Buying a house at auction
Participating in an auction can be a foreign experience for most and it’s likely you won’t know about the whole process.
We’ve listed several auction tips for buyers to give you a helping hand with your preparations and hopefully come out satisfied on bidding day.
What’s the difference between house auctions and private treaty sales?
‘Private treaty sales’ is the correct term for the usual process of buying. The property is listed for sale with a real estate agent and the prospective buyer(s) make an offer to the agent who passes it to the owner who may then accept or decline the offer. Auctions, on the other hand, gather all the interested buyers together so that they can bid against each other.
If you have your offer accepted for a private sale, you’ll likely sign a contract with the property owner before putting down a partial deposit.
The most important difference between the two is that you’ll have the opportunity to change your mind with a private treaty sale even after signing the contracts. This ‘cooling off period’ will let you change your mind but you might find that you end up losing a portion of your deposit or, all of it.
Our top auction tips for buyers:
1) Be prepared when buying a property at auction
Doing your homework before attending your first auction should really help you on the day you plan to make your own bid. So, sit in on as many local auctions as possible to learn what to expect in terms of prices, process and people.
2) Always inspect a property before you bid
A picture really can paint a thousand words, but they can also be quite deceiving. Don’t entirely rely on a seller’s word or photographs as evidence of a safe and proper home. Visit and inspect the property to make your own judgement on whether the presentation meets your standards.
It’s also vital you question whether pest and building inspections have been carried out prior to the auction. Remember, there’s no going back once the hammer comes down in your favour.
3) Don't forget to gain mortgage pre-approval
It’s probably wise to have received written mortgage pre-approval before the day of the auction. As mentioned above, once your bid at auction has been accepted, you are committed to buying the property. So, search the market for a favourable home loan product and then contact the lender ahead of time. Additionally, you’ll probably need a 10% deposit too^.
4) Set a budget you can stick to
Auctions can be exciting but sticking to your budget is extremely important. Remaining calm and not letting yourself get carried away in a bidding war is key.
Do you have a financial buffer in place to help pay your mortgage in the case of illness, injury, death, or involuntary unemployment? At ALI, our Loan Protection Plan is designed to help you handle your mortgage repayments when you’re unable to work.
Speak with any one of our local ALI-authorised mortgage brokers today for more information, or alternatively, if you’re ready, request your loan protection quote here.
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