When you come across a home being sold by auction and you like it, you… like most will have questions about what you need to do to be able to purchase. A real estate auction is not only a great way to sell a home but also presents many opportunities to buy.
Auctions favour buyers before and on the day of the calling because in order to purchase the property you must be in a secure financial position and be able to offer a substantial deposit upon the fall of the hammer. This cuts out a lot of potential buyers and puts you in a great position to purchase the property.
Often buyers become apprehensive about the number of people attending a auction but the majority of people are there to watch the event take place. So the next time you are considering purchasing a property for auction know this, you are most likely one of the few in a position to bid on the property.
Below you will find some general Questions and Answers to buying a property at auction.
Q. What is a Real Estate Auction?
A. Auction is a form of marketing a property through intensive advertising mediums designed to capture the maximum attention of buyers within a set time frame. The process is a means of purchasing Real Estate through public negotiations to determine the true market value of the property.
Q. What’s the reserve price?
A. The reserve price is usually set on the day of the Auction by the Seller. The Real Estate Salesperson is unaware of the reserve. The only person who will know is the Auctioneer. The reserve is generally established by the intending Buyers feedback.
Q. How do we bid at Auction?
A. Simply attract the attention of the Auctioneer by:
- Putting up you hand.
- By calling out.
- By nodding your head when you catch the Auctioneer’s eye.
The Auctioneer normally nominates the amount of the bid he is looking for. If you are the successful bidder, you will be asked to pay the deposit and sign the contract.
Q. Can I buy before Auction?
A. Yes, in most cases you can. You simply submit your offer to the agent on a REIWA contract of sale and if the price and conditions is agreed to, the contract is then completed and the property sold before Auction. In fact, 50% or more Auctions are sold this way.
Q. I can’t buy at Auction because I have to get finance.
A. That’s OK. You can organise, through your Bank or Building Society, approval to bid up to a price that you are prepared to pay. This offer would be subject to the Bank’s valuation. This is simple to organise and only takes a couple of days.
Q. I want to buy it, but I have a house to sell.
A. There are two answers. If you are in a sound financial position you may organise a Bridging Loan. The other way is to buy on a longer settlement date, giving you time to sell and to settle your house.
Q. What price do I have to pay to buy the property?
A. This is the price YOU are prepared to pay. Other people will perceive different amounts. Generally, your price will be established by what property has sold for around the area and also the particular features that the home offers you.
Q. What if the house doesn’t sell?
A. If the reserve price is not reached, it is passed in to the highest bidder. The highest bidder then has the first right to purchase the property immediately after the Auction at the reserve price, otherwise the property will be offered for sale to all other interested parties.
Q. What contract do we sign and what are the standard conditions?
A. The contract is the standard REIWA contract. This contract is on display at the Auction. The usual conditions for purchase at Auction are:
- 5% of the purchase price paid as deposit: either by cash, bank cheque or personal cheque.
- Settlement date is 30 days from the signing of the contract.
If you have any more question about purchasing a property by auction or perhaps you bought or sold a property at auction and want to let others know about your experience, please let us know the details in the comments below.