There’s no escaping it, buying a house at auction can be stressful. It’s something that most people have zero experience in. Auctions are a method of selling often sensationalised by the media. We’ve all seen news reports where reserve prices have been smashed by tens of thousands of dollars and in some cases even hundreds of thousands.
What you don’t see publicised in the media are the hundreds of homes that fail to attract bids every weekend. A prepared buyer, and one without any competition, can give themselves a massive advantage when buying a house at auction.
Tips for buying a house at auction in NSW
Over the years I’ve met thousands of buyers’. I’ve also taken many of my clients properties to sale using the auction method. Below are answers to commonly asked questions about the auction process. So follow this checklist and you will go in feeling prepared and confident on auction day!
I talk to many buyers about buying a home at auction. In almost every instance they are close to petrified about the process. Mention that you’re buying a house at auction and many well meaning family and friends will start sharing their horror stories. It seems that plenty of us have heard of a nightmare auction story. It’s no wonder that the thought of buying at auction is nerve-racking.
SOLD at Auction 5 Neale Street Long Jetty NSW 2261
For everything about buying a house at auction including:
- what’s it worth?
- your legal obligations
- pest and building inspections, and
- acceptable methods of deposit
House Auctions in NSW
When you buy a property at auction in New South Wales Australia the sale is legally binding on the fall of the hammer? That means that you can’t change your mind. And there is no re-course if you go in unprepared.
Did you know?
If you’re the highest bidder on the fall of the hammer then you are locked in and are legally bound to proceed. There is no cooling off period. If you don’t proceed you will lose your 10% deposit. The vendor can then sue you if the property later sells for less.
House Auction Tips
When buying a house at auction you will give yourself every chance by going into the auction prepared. Auctions are stressful. If you’re adequately prepared you’ll lower your stress levels. Follow these tips for buying a house at auction and you won’t get buyers remorse. Or worse yet, find yourself legally committed to a property that you can’t get finance for.
See a Solicitor or Conveyancer
As a potential buyer you should have a solicitor or conveyancer look over the contract. Make sure to request any changes to terms and conditions before the auction. Examples to contract changes include things like; negotiating a 5% deposit instead of a 10% deposit. Other alterations to the contract can include changes to the settlement period or the settlement date along with early access prior to settlement. Often these changes can take some time to be agreed upon so it’s important not to leave the discussions until the last minute. The agent and solicitor will need time to speak to the buyer and seller and sometimes theses negotiations can take several days to be agreed to. You don’t want to add to your stress levels by not having all the answers prior to the auction.
Obtain Your Finance
- Ensure that you have finance in place. Upon the fall of the hammer you will be required to sign the contract and pay your 10% deposit. (Unless a 5% deposit has been arranged prior to the auction).
It isn’t enough to have your deposit available. You will also need to be sure that you are able to complete the purchase at settlement. Your solicitor or conveyancer, as well as your bank or finance broker will discuss your financial position with you. They will make sure that you don’t have trouble coming up with the rest of the purchase price.
Important: Being able to put down 10% when buying a house at auction doesn’t guarantee that the bank will provide the funds at settlement. Don’t put yourself in a sticky situation where you are legally committed to proceed but then can’t get finance.
Get a Pest and Building Inspection
- Engage a qualified pest and building inspector. They will conduct an inspection of the property. This will ensure that the property is structurally sound and termite free. If you’re buying a knockdown at auction you may still want to get a pest inspection to note whether there are any termites on the block. You should probably also think about getting a quote for the removal of the existing home. Most of the homes in Bateau Bay NSW 2261 built before 1990 will contain asbestos. There are also many built after 1990 that will have some asbestos so keep the removal costs in mind and factor those costs into any bid that you may make.
- In NSW it isn’t compulsory for a seller (the vendor) to provide a pest and building report. It’s the sellers choice if they choose to do so. Although some home sellers will provide it, many that I speak with expect that the buyer should do it. Read my thoughts on this here…………
“Karen we went to an auction on Saturday and we can’t thank you enough. We followed your bidding strategy and we won! It went exactly as you said it would.
After missing out on a few properties we were almost ready to give up.
We are so excited! Thank you for all of your help.
It’s nice to meet an agent without an agenda. Tim & Amy.”
Buyer Tim Ditton
Real Estate Values
Opinions of home property values can differ significantly. As a result asking a buyer, seller, agent or valuer the value of a property and you will usually get vastly different answers.
Research the Market
You should do some research on sold prices of similar homes in the area. You don’t want to pay too much for any home. This is especially important if you end up not staying there as long as you plan. Life throws us curve balls at times. If you overpay for a property in a strong market and end up selling a few short years later, and in a much cooler market, you will find it pretty much impossible to get your money back. Especially when factoring in other home buying and home selling costs like, stamp duty or agents fees and solicitor costs.
To research sold prices in Bateau Bay visit realestate.com.au and domain.com.au Check the sold tab on the site and type in the suburb that you are interested in buying in. This will bring up a list of recent sales, the number of bedrooms, bathrooms and parking, internal pics, land size and often a floor plan and video tour.
One of the very best ways to research an area is by attending open homes. Doing so will let you see in real life what the home has to offer. I often meet buyers at open homes who have just started looking and who tell me that they don’t know what anything is worth. Within a few weeks, they know what represents good value. They also know what is overpriced and what sold for a bargain. So get online, make your shortlist for this weekend’s open homes and go out and see what you can find.
Be wary of on-line valuation sites.
A desktop valuation through on-line valuation sites can be very ‘hit and miss’. Be careful when trying to estimate the value of a home that you wish to buy.
On-line Valuation Services
Out of curiosity I’ve used these services over the years to price my own home and also my clients properties. I’ve seen differences of several hundred thousand dollars at times. This was particularly interesting when one of these services priced my own home at around 200,000 above what I know it to be worth.
More Tips for Preparing for Auction
Visit Local Agents – discuss the auction process with agents who are experienced in running auction campaigns. An experienced agent should be able to run you through methods of deposit, and a bidding strategy as well answering any other questions you have about buying a house at auction.
It is important to note that there are few auction agents in the area. A little known fact that a lot of agents wouldn’t want you to know is that they are not experienced in selling properties at auction. Many agents working in the 2261 postcode don’t have firsthand experience running auctions themselves. So if you are dealing with an agent that isn’t giving you the advice you seek bear in mind that it could be a case that they just don’t know the answers themselves, not that they are trying to be secretive.
Read Auction Articles – search the internet. Just be sure that the information you are reading relates to the laws and legislation in your home state.
Attend other auctions prior – this isn’t essential but it’s good to have seen one or two prior to going there and bidding yourself. At least this way you will have a better understanding of how the auction may unfold.
Buying a house at auction doesn’t have to be overwhelming. By following these auction tips, doing your homework and reading some auction articles you will arrive at the auction prepared and ready to go!
Your Checklist for Buying a House at Auction
- Have the contract of sale checked by a solicitor or conveyancer – with terms and conditions agreed to ✔
- Finance approved – bank or broker has arranged finance-not just a pre approval ✔
- Deposit – 10% available for auction day OR agreement received for a 5% deposit ✔
- Get a pest and building inspection done ✔
- Research the market by attending local open homes (if available) and researching sold properties ✔
- Visit local agents, find one or two that you trust and feel comfortable with – this may or may not be the listing agent of the property that you are wanting to buy ✔
- Attend the auction prepared and ready to go with deposit and appropriate ID ✔
If you follow these tips you will reduce the stress experienced by a lot of bidders trying to buy a house at auction. Good luck!