Buying Property at Auction: Key Steps
Buying a property can feel intimidating, especially at an auction. At auction, you compete with other buyers and there is no cooling-off period.
Many sellers choose auctions, particularly in a rising market. As a buyer, you need to understand the process so you can bid with confidence on auction day.
You should complete several important steps before the auction to protect your interests and fully understand the property you plan to buy. The information below is general only. You should obtain legal advice tailored to your situation.
Contract Review
Take the contract of sale to your lawyer well before the auction date. This step is essential.
Your lawyer reviews the contract and explains the terms in plain language. They also help protect your interests by identifying clauses that may need changes. These may include a longer settlement period, a lower deposit, or extra conditions.
If you win at auction, you can sign a reviewed contract with confidence.
Inspect the Property
Arrange pest and building inspections before the auction. If the property is in a strata complex, obtain a strata report as well.
Inspect the property thoroughly before auction day. Check that fixtures and fittings work properly. Test gas, water, and electricity where possible.
If you buy at auction, you purchase the property “as is”.
Research
Research the suburb and surrounding areas before auction day. Compare recent sales and market trends.
This research helps you set a realistic price range. It also allows you to bid with confidence.
Finance
Organise your finance early. If you borrow money, confirm your borrowing capacity with your lender.
Make sure you meet the lender’s conditions for unconditional approval. Ensure you can settle within the timeframe in the contract.
Deposit
If you win the auction, you must pay a deposit immediately after signing the contract. This is usually 10% of the purchase price.
You can pay by EFT, cheque, or deposit bond.
Register to Bid
You must register with the selling agent to bid at auction. The agent will give you a bidder’s number.
You can register before the auction or on the day. Many buyers register during property inspections.
To register, you must show identification from a government or financial institution. Acceptable documents include:
- Driver’s licence or learner’s permit
- Vehicle registration paper
- Council rates notice
If you do not have one document, you can use two documents that together confirm your name and address.
Reserve Price
The seller sets a reserve price before the auction. The reserve price is usually not disclosed to buyers.
If bidding reaches the reserve price, the property sells to the highest bidder when the hammer falls.
Bidding
Prepare a clear bidding strategy before the auction. Set your maximum price and stick to it.
If you feel unsure about bidding, you can appoint someone to bid for you. You must provide written authority to the agent for this arrangement.
Successful Bidder
If you are the highest bidder, the agent will ask you to complete several steps immediately after the auction:
- Provide your lawyer’s contact details
- Sign the contract of sale
- Pay the deposit
You enter into a legally binding contract with no cooling-off period.
The agent then sends the signed contract to your lawyer. Your lawyer will contact you to explain the next steps.
Conclusion
Our property and conveyancing lawyers can make the auction process much smoother. You reduce risk by understanding each step before auction day.
Buying a property at auction does not need to be overwhelming. With the right support, you can protect your interests and make informed decisions.
If you need advice or assistance, contact us on (03) 9422 5439 or email [email protected].