Auctions can be action-packed and overwhelming, so it’s important that you are comfortable with your finances and understand the potential risks involved. It is highly recommended that you have a strong pre-approval in place prior to purchasing at auction, as the winning bidder is immediately expected to exchange contracts without any cooling off period.
HOT TIP: Attend a few auctions without bidding to help you feel comfortable and confident with the process and environment
You will need to conduct your review of the property before the auction, including a pest and building report if you choose. You should receive a copy of the marketing Contract of Sale from the Selling Agent for your Conveyancer to review and discuss with you any potential risks. You should also enquire about the terms of the deposit for the winning bidder.
A bank valuation cannot be ordered prior to an auction. This means that if the valuation is under the auction price, you may have to reduce your loan amount thus requiring a higher savings contribution. It is not common for valuations to be under the purchase price, however it is a very real risk that you need to consider and have a contingency plan.
On the day of auction, you will need to arrive early to register with the selling agent. You will need to show photo identification. You will follow the instructions of the Auctioneer in regards to bidding. If you are the highest bidder, and the Auctioneer declares you have won the auction, you will sign the Contract of Sale immediately. A 10% deposit will be required to be paid, sometimes on the spot and sometimes the following business day. A Deposit Bond may also be acceptable.
The remainder of the process is exactly the same as a normal purchase. The exchanged Contract will be used to order a valuation, and sent to your lender to convert your pre-approval to formal approval. Loan documents will be issued for you to sign and return, Building Insurance will be required, and your Conveyancer will act on your behalf for settlement.
Checklist of milestones and who is responsible:
- Pre-approval – Buyer and Broker
- Contract of Sale Review – Buyer and Conveyancer
- Auction – Buyer and Selling Agent
- Contract of Sale Exchange – Buyer and Selling Agent
- Deposit paid – Buyer and Selling Agent
- Pest and Building – Buyer
- Valuation – Broker
- Formal Approval – Broker
- Loan documents – Broker and Buyer
- Building Insurance – Buyer
- Outstanding contribution – Buyer & Conveyancer
- Final inspection – Buyer
- Settlement – Conveyancers
