Preparing for first auction - advice needed

Hi All,

I'm preparing for my first auction and need some advice please:

a. Is a request for a settlement period beyond 90 day possible? I am thinking 120 days with a 5% deposit due to timing issues, but I am not sure if this unreasonable to the point of being ignored? And if it's accepted does it mean that there might be different contracts for different bidders?

b. Do I need to register to bid at the auction? And if so, do I just send the agent an email that I'll be bidding?

c. How do I pay for the deposit if I succeed? Do I need to prepare a bank cheque, use my transaction account cheque book, or can I do a bank transfer?

d. Besides getting a building+pest inspection, and a conveyancer to go through the contract, pre-approval loan from the bank, is there anything else I should be looking at?
 
Hi All,

I'm preparing for my first auction and need some advice please:

a. Is a request for a settlement period beyond 90 day possible? I am thinking 120 days with a 5% deposit due to timing issues, but I am not sure if this unreasonable to the point of being ignored? And if it's accepted does it mean that there might be different contracts for different bidders?

b. Do I need to register to bid at the auction? And if so, do I just send the agent an email that I'll be bidding?

c. How do I pay for the deposit if I succeed? Do I need to prepare a bank cheque, use my transaction account cheque book, or can I do a bank transfer?

d. Besides getting a building+pest inspection, and a conveyancer to go through the contract, pre-approval loan from the bank, is there anything else I should be looking at?

a. Not unreasonable but depends on the vendor's situation. We negotiated 120 days settlement and 5% deposit when we bid at auctions. But negotiate with the agent prior to auction day (and confirm in writing - email)

b. Not sure about other states, but in Vic don't need to register - happy to be corrected by more experienced people

c. Best method we found is to get a "counter cheque" from your bank. You can get it over the counter and didn't cost us anything (ANZ). Its just a blank personal cheque.

d. Don't think so - depends on your situation whether you are buying in a different entity etc. Again, happy to be corrected.

All the best. Bid with confidence.
 
d. Don't think so - depends on your situation whether you are buying in a different entity etc. Again, happy to be corrected.

Everything seem right, only thing I would add to this is get a licensed valuation done. Cause banks will typically lend 80% of what they value the property, which could expose you to pay a larger amount.

e.g. You are bidding on a house and win it for $600,000 but the bank values the house at $500,000. Meaning they will only lend you $400,000 without insurance or may reject the loan unless you reduce the LVR.

This could lead you having to find 10,000s to find just to get a loan or in the case above to get to 80% LVR you would need a deposit of $200,000 and not $120,000 that you thought you needed.

Not trying to scare you was a recent post about this http://somersoft.com/forums/showthread.php?t=98709

For my first property I did building, pest, valuation and had the solicitor read the contract.
 
I did have one seller calculate that for an extra 30 day in settlement, what the lost interest would be, so indicated that he would only accept, if the bid was $x above the previous bid. Only had one seller do that, so you should be fine.

On another situation, a buyer ended up bidding some $70,000 over the prevaluation he had done, which forced him to apply at another bank. The other banks valuer came in at the sale price.

Big Will, I think a valuer would have a hard time coming too far under the sale price where there was legitimate competition at the auction. Just my thoughts.
 
A) Make sure you get this agreed to prior to the auction.
B) not in Victoria, just rock up and bid - sometimes this is better anyway as you do not show your intent early. You may be the only one bidding.
C) I have used personal cheques before, twice.
D) I think that covers it, I wouldn't bother with a valuation as it's no good as bank will send their own valuer, you should have a good idea on what the property is worth prior to auction and set your maximum big accordingly.
 
Thanks everyone.

If I win the auction, do I just go into the house, sign the papers and handover the cheque? Are there any other fees I need to be aware of or anything out of the ordinary the agent might throw at me?

Both my partner's and my names will be on the property. Does that mean both need to be present to sign?

simtr, I heard that if the auction is passed in (not that I think this would), the negotiations will take place based on the highest registered bid? Is that true, or is it just based on the sequence of the highest bid?
 
Are there any other fees I need to be aware of or anything out of the ordinary the agent might throw at me?
Maybe just go in and get a copy of the contract they will use and have a Solicitor have a look prior,also factor in stamp duty costs legal accounting ect,and have the insurance in place the minute you sign the contract,good luck..imho..
 
Thanks everyone.

If I win the auction, do I just go into the house, sign the papers and handover the cheque? Are there any other fees I need to be aware of or anything out of the ordinary the agent might throw at me?

Both my partner's and my names will be on the property. Does that mean both need to be present to sign?

simtr, I heard that if the auction is passed in (not that I think this would), the negotiations will take place based on the highest registered bid? Is that true, or is it just based on the sequence of the highest bid?

1. If you win you go inside sign contracts and hand over deposit or whatever arrangements had been made prior and you will leave with a legally bound signed copy of the contract of sale. They may get you or the vendor to place the sold sticker up, if you really want to do this ask them during the signing tell them it is your first house and most vendors/agents will agree.

2. You can both be there to sign or you can have you and/or nominee then nominate at a later date both yourself and your wife (extra legal fees are usually involved).

3. If passed in the person with the highest bid prior to being passed in will have the first right of refusal at the vendor's reserved price. Depending on the agent and how many people were interested in on bidding. If there is a lot of people bidding the agent might simply say the reserve is x and you can say yes (deal done) or if you try to negotiate they may go to bidder 2 and give them the same reserve and if they say yes you lose.

If you are the only one they will work with you and the vendor to reach an agreed value if it doesn't seem they will get a sale or have other people interested that couldn't attend or prefer private sale then they may just change it to a private sale and follow those rules.
 
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
 
simtr, I heard that if the auction is passed in (not that I think this would), the negotiations will take place based on the highest registered bid? Is that true, or is it just based on the sequence of the highest bid?

Yes, that's correct, if you're the highest bidder and the property gets passed in you have first right of negotiation.

One property I bought I was the only bidder and thus did not reach reserve, after auction the agent and I negotiated and came up with a price (and conditions) that were acceptable to all. This is pretty important, if it gets to negotiation stage you can throw in various conditions and see how you go especially if they're stuck on a price. I managed to get an extra 60 day settlement which suited me perfectly. I've never tried this before, but you might be able to throw in subject to finance if they want a bit more. Say something like "I think the price you want is over value, so I'd need to buy subject to finance" plenty of tips and tricks you can use, the negotiation stage is the fun part!

I have to say I love auctions, everything's out in the open and there is the excitement of it all!
 
Back
Top