Buying at auction can present great opportunities for homebuyers, but can also come with some inherent risks for those home buyers who are not prepared. One of the unique elements of buying at an auction “under the hammer” is that typically there is no finance clause associated with your offer. That means, if you need finance for your purchase and for whatever reason your finance is not approved, you are still committed to the purchase. This is in contrast to a traditional style of offer, which is made “subject to finance approval”. Follow our 10 Step ‘Buying at Auction’ Finance Checklist to ensure you are well prepared to secure your dream property and the further auction benefits below;
- The competition and negotiations are transparent on the day
- Every buyer is given a fair opportunity to bid for the property
- You can be confident you are dealing with sellers who want to sell
- If your bid is successful, at the fall of the hammer, the property if yours without further negotiations – you sign the contract of sale immediately on site.
STEP 1. Consult Your Finance Broker
Advise them that you are interested in purchasing a property under the auctioneer’s hammer.
STEP 2. Consult Your Accountant
Decide on the most appropriate entity to purchase your property. For example: company, SMSF, joint names or tenants in common.
STEP 3. Organise Finance Pre-Approval
Speak to your broker to and arrange pre-approval with your preferred lender to ensure your finance is in place for your proposed security location and type prior to bidding at auction.
STEP 4. Deposit Bond or Bank Guarantee?
Discuss with you broker if you need to arrange either of these to ensure that you have the funds available for the deposit once you have successfully secured your property under the hammer.
STEP 5. Consult your Real Estate Agent
Have a chat to identify suitable properties that are coming up for auction within your price range, as previously identified through the pre-approval process with your broker.
STEP 6. Ask Your Real Estate Agent for the Auction Terms
This may include the upfront deposit required (usually 5 or 10% of purchase price) and settlement terms (could be 28 days from contract date). Also request a copy of the building and pest report from the agent. Discuss the possibility of varying the sale terms with your agent i.e longer or shorter settlement terms and the required deposit amount.
STEP 7. Select Your Settlement Agent or Solicitor
Decide who will act on your behalf when you secure your dream property. Ask them to review the sale contract to ensure feasibility of sale and proposed settlement terms.
STEP 8. Arrange Your Deposit Transfer
This may be in the form of a deposit bond, bank guarantee, bank cheque, loan drawdown or bank transfer.
STEP 9. Offer & Acceptance
Provide a copy of the offer and acceptance to your broker to seek formal approval on your home loan.
STEP 10. Congratulations!
Now that settlement is complete, you can take ownership of your new home – make sure you celebrate!
If you are thinking about buying at auction and would like to discuss your options, get in touch with your broker for a free consult. Call (08) 9367 4222, email firstname.lastname@example.org or fill out the form on this page..