THE GUIDE TO BUYING A HOME
Step 10 – Buying at Auction
An auction is when prospective buyers come together and bid on a property, with the highest bidder being successful, subject to the bid exceeding the seller’s reserve price (the lowest price at which a vendor is prepared to sell a property). Auctions can be very emotional, and it is important not to get swept away by the exciting atmosphere and offer more than you can afford.
Before the auction
| 1. |
Speak to your mortgage provider to get a clear indication of your maximum limit |
| 2. |
Get your conveyancer/solicitor to have a look at the contract you will sign if you are successful |
| 3. |
Ask the real estate agent what form of deposit you need on the day and how much is required |
| 4. |
Do your building and pest inspections on the property |
| 5. |
Understand the terms and conditions of the auction |
Auction registration
Auction regulations vary from state to state, but generally you will be required to register with the agent selling the property and obtain a bidder’s number. You will also need to show some form of identification (eg; driver’s license). When the auction begins, you must display your bidder number each time you make a bid.
How the auction starts
The auction will begin at the allocated time with the auctioneer welcoming people, and announcing that he or she will start the auction. Some details about the property will be read out such as the address and some of the key features of the property. The auctioneer will then ask for an opening bid. The vendor may make an opening bid to get the ball rolling.
How to bid at auction
Once the auction is in progress you can make a bid at any time, either verbally or non-verbally, by raising your hand or nodding your head or displaying your bidder number.
The auctioneer normally informs people of the increments that you can bid on. At the beginning, it’s not unusual for bidding to be made in $10,000, or sometimes $20,000 increments. When you feel like slowing the increments down, you can offer an increase of $5,000 or less (e.g. $1,000). However, the auctioneer can ask that bids be kept to a minimum increment. However, when bidding stalls, they will generally accept smaller increments.
What happens when bidding stalls?
When bidding stalls, the auctioneer will consult the vendor to ask if the reserve price has been reached.
If the reserve has been met, the auctioneer will announce it is ‘on the market’ and bidding continues until it stalls. The auctioneer will then solicit final bids, repeating the highest bid. If there are no further bids he or she will say “Going once, going twice, going three times, sold!” and bring down his or her hammer on the word “sold”. The property is then sold to the highest bidder.
When the reserve is not met, the crowd has one last opportunity to bid. If bidding stalls and there are no more bids then the house is considered to be passed in (not sold). If the house is passed in, the highest bidder usually has first opportunity to negotiate with the seller and the agent.
What happens if your bid is successful?
As the successful bidder, you will be required to sign the contract and pay a deposit on the spot, usually 10% of the purchase price (however, you can negotiate with the seller to put down a smaller deposit prior to the auction).
Auctions automatically waive any cooling-off period. So be aware that once you sign the contract, if you do not continue with the purchase, you will lose your deposit. You may also be liable to the vendor for any costs they may incur as a result of you breaching this contract.
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