Sam: If you found the property that you want to purchase and the auction's coming up soon
and you've never been to one before, and have no idea how it's work.
Don't stress.
Today I'm going to take you through the process of how to buy a property at an auction.
We'll talk about a few of the key requirements and things that you need to understand, like
what unconditional offer is, what on the market means, when to actually pay a deposit, and
a few bidding strategies for the day.
Let's jump right in.
Sam: Now, there are a few basic rules of property auctions that will apply in different states
and territories.
The first and most important thing to understand when buying at an auction is that offers are unconditional,
which means there's no cooling off period.
This means that if you make the winning offer, you cannot back out of the contract of sale,
and to do so would generally mean forfeiting your hard earned deposit.
It's incredibly important to make sure your finances are sorted so you can be 100% confident
when bidding at an auction, and the easiest way to do that is to get a home loan pre approval.
Sam: Now, the second thing to know is that during the auction itself, the property will
not technically be on the market for sale until bidding reaches the vendor's reserve
price.
The reserve price is the minimum price that the vendor has agreed to sell their property
for, and this will not be advertised anywhere prior to the auction.
Once the auction is kicked off, the auctioneer will notify bidders once the reserve price
has been met and the property is on the market.
If the price never reaches the minimum reserve, the property will be passed in.
If the reserve price is met, the highest bid at the auction will win the property and the
contract of sale is exchanged unconditionally with the check for the deposit being transferred
straight away.
For this to happen, there will be a few things you need to prepare for prior to that event,
so let's go through what these are.
Sam: In addition to having your finance in place, you'll need to be ready to pay the deposit
should you be the winner of the auction.
It's important to speak to the real estate agent prior to the auction to ensure your
method of payment is acceptable within the contract of sale.
An example of the deposit payment could be a bank check or even an electronic payment.
The actual deposit requirement will be stipulated on the contract of sale.
This is generally 10% however, it can be negotiated to a smaller deposit such as a 5% or even
a two and a half percent if it's negotiated in with the real estate agent and conveyancer
prior to the auction.
It's really important to have any amendments to the contract of sale approved and agreed
in writing prior to the auction and that's why it's so important that a conveyancer reviews
the contract.
Sam: A good example of this could be an extension of the settlement period, a reduction in
the deposit amount, or any other changes to any of the clauses on the contract of sale.
Finally, and most importantly, you should have an agreed walk away price prior to the
auction starting to make sure you can stay within your budget as auctions can be an
incredibly stressful and emotional time.
Sam: All right, let's talk through the three key tried and tested tactics to not only help
you be the successful bidder at the auction, but to help you get it at a good and fair
price.
Sam: The first is timing.
When multiple bidders are fighting for a property wait until the bids start to die down before
making yours, because you don't want to get caught up in a rapid fire bidding war.
Just make sure your walk away price is front of mind.
Sam: The second tip is to use on the market tactics.
Once the property is declared on the market for sale, start to reduce your increments
in bidding so that you can look around the room, analyze your competition, and start
to take control of the final stages of the auction.
Sam: The third and final tip is to make big jumps.
For example, if the last few bids have been at $500 and you're still within your walk
away price, don't be afraid to throw out a five or even a $10,000 bid to give the illusion
that you've got deep pockets, and to also create doubt in your competition's mind.
Sam: So there it is, how auctions work, the things you need to think about and prepare
for prior to the big day, and a few tips to help you secure the property at a good price.
Now, if you're thinking of bidding at an auction and don't have your finances sorted, or want
to make sure you've got the best deal sorted before that auction
Sam: Jump on to lendi.com.au.
Our online home loan platform compares 2,500 from over 35
different lenders to make sure you get the best rate possible.
We've also got a team of locally based home loan specialists to hold your hand and walk
you through the process.
Check out our video if you want more information on the home loan preapproval process, things
to look out for, and key benefits of being preapproved.
You can also check out our video on stamp duty, one of the key costs applicable when
purchasing land or property in Australia.
Sam: Finally, if you like this video, give us a thumbs up, subscribe to our channel and
hit the bell so you can get notified when we post new videos.
See you next time.