Buying a property at auction can be both a nerve-wracking and exciting experience. In this post, we share some tips on what to do if you are planning on purchasing via auction.
Buying property at auction
The auction process is a very popular method of selling a property in Melbourne. Recent auction results show that even the weather has done little to dampen the spirits of buyers at auctions across Melbourne.
An auction is advertised for a specific place, time and date. Prospective buyers bid and the property is offered to the highest bidder. There is an advertising campaign several weeks leading up to the auction date.
Before you bid
We recommend that before you bid at an Auction, you extensively research the market, attend auctions and monitor auction results.
If you find a property that you are interested in and intend bidding at the auction, we recommend you speak with our property team and forward a copy of the Vendors Statement and Contract of Sale to our property team to peruse prior to the auction day.
A copy of the Vendors Statement and Contract of Sale can be obtained from the selling agent. A member of our property team will provide you with legal advice on the property prior to the auction day.
Making an offer before auction
You can make an offer to purchase the property through the agent prior to an auction. However, offers are not usually considered by the vendor the week of the auction. Keep in mind, if you put in an offer three clear business days prior to an auction, the cooling-off period does not apply.
Bidding at an auction
Auctioneers can set the amount by which bids increase. You can bid at the amount stated by the auctioneer or offer an alternative amount. The auctioneer may choose to accept or reject your bid. We recommend that, prior to the auction, you have a clear bidding limit.
Don’t be afraid to ask the Auctioneer during the auction, who has made a bid.
Bid confidently! If you are feeling anxious or emotional about securing the property at auction, it may be wise to appoint a friend or relative to bid on your behalf.
The vendor is entitled to make a Vendor bid during the auction. There are no restrictions on the number of Vendor bids however, one or two vendor bids appear to be the usual practice.
The reserve price is the price at which the vendor is prepared to sell the property. The price may fluctuate over the course of an advertising campaign and is often set by the vendor on the day of the auction.
What if the property is passed in at auction?
Often properties are passed in at auction. This means that the bidding has not reached the vendor’s reserve price and the property is not sold. The highest bidder then gets the right to negotiate with the vendor. Often negotiations take place after a property has been passed in and the property is then sold.
What if I am the successful bidder?
If you are a successful bidder on the day of Auction, you will be required to sign a Contract of Sale and pay your 10% deposit to the agent by way of cheque or electronic funds transfer. Remember, that if you buy on auction day, you will not have a cooling-off period!
Most important auction tip to remember is - don’t scratch your ear on the day and make an accidental bid!