You have been house hunting for months and have finally found the house that matches all your criteria. Price seems good, your fridge fits in the kitchen and you have a list of home improvement visions to make the home perfect. You make the move to buy and realise the property is going to auction in a few weeks. So what do you need to do from this here?
Firstly, a few points every buyer must know about an auction:
- Auction buying is unconditional. This means if you win the auction, you have to commit to buying. No cooling off allowed.
- On auction the day, you must pay a deposit, normally this is 10% of the purchase price. This figure is non-refundable, so if you have problems with your finance and can’t settle on the property, losing your deposit is stand practice under Australian law.
- Buyer beware, if a house has structural defects, unpaid rates or a property dispute with neighbours, this is all inherited when you purchase.
- Successful auction bidders must understand a property’s market value, it’s common for bidders to overpay for property. This can causes problems with your finance and your bank not loaning you the correct amount of funds putting the pressure back on the buyer to make up the difference.
So doing your home work is key to making sure you don’t get caught out with a lemon property.
Why real estate agents loves auctions?
If all goes to plan, an auction campaign should only take 4 weeks to sell a house. This puts pressure on buyers and sellers to confirm to a time frame. Most importantly, real estate agents need to do very little to condition buyers and vendors to come to terms on price.
Did you know an auction model is designed to return maximum dollars to the pocket of the vendor. It puts buyers under unnatural pressure in front of competing parties where only experienced property buyers know how to avoid the pitfalls and come out on top. Typical pit falls buyers get caught up in:
- Auctions are designed to create uncertainty, excitement and tension in buyers. This heady mix of emotions serves to push bidders to extend themselves beyond their price ceilings and what they logically know to be reasonable.
- Real estate Agents under quoting: All too often, potential buyers are offered price estimates that fall notably short of the final sale price, in order to ensure that as many interested (and emotionally attached) parties at the auction as possible.
- The third factor, of course, is lack of preparation and research. You are almost certain to underachieve in this market without studying comparable local sales, acquiring the proper inspection reports and having a reasonable understanding of the current market dynamics.