Buying a property at auction can be a stressful event, even if you have done it once or twice before. It is the fact that there are other people there to compete in price for a property that you have already decided you would like to buy.
That is one of the reasons why people take properties to auction – to create that emotion and build that feeling in the buyers that they may miss out; moreover it is in our nature that once we have decided we want something, we’re very likely to go after it.
This is why it is so important, as an investor, to be well prepared beforehand.
Here are some tips for being prepared when preparing to buy at auction:
- Get your mindset right – this is an investment, not your home
- Do your research and calculations and come up with your absolute maximum buying price – one you will not go beyond, hopefully a lot less.
- Get finance approval.
- Inspect the property
- Do the respective searches – title search and any other that needs doing.
- Do a building and pest inspection
- Get an independent valuation which includes probable rent for the property
- Find out how much deposit is needed and how you need to pay
- Get a copy of the contract and check the terms and seek legal advice to ensure you understand all the ramifications of buying under the hammer at auction.
On Auction Day
- Check to see if there have been any changes to terms and conditions or to the contract and ask any questions you may have. It is not a bad idea to actually ring the agent about this earlier in the day so that if you want to check anything with anybody else, such as a solicitor, you can before the auction. But confirm no changes when you get to the auction.
- Register as a bidder before the start of the auction and receive a paddle.
- If the property does not sell under the hammer, the highest bidder has the first right of negotiation with the seller.
- If you purchase under the hammer at auction and do not, or cannot go ahead for some reason, there are legal ramifications to this which could possibly be: paying the auction price, pay for the cost of a re-auction and possibly any shortfall in the price of the original auction to the second auction sale price.
- If you buy at auction, you do not have the 5 day cooling-off period protection.
- If the property does not sell at auction and you negotiate a deal afterwards, then you do have the 5 day cooling-off period protection.
This is why it is important to check with your legal person about the relevant points of an auction.
There can be great rewards buying at auction, but also a buyer needs to be very resolved to sticking to their buying price, and having done all their checks to protect their interest in the property.