Real Estate auctions have been building steam coming out of the pandemic. If you’re looking into buying your first home, there’s a strong chance now that you’ll need to brave the fast-paced world of buyers, sellers, and auctioneers.
But buying at an auction isn’t quite the same as a private sale, so to help you prepare for your first auction, we’ve got some tips for you. Australia is the perfect place to get your first home, but make sure you take security measures and verify your identity properly!
5 tips for your first auction
1. There’s no cooling-off period
Unlike a private sale, when you buy a house at an auction, there is no cooling-off period. If you read our previous blog on cooling-off periods and what they do, you’ll understand that it’s there to protect you.
So, what do you need to look out for without this protection?
First, ensure you have access to a building and pest inspection before the auction. You won’t have an opportunity to back out or renegotiate prices after the gavel falls, so it’s essential to have a report beforehand. You can request one from the seller’s agent or even have one performed yourself.
Any other issues that you usually would rely on the cooling-off period to protect you from, such as changing financial situations or interests in other market properties, should also be accounted for. Take the time to plan ahead because you won’t have the option once you’ve signed a contract.
This leads to our next tip.
2. Contracts are unconditional
When you buy at an auction, the contract you sign is unconditional; not subject to finance or the results of a building and pest inspection. You must have your finances sorted on the day and be confident about purchasing the property.
It also means that when you outbid your competitors at the auction, you’re expected to present your finances. The 10% deposit is required on the day, and the remainder of your financing by the settlement date, so you’ll need your chequebook or electronic transfer.
3. The Form 1 is there for you
On a private property sale, the delivery of the Form 1 instigates the cooling-off period. In an auction, there is no cooling off, so it’s essential to have read and understood the information presented in the Form 1 before you begin to bid.
So, where can you find the Form 1 for an auctioned property?
The agent responsible for the auction is required to have the Form 1 prepared and available on their premises three days before the auction. But the online copy will only be available 30 minutes before the start of the auction, which doesn’t leave you a lot of time to make an assessment.
Once again, the Form 1 is a document meant to protect you, the purchaser, from any unforeseen problems involving ownership, development, claims, or caveats on the property. Fully understanding it before you sign a contract is important, and your conveyancer will help you with that.
4. Understand the jargon
One of the most significant obstacles you’ll face during your first auction experience is understanding the language auctioneers use. Here are some terms you’ll hear and what they will mean for you.
Reserve Price: The minimum sell price that the agent sets on behalf of the seller. The auction will start below this price, and the property won’t be sold if no one bids high enough to surpass it.
Passing in: If the reserve price isn’t met, the highest bidder earns the right to negotiate with the agent before anyone else.
This means that when the current bid is below the reserve price, buyers aren’t bidding on the property; they’re bidding on the right to negotiate with the seller. And importantly, there’s no obligation of a buyer or seller to commit to a contract until the reserve price is met in the auction.
Vendor Bid: A “bid” from the seller’s agent intended to drive up the price of the auction. In South Australia, vendor bids can only be made while the property is below the reserve price, and they must be announced as vendor bids by the auctioneer. The seller is allowed three throughout the auction.
When the auction sits below the reserve price, be aware that it’s in your best interest to see a slow auction, so listen out for a vendor bid. A dummy bid is like a vendor bid but is secretly made by a bad actor and is actually illegal in Australia. It still happens sometimes, so you should watch out for it.
Hammer falls: Signifying the end of the auction. The auctioneer will ask for any final bids and, if none are made, will swing the gavel down. Whoever made the last bid won the auction, and if the bid exceeds the reserve price, they must purchase the property.
5. Stay level-headed
Auctions are popular in property sales because they can secure higher prices without too much risk. As a purchaser, you could quickly pay much more than you should on a house if you lose yourself to the excitement.
So, the best thing to do when you’re attending your first auction is to stay calm, slow down the bidding, and pay close attention to what the auctioneer and other bidders are doing.
Go in with a strategy, a price limit, and a clear head. And if you’re worried about getting excited, you can always have a relative, friend, or agent attend the auction on your behalf.
If you’re serious about buying a property at auction, talk to a conveyancer.
Your conveyancer can begin to help you with your property goals long before you attend your first auction. Get ahead of the curve and talk to them as soon as possible.
At Beltana Property Group, we are experienced conveyancers in South Australia. We tailor our advice and services to meet your specific circumstances to ensure we provide you with a smooth, stress-free experience. This means that by engaging Beltana Conveyancing, you can be assured that you won’t be caught out while navigating the property market.
So, if you’d like to have a chat with us about your property goals, whether it’s in metropolitan Adelaide or regional South Australia, we’d love to hear from you and find out if we can help you achieve your dreams.
