before the actual auction. Also, make sure to learn more about the neighborhood: visit at different times of the day and night and check the noise levels and traffic volume. You could even talk to some of your potential neighbours.
This is a big purchase and you want to make sure that your money will be spent buying something that you really want.
There is a registration to bid
Property auctions require prospective buyers to register before they can enter. The most basic requirement is a government-issued proof of identification. Most common identification methods are a driver’s license or passport. Keep in mind that auctioneers have different requirements, so it will be wise to call ahead before the date of the event.
The whole registration process helps the auctioneers in weeding out the serious buyers from those who aren’t.
Get your finances ready
Make sure you have all your finances in proper order before joining any property auction.
At best, you miss out during the auction because you had to be too cautious with your maximum bid. At worst, you end up bidding too high only to find out that you are unable to pay.
This means that if you are acquiring mortgage finance, it should be unconditionally approved and not just pre-approved.
Proxy bidding is allowed
If you are unable to attend the auction, then having someone else bid for you is allowed. You will need someone who is over the age of 18 and is willing to undergo the registration process. A lot of people do this especially if their schedules cannot permit them to be physically present.
It’s also helpful to have someone not emotionally invested in the property to bid on your behalf. This way, you avoid overbidding on a property just because your emotions got the best of you.
Changing your mind is expensive
One drawback of bidding at a property auction is that once the hammer falls, changing your mind can be a costly affair. Once the reserve price has been agreed upon and your price has been declared as the highest bidder, you are technically the new owner of the house. Keep this in mind as you have to be absolutely certain about a property that you want to purchase.
Unlike real estate agents who will need your signature in order to officially crown you as a new owner. These auctions have a much faster transfer rate of properties from the seller to the buyer. Having second thoughts and completely pulling out is going to entail a lot of paperwork and cost a lot of money.
What you can do is to make sure to obtain a professional building report. Unless you are a professional builder, you will need a professional builder to check for potential issues within a home so you do not bid blindly at an auction.
Highest bidder does not always get the property
Contrary to common belief, a property at auction does not have to be sold. If the seller’s reserve price is not met, then the property won’t be sold. What this means is that the vendor may not be willing to part with the property because he has a minimum sale price set.
So what happens if no one meets the reserve price? Then the highest bidder of the property gets to negotiate first. If the two parties do not agree on a price, then that is where the other bidders can come back.
The selling agent can then try negotiating a price to the other bidders or get another set of potential buyers.
If you are really keen on being strategic when it comes to property auctions, try getting as close to the reserve price without going over. This way you can have negotiation rights when the selling agent contacts you.
Contract exchanges are extremely fast
Once the auction has ended and you are the winner of a property, then the sale contract becomes legally binding immediately. You, therefore, must have thoroughly reviewed the contract prior to the auction to avoid any nasty surprises.
Ideally, you will want your lawyer to review the contract and advise you against any red flags and generally protect your interests. If you are unhappy with any of the items in the contract, make revisions before the auction. Why? Because you can no longer make revisions after the auction. Keep this in mind especially when dealing with payment methods and timing.
Property auctions can have a lot of benefits if you are ready for them. And the more you prepare for a property auction, the better the outcome.
Keep these handy tips in mind before picking up a pad and bidding. Prepare for a property auction diligently and you are much more likely to reap the benefits.
If you are thinking of purchasing a property in Sydney’s eastern suburbs, feel free to give me a call. Not only can I help you prepare for a property auction, but I can also bid and negotiate on your behalf.