Auctions are stressful situations especially when you have your heart set on a property. Make sure you’re as prepared as possible come auction day by taking these five steps
For several years now auctions have been a very popular way to sell houses, and in many urban areas such as Auckland it has been the preferred option for the majority of vendors. Auctions are typically a stressful experience for buyers who may find they have spent a lot of time preparing themselves to buy a property, only to lose out on the bidding process.
The key thing about auctions is that they are transparent — you know how many people are interested in the property and what they are willing to pay for it. There are a number of considerations and processes that you need to be aware of before you decide to bid at an auction.
If you are interested in a property that is going to auction you will need to be fully prepared beforehand. Auctions are unconditional sales – that is, if you are the winning bidder you will have to immediately sign the sale and purchase agreement and pay the deposit (usually 10% of the purchase price).
This means that you need to have done all your homework on the property and have finance in place before you attend the auction. To help you get started we’ve rounded up the main steps you will need to take before auction day.
1. Thoroughly research the market
Check out comparable properties in the surrounding area, what they have sold for, and the amount of similar housing stock available. You need to establish a ballpark value for the property and what you are prepared to pay for it.
2. Carefully inspect the property
Get a building report if you are serious about bidding, make sure the LIM report is ticked off and do a property search. If you are considering making major changes to the property now is the time to involve your builder or architect to see if what you have in mind is feasible.
3. Contact your bank manager
You will need to have a loan approved by the bank and sufficient funds available to pay the deposit at the auction if you are successful.
4. Engage a lawyer
Your lawyer will help with checking all the red tape involved in property searches, signing off paperwork with agents and completing the property transaction and transfer of title. Many will charge a flat fee for the basic process.
5. Register your interest with the agent
Before you bid at an auction you need to let the agent know you are interested in the property. They will have forms that your lawyer needs to check before you sign them. The agent will supply you with important information such as the amount of the deposit, terms and conditions of sale and material such as LIM reports for your lawyer to check.
If you want any changes to the terms and conditions of the sale now is the time to request these, eg, you may want a longer settlement date. The agent will put together a request for a “variation” and present it to the vendor, who can then formally accept or decline your request.
It is important that you register with the agent promptly as the agent then must inform you if a pre-auction offer is made on the property. This often results in the auction date being brought forward and is sometimes used as a strategy by a buyer to discourage other buyers who may not have had enough time to get their finances in place. If the vendor does not accept the offer and fast forwards the auction date, the pre-auction offer will be the opening bid at the auction.
You may choose to make a pre-auction offer yourself, and your lawyer can facilitate this with the agent for you.
Photography by: Helen Bankers, Georgeclerk/Getty Images, Wendy Fenwick, Helen Bankers, David Straight.