Top 7 Things you need to know before you bid
Auctions can be a tense and nail-biting way to buy property.
The other bidders can be unpredictable and the auctioneer will do their best to put the pressure on and try to get you going above your limit.
And at the end of the day you won't really know whether your bid was high enough until that hammer comes down for the final time. Thrilling stuff.
With all the stress and emotion of an auction, the last thing you want to do is to forget something on the day! So, if you're a first home-buyer or if you've just never bought at auction before – check out these tips below to make sure that you've got everything you need for auction day!
1. No cooling off.
Usually, when you buy a property you get a cooling off period. The term varies from state to state but generally the 'cooling off' period is about a week where you get to change your mind.
At auction, you don't get the luxury to change your mind. Once the hammer falls, you've entered into a contract and signing the contract is just a formality. Which brings us to tip number two, the Contract.
Before you make that first bid, you need to know exactly where you stand with all aspects of the sale, which will be documented in the sales contract.
To avoid any unexpected issues, once you're keen on a property, ask for a copy of the contract from the real estate agent, take a look yourself and have it looked over by a solicitor or a conveyancer. They'll let you know if there's anything you should be aware of and will also help you to negotiate as much as possible.
- if you haven't saved up a full 10% deposit – maybe the vendor would be happy with 5%?
- or if you want to move in quickly, maybe the vendor is happy to complete the purchase earlier than the standard 42 days after contract.
Also, make sure to check inclusions and exclusions, you might think that new Miele dishwasher or pool cleaning equipment is handy, but do they come with the house? (Check the inclusions and exclusions just to make sure)
3. Cash flows and taxes.
A house is probably going to be the biggest purchase in your life. Make sure that it makes sense financially.
Depending on how much you pay, you might be eligible for stamp duty exemptions.
If you're buying an investment, you might be able to negative gear the property.
And if you're living in the property, then you won't have to pay capital gains tax when you sell it.
Since there's a lot to figure out – talk to a mortgage broker or financial adviser about what the cash flows will look like.
The last thing you want is to have "too much month at the end of the money" after you buy a place. Which brings us to tip number 4 – stick to your limit.
4. Stick to your limit.
Like we've already mentioned, the excitement of an auction is contagious.
But, don't let the excitement or the emotion get to you - it can really cloud your judgement and make you overextend yourself financially.
Talk to a mortgage broker about how much you can really afford to borrow – and pick a limit that you're happy to pay for the property.
Then stay under that limit so that you don't end up regretting the purchase or living off 2 minute noodles for the next couple of months.
And remember, there will be other properties - if you stick to your limit, you may need to go to a few different auctions, but eventually it'll pay off and you won't be in financial trouble.
5. Have your deposit ready.
Once the auctioneer congratulates you and the crowd starts clapping, you'll be asked to pay the deposit.
Typically, this is 10% of the purchase price – but as we've said, you can sometimes negotiate this down to just 5%.
Also, remember – this will need to be a personal cheque (not a bank cheque prepared earlier as the deposit amount is decided on auction day).
Finally, don't be panicked on the way to the auction because you forgot your ID.
The real estate agent needs to take down your driver's licence details so that they know that you’re serious before issuing you with a bidder number.
If you can't make auction day yourself, you can have someone else bid on your behalf but you'll need to arrange to sign a nomination form and provide it to the real estate agent in advance.
7. Do you need to go to auction?
Now I know this isn't technically an auction tip, but it could save you thousands.
A lot of properties listed for auction actually sell prior to auction day.
Would-be purchasers put in offers in advance, and if they're strong enough – a lot of vendors will say Yes. Not all vendors, but enough to make it a good move.
So, to make sure that you don’t miss out on your dream property - remember these auction tips, and get in touch with a finance professional early in your property search to 1) understand the cash flows 2) find out how much the banks will lend you, and 3) to ensure that auction day and settlement run smoothly.
If you want to know more or have any questions, head to www.askamortgagebroker.com.au and we'll answer your queries, when it suits you! And feel free to call or text me directly on 0416 17 37 27.
Thanks for reading everyone,
PS - we're always running deals on our website, whether its free accommodation in the Hunter Valley for new clients or David Jones gift cards for referrals - so make sure to check out the promotions page to take advantage of our offers.