Auctions - Street Theatre at it's Best!!
Hi fh
Welcome to the Forum!
Auctions are strange beasts. You may find yourself standing with a crown of a hundred people and no bidders, or a straggly group of about five people, all determined not to leave without buying the property!
Your preparation for the Auctions could include:
Deciding on your price limit and being realistic. The last time I bought at Auction it was well short of what I was prepared to pay as I considered the property to be unique and the opportunity very unlikely to come again
However, I paid $1,000 more than the under bidder so I was quite happy with that.
Be realistic about how much money you will need to have available: Lenders will not release money prior to settlement so do not promise to pay more deposit than you have cash available, and not more than 10% of the purchase price in any case.
There will be a few expenses you will need to pay prior to settlement eg your solicitor or conveyancer may require a search fees deposit when you engage them, with their actual professional fee paid at settlement.
Talk to the Agent: Say something like:
I would like to bid for this property. However, my money?s tied up at the moment but I will have $500 / $1,000 in cash with me on the day and would be able to pay up to $13,950 by the following Friday. Overall , despite what I may pay for the property, the maximum funds available to pay as a deposit would be $14,950. Can you confirm that this would be acceptable to the vendor?
I would like to bid for this property however my money?s tied up at the moment, and I would require a six month settlement. Regardless of what I may pay for the property, I do have $23,500 in available funds so if I am the successful bidder I would be offering $23,500 by way of deposit with $500/$1,000 of that paid on the signing of the Contract and the balance by the following Friday. Please confirm that the payment of the deposit and the six month settlement would be acceptable to the vendor.
Don?t get a bank cheque for the auction, bank cheques cost $12 and you may have to redeem it yourself if you are not the successful bidder. Talk first and take a reasonable amount of cash with you but not more than $1,000. You will be required to pay some deposit on signing the contract but the Agent doesn?t want to be walking around with cash money, so suggest $500 to be paid on the day and that would usually be acceptable.
Nowadays, you can simply ?pay anyone? via your internet banking but be aware of your daily limit, in which case you need to take care that you allow plenty of time for all the money you promised to be transferred to the Agent?s Trust Account by the due date.
If you are getting a pre-approval for finance you can then apply for a Deposit Bond which has a specific value and you then write in the Agent?s (Trust Account) Details and the Bond amount up to your silent value of the Bond and that would usually be acceptable for securing payment of the deposit.
When the Auction starts, the Auctioneer will read out the Contract, and the contract would usually contain generic conditions such as 10% Deposit and Settlement 30 days, and the Auctioneer will usually say ?unless otherwise agreed?. If there a 5 bidders there could be 5 different arrangements, but the details of the sale are handwritten into the contract after the sale, it is the buyer who offers the price, terms & conditions and the vendor who accepts these or not.
My last purchase was for a five month settlement but it ended up being six months which was OK with everyone. The Agent asked if I could make 5% deposit but I said that I could make a certain amount of $ rather than 5% ? 5% of what? I didn?t know how much that would be but I did know how much $ would be, so I stuck with the $ amount and the vendor accepted that.
The vendor wasn?t really fussed about the deposit and in the end she didn?t claim Early Release of the deposit and just waited until settlement for all the proceeds to be paid in one go.
Remember that getting all the inspections will be wasted if you don?t buy the property. This can be quite expensive if you get inspections and eventually bid on a half dozen properties before you are successful. Learn what to look for when you inspect properties, curtains and paint colour don?t matter but damp does and overgrown vegetation covering sub floor vents does and suspicious looking stains in the ceilings do and any internal cracking should be viewed with deep suspicion.
Not so exterior cracking (unless the wall is leaning away from the frame as it was with one house I inspected) so just use your common sense and remember that the building and pest inspectors do not have XRay vision but they will climb into the roof and crawl under the floor, assuming that there is space for them to do so.
Making sure you have a pre-purchase finance approval is helpful so that you don?t go over your financial capacity but the lender will still send the valuer out before they make you an unconditional offer of a loan for that particular property. If there is anything unusual about the property communicate this to your broker so that they can match up the property with the appropriate lender eg small floor area, specific postcode, specific building (if Westpac), any restrictions or covenants on the title which the lender may not accept, or even Company Title if buying an older flat in areas known for these buildings. However the pre-approval usually cuts down the final approval time and thus the suspense of waiting for that Offer!
Good luck, remember that the opportunity of a lifetime comes around every Tuesday. If you miss this one there will certainly be another but if you like it enough to consider bidding for it then be sensible about what you are prepared to pay ie don?t skimp and miss out for $1,000!
Hope this helps
Kristine