Auctions and B&P

[Sove18a]

I've been searching old threads and cannot find what I'm looking for so I hope you can help.

I have a house I am interested in. It goes to auction in two weeks. The price guide I have been given by the agent is $300-350 but the agent said he thinks it will sell for more. I'm not sure whether to believe him or not!

I've been told a B&P must be done prior to auction. Why would anyone do that? It is an expensive outlay with no guarantee of success since you don't know who your competition is or if there is any competition. Can you ask the agent what the competition is or if there has been any B&P's done?

What is the point of doing a B&P if you buy at auction since you can't use it as a negotiating tatic?

What can I do to minimise the risk if I want to bid? Any advice is appreciated

Sue

 

[depreciator]

Sue, there are many people who pay for multiple B&P reports only to miss out at successive auctions. It's just the way it is. The point of doing a B&P before an auction is largely for a prospective buyer's piece of mind.
I have never paid for one, but I reckon I'm pretty good at knowing what might be wrong with a property - and I accept that there will always be something wrong with a property.
Do you know a builder? maybe you could take them along to an inspection and get them to have a good look around.

 

[alexlee]

I've been told a B&P must be done prior to auction. Why would anyone do that? It is an expensive outlay with no guarantee of success since you don't know who your competition is or if there is any competition. Can you ask the agent what the competition is or if there has been any B&P's done?

What is the point of doing a B&P if you buy at auction since you can't use it as a negotiating tatic?

Since auction contracts are unconditional, doing one prior to the auction is the only chance you get to find out where there are issues.

What can I do to minimise the risk if I want to bid? Any advice is appreciated

If you want to minimise the risk, do the B&P prior to the auction.

 

[Peterw]

I believe that nearly 50% of all properties in Melbourne choose to enter the market via Auction. While the number is lower here in Brisbane, however I believe it is growing. I think that using a building and pest inspection to renegotiate the price, is one reason when sellers make that choice. We recently had a buyer hit a seller up for a reduction of $50,000 on a $300,000 property, based on a building and pest inspection. You can appreciate that it was an old house and yes needed work. The buyer was not watching his times, and ignored our suggestion to request an extension and then missed his window. We resold the property for the same price, and he then complained that he was told to do this by "advisers" and in reality he was prepared to continue without a reduction. On other occasions when the seller has had an inspection done, some buyers treat it with suspicion. Its hard to please everyone all of the time.

 

[Sove18a]

Thanks for your responses.

I cannot justify spending $700-900 to do a B&P prior to auction since they don't really tell you anything unless it is a really old house then you would want to do a B&P ...

My sister had a B&P on a 5 y.o. house they bought (private sale) and it failed to tell them that the dishwasher, oven and stove were not working. They had to spend nearly $3500 on new appliances. Even the rotary clothesline did not work - it collapsed upwards when you try to wind it up! These are things that should have been picked up in a B&P - otherwise what are you paying them $700-900 for?

 

[depreciator]

I would check that stuff myself.

With a B&P report, you are hopefully paying for someone to spot problems with the building that might not be obvious to an untrained eye and active termites.

 

[Sove18a]

Just an update ... I emailed the agent to find out a bit more about buyer interest and whether any B&P has been done prior to auction (which is this weekend).

His response was "People have been expressing interest in the property, but no one has formalised an offer in writing. No building & pest inspections have been conducted at this stage."

Hmmm seems no one cares about the B&P for this property ... it is a 9 year old house and when I read the S32 it mentioned something about the area being known for termite activity (can't remember the exact wording).

Also, I was under the impression that the vendor was not accepting offers prior to auction. Here the agent is saying "no one has formalised an offer in writing". I'm confused, what does this mean?

 

[depreciator]

If somebody made an offer to the agent in writing and it was more than they thought the property would get at auction, I'm sure the agent would take it to the owner.

 

[Sove18a]

Thanks depreciator for your comments.

Sorry, I forgot to mention that the vendor is a bank. It is a mortgage reposssession.

I queried the statement and the agent responded "Most of the time Vendors can be reluctant to sell prior to Auction, particularly if the interest level is sufficient. However I would present any written offers for their consideration."

Gah if I had known this last week! I understand once you get to a few days before auction it falls under auction rules? Or is this after auction?!

 

[Leeburg]

When you purchase via auction you cannot make the contract conditional. This means it will not be subject to finance, building and pest, cooling off period or anything else.

For this reason, if you wanted to have a building and pest inspection done prior to potentially having an unconditional contract on the property, you would need to do it before auction day. If you are seriously interested in the property it will be well worth it for peace of mind. At the very least try and have a tradesperson inspect and tell you about potential building issues (though you won't know about termites which can be much more expensive).

I understand once you get to a few days before auction it falls under auction rules? Or is this after auction?!

Not in Queensland. I cannot answer for Victoria, but in QLD the vendor is able to sell the property all the way up until auction day.

If the property does not sell at auction the vendors agent will negotiate with the bidders to try and form a sale. In my experience, if the vendor has priced the property accurately it is uncommon for it not to be sold either at auction or in the following days.

"Most of the time Vendors can be reluctant to sell prior to Auction, particularly if the interest level is sufficient. However I would present any written offers for their consideration."

This is true. If the vendor or agent thinks that there will be many bidders competing against each other it is unlikely they will accept an offer prior to auction. Essentially your offer will not be accepted if the agent tells the vendor they have a good chance of achieving a figure higher than your offer come auction day