Purchasing a property at auction has different challenges to buying through a negotiated sale. Many purchasers can find the experience daunting, especially if they are attending an auction for their first property purchase. These are some things you should know before attending any auction:
1. There is no cooling-off period if you buy a property at auction. This means that if you are the highest bidder at the auction you will then have to sign a contract for the purchase on the same day. This makes the purchase binding and you cannot pull out of the contract if you change your mind about buying the property.
2. It is important to speak with a banker or mortgage broker well before attending the auction to obtain preliminary finance approval and ensure you are able to borrow enough to complete the purchase. You will generally have a 6 week settlement period after the auction and you will then be required to complete the settlement and pay the balance of the purchase price. If you don’t begin to organise finance approval until after the auction it is unlikely that your loan will be approved in time and you risk being in default under the contract.
3. In addition to organising finance approval with a bank you need to have enough funds on the day of auction to pay the deposit. A deposit is usually 10% of the purchase price which you will be required to transfer to the real estate agent upon signing the contract immediately after the auction.
4. Before the auction you need to complete all of your own inspections and enquiries about the property so that you are satisfied that it is in an acceptable condition. If you wish to organised pest and building inspections, you should do this well before the auction date. If the pest and building reports reveal hidden damage or termite infestation you will not be able to get out of the contract after signing the contract at auction.
5. Importantly, you should request a copy of the contract as soon as possible from the real estate agent and ask your solicitor to review the contract before the auction. If you are successful at auction you will be bound by whatever conditions are in the contract so it is important to seek advice beforehand. Your solicitor will ensure the contract is fair and complete and will be able to negotiate conditions that you may require in the contract. They can also provide advice as to whether the property will actually be suitable for the purpose you intend to use if for, i.e. will you be able to build a pool in the back yard? Is the property able to be subdivided? What sort of businesses are permitted to be operated on the property?
If you need further advice in relation to any property transactions or you require a solicitor to review a contract before auction, contact a solicitor at Everingham Solomons because Helping You is Our Business.
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