Bought at Auction & Funds not avaliable
- Thread starter Straddie
- Start date
Hi Straddie and welcome to the forum.
If you are going to go to Auctions with a serious intent of purchasing you should first contact your favourite lender or mortgage broker and get your finance pre-approved. That way you will know what your limits are and if you will be able to continue any deals through to the end.
Having said that if you are the successfull bidder at an auction, this does not mean that you have purchased the property, it just means that you have won the first right to negotiate. If you are the successfull bidder the vendor does not necessarily have to accept your bid......and conversely you do not have to agree to their terms, regarding settlement etc..etc. So if you are the successfull bidder and then discover you don't have the funds available......you have basically just dicked the vendor around and made a _large_ nuisance of yourself. The vendor may remove a limb or another body part.
The purchase only takes place once you sign the contract of sale. If you sign this and then don't have the funds available to settle the property at settlement, then you are in a whole world of hurt. The bank will sell your propertythat you have bought and bill you for any losses and costs that they incurr in the selling of the property.
You may be able to obtain bridging finance, but that will be very expensive and if you delay settlement you will be up for penalty interest rates and other costs the vendor incurs.....but that all depends upon the terms in the contract of sale.
Hopefully that helps!!
If you are going to go to Auctions with a serious intent of purchasing you should first contact your favourite lender or mortgage broker and get your finance pre-approved. That way you will know what your limits are and if you will be able to continue any deals through to the end.
Having said that if you are the successfull bidder at an auction, this does not mean that you have purchased the property, it just means that you have won the first right to negotiate. If you are the successfull bidder the vendor does not necessarily have to accept your bid......and conversely you do not have to agree to their terms, regarding settlement etc..etc. So if you are the successfull bidder and then discover you don't have the funds available......you have basically just dicked the vendor around and made a _large_ nuisance of yourself. The vendor may remove a limb or another body part.
The purchase only takes place once you sign the contract of sale. If you sign this and then don't have the funds available to settle the property at settlement, then you are in a whole world of hurt. The bank will sell your propertythat you have bought and bill you for any losses and costs that they incurr in the selling of the property.
You may be able to obtain bridging finance, but that will be very expensive and if you delay settlement you will be up for penalty interest rates and other costs the vendor incurs.....but that all depends upon the terms in the contract of sale.
Hopefully that helps!!
The answer depends on if you can raise the funds at all....
If yes, but you need longer, there's a process for doing this (extending settlement) - refer it to your conveyancing person. It happens often.
If no, or you can't in a reasonable timeframe, then you need to see if you can get out of the deal.
Good luck.
Simon.
If yes, but you need longer, there's a process for doing this (extending settlement) - refer it to your conveyancing person. It happens often.
If no, or you can't in a reasonable timeframe, then you need to see if you can get out of the deal.
Good luck.
Simon.
Hi Straddie, welcome to the forum.
As in all contracts it is a legally binding document. If you can't or don't meet those terms the other party does have legal recourse to recoup the costs. Whether they would be prepared to go to that hassle and expense may be another thing, but it is possible.
In the event that you signed a contract after an Auction and later found out you couldn't proceed you would open a whole pandora's box of possible legal implications. Certainly you could be sued, if not for the sale of the property, definately for costs incurred and probably any loss between your sale price and the eventual sale price.
I wouldn't recommend it, make sure finance is a done deal before bidding at Auction.
Kev
www.nundahrealestate.com.au
As in all contracts it is a legally binding document. If you can't or don't meet those terms the other party does have legal recourse to recoup the costs. Whether they would be prepared to go to that hassle and expense may be another thing, but it is possible.
In the event that you signed a contract after an Auction and later found out you couldn't proceed you would open a whole pandora's box of possible legal implications. Certainly you could be sued, if not for the sale of the property, definately for costs incurred and probably any loss between your sale price and the eventual sale price.
I wouldn't recommend it, make sure finance is a done deal before bidding at Auction.
Kev
www.nundahrealestate.com.au
Straddie,
um - be careful of what you read here and still do your own research.
From my understanding of the legalities of auctions The Captain has it slightly incorrect.
Once the property is on the market (reserve passed), the higher bidder is, by 'winning', entering a legal agreement to purchase the property, they can't squirm out of it by claiming not to have the funds.
If the property doesn't reach reserve (is passed in) at that stage the highest bidder has the first right to negotiate the price with the vendor.
So if you 'win' an auction (I've never felt that win is the right word - too emotional) you better be able to buy or you can be hounded for all kinds of damages.
If you want an extended settlement or other special conditions you cannot negotiate this after placing the winning bid as at this time you are agreeing to the sales contract as available at the auction (and you should always review this ahead of time anyway).
Instead submit them to the agent well before the auction so that the agent can check with the vendor and have them approved. We do this when we're bidding, and at the last auction we were seriously attending we actually pointed out to the agent that they wanted the property to settle on Dec 28, which would not be practical for most people as everyone is on holidays & they amended the contract for everyone.
Cheers,
Aceyducey
um - be careful of what you read here and still do your own research.
From my understanding of the legalities of auctions The Captain has it slightly incorrect.
Once the property is on the market (reserve passed), the higher bidder is, by 'winning', entering a legal agreement to purchase the property, they can't squirm out of it by claiming not to have the funds.
If the property doesn't reach reserve (is passed in) at that stage the highest bidder has the first right to negotiate the price with the vendor.
So if you 'win' an auction (I've never felt that win is the right word - too emotional) you better be able to buy or you can be hounded for all kinds of damages.
If you want an extended settlement or other special conditions you cannot negotiate this after placing the winning bid as at this time you are agreeing to the sales contract as available at the auction (and you should always review this ahead of time anyway).
Instead submit them to the agent well before the auction so that the agent can check with the vendor and have them approved. We do this when we're bidding, and at the last auction we were seriously attending we actually pointed out to the agent that they wanted the property to settle on Dec 28, which would not be practical for most people as everyone is on holidays & they amended the contract for everyone.
Cheers,
Aceyducey
Hi Aceyducey,
mmmm - thinking about it I still reckon I am right but you have managed to plant the seeds of doubt
. However I am prepared to stick to my guns until proven otherwise.
Any solicitors or RE's care to give us the definative final word on this? If a property is "on the market" and you have finance, but fail to agree on another aspect of the contract i.e. settlement term as an example.........will the deal fall through......I _was_ 100% sure that until you signed the contract of sale......nothing was set in concrete and you were free to abscond from the deal if you wished........not that I would ever do this......my time, life and physical well being is too valuable . The same goes for the vendor as well. Have a look at the following thread I dug up from the archives (I remember reading this a while back and found it with a search term of dale and paper and auction......funny how the mind works).
http://www.somersoft.com/forums/showthread.php?s=&threadid=4315&highlight=dale+and+auction
Also you are correct.......you do need to be careful of what you read in this and any other forum and use your intelligence and own due dillegence at all times.
mmmm - thinking about it I still reckon I am right but you have managed to plant the seeds of doubt
. However I am prepared to stick to my guns until proven otherwise.Any solicitors or RE's care to give us the definative final word on this? If a property is "on the market" and you have finance, but fail to agree on another aspect of the contract i.e. settlement term as an example.........will the deal fall through......I _was_ 100% sure that until you signed the contract of sale......nothing was set in concrete and you were free to abscond from the deal if you wished........not that I would ever do this......my time, life and physical well being is too valuable
. The same goes for the vendor as well. Have a look at the following thread I dug up from the archives (I remember reading this a while back and found it with a search term of dale and paper and auction......funny how the mind works).http://www.somersoft.com/forums/showthread.php?s=&threadid=4315&highlight=dale+and+auction
Also you are correct.......you do need to be careful of what you read in this and any other forum and use your intelligence and own due dillegence at all times.
Are there legal sites that may shed some light on this ?
Is a oral bid recognised legally ?
Is a bidder required to 'register' before his bid is accepted ?
Here is an extract from an internet auction site ...
As a bidder, you know that placing a bid is a binding contract between you and the seller, and the bid cannot be retracted unless due to fault by the seller of typographical error, or other error, due to human error on the seller's part. Once you place a bid, and if you win, you will be obligated to buy the product at the said price you indicated as your bid. Placing a bid on this auction site, and winning, then not paying for the product is illegal in most states, and prosecution can result to you.
Is a oral bid recognised legally ?
Is a bidder required to 'register' before his bid is accepted ?
Here is an extract from an internet auction site ...
As a bidder, you know that placing a bid is a binding contract between you and the seller, and the bid cannot be retracted unless due to fault by the seller of typographical error, or other error, due to human error on the seller's part. Once you place a bid, and if you win, you will be obligated to buy the product at the said price you indicated as your bid. Placing a bid on this auction site, and winning, then not paying for the product is illegal in most states, and prosecution can result to you.
Hi All,
Acey is correct here, in NSW anyway.
Once the reserve has been passed at auction you are, as the highest bidder, obligated and required to complete the sale. Your winning bid is a legally binding contract.
If you listen to the auctioneer prior to the auction he/she will clearly state that the winning bidder is the purchaser and obligated to the purchase. The auctioneer is required by law to make this statement along with the rest of the ramble he makes about vendor bids etc etc.
If you do not sign a contract on the night the auctioneer or agent has the power to sign it on your behalf. I have signed contracts on behalf of vendors and purchasers many times at auctions.
I've heard of one instance where the purchaser couldn't complete and had to go bankrupt in order to avoid settling on the purchase.
I heard another example where an agent placed a dummy bidder in the audience. The auctioneer placed the property on the market and the dummy didn't hear it and continued to bid, and ended up being the highest bidder, legally obliged to buy the property. The situation was resolved by the agent explaining the situation to the vendor, then commencing negotiations with the underbidder, who ended up purchasing for $5k less.
I've also heard of people who are the eventual purchasers run away after the auction is over, and no one not knowing who he/she is, so the property will need to be reauctioned or negotiations with the underbidder commenced.
Oral bids are accepted.
In some states registration prior to the auction is required.
Also, if a property is auctioned and passed in, but you go and buy the property before midnight on the day of the auction, auction conditions still apply, ie no cooling off period, even though you did not succeed at the auction.
Hope this helps.
Acey is correct here, in NSW anyway.
Once the reserve has been passed at auction you are, as the highest bidder, obligated and required to complete the sale. Your winning bid is a legally binding contract.
If you listen to the auctioneer prior to the auction he/she will clearly state that the winning bidder is the purchaser and obligated to the purchase. The auctioneer is required by law to make this statement along with the rest of the ramble he makes about vendor bids etc etc.
If you do not sign a contract on the night the auctioneer or agent has the power to sign it on your behalf. I have signed contracts on behalf of vendors and purchasers many times at auctions.
I've heard of one instance where the purchaser couldn't complete and had to go bankrupt in order to avoid settling on the purchase.
I heard another example where an agent placed a dummy bidder in the audience. The auctioneer placed the property on the market and the dummy didn't hear it and continued to bid, and ended up being the highest bidder, legally obliged to buy the property. The situation was resolved by the agent explaining the situation to the vendor, then commencing negotiations with the underbidder, who ended up purchasing for $5k less.
I've also heard of people who are the eventual purchasers run away after the auction is over, and no one not knowing who he/she is, so the property will need to be reauctioned or negotiations with the underbidder commenced.
Oral bids are accepted.
In some states registration prior to the auction is required.
Also, if a property is auctioned and passed in, but you go and buy the property before midnight on the day of the auction, auction conditions still apply, ie no cooling off period, even though you did not succeed at the auction.
Hope this helps.
