THE IN'S AND OUT'S OF BUYING A HOME AT AUCTION
Buying at auction is a relatively simple process, with many advantages for the buyer as well as the seller. However, it's not simply a matter of turning up on the day and catching the auctioneer's eye. You do need to do your homework so that you know your rights and obligations, and so that you feel comfortable bidding on the day.
The following is a list of things you'll need to do before you raise yout hand at auction day:
Register Your Interest
You must let the real estate agent know if you are interested in buying the property. That way if another buyer makes an offer before the auction, the agent will be able to contact you.
This is very important. Buying at auction is unconditional - there is no "subject to finance" clause. So you must be sure you are able to fully finance the home if you are the successful bidder. Most lenders will pre-approve your bid, up to a certain price. If you are the successful bidder you will also need to pay a deposit (usually 10% of the sale price) on the day of the auction.
Read the Contract
The "Particulars and Conditions of Sale" is the contract signed by the seller and the successful bidder. It contains a legal description of the property, a list of chattels, terms of settlement and the possesion date. Obtain a copy before the auction and get your lawyer to check it for you.
Make any Changes
If the terms of contract don't suit you, you may be able to change them. For example, you may be able to extend the possession date or pay a lesser deposit. You must let the real estate agent know before the auction, and obtain the seller's agreement in writing.
Carry out the Checks
The onus is on you, the buyer, to ensure that all checks have been carried out before the auction day. This includes LIM reports, builder's and engineer's inspection, valuation etc.
Know the Value
If you have been studying the market, you may have a good idea of what the property is worth. If you need help , your real estate agent can refer you to similar homes, which have sold recently, that are a good comparison. Otherwise you could arrange a valuation.
Know the Process
Talk to the real estate agent about exactly what will happen on the day. You may like to attend a few other auctions before bidding yourself. to familiarise yourself with the process.
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