| Buyers
Guide
Buying
at Auction
BEFORE
BUYING
In order to make a successful purchase, bidders must do some homework
before the auction.
Inspections
Inspections should be carried out before the auction, either by
appointment or at "open for inspection" days. Consider
having the property inspected for structural damage by a licensed
builder or other qualified persons before the auction.
Finance
It is vital that you contact your financial institution before the
auction. Give yourself time to shop around to get the best rate.
Once you have decided to bid on a property, ask your financial institution
to process your application for finance so that you have an indication
of the amount of money they are prepared to loan you.
Price
The agent or auctioneer cannot disclose the reserve price of the
property. Therefore, to establish price range, you should enquire
from the agent or auctioneer what similar properties are selling
for in the area. Try to attend other auctions in the area before
bidding. This will familiarise you with the auction process and
help determent the price range of your desired property.
Particulars
& Conditions of Sale by Auction
These outline the details of the property to be auctioned. All fittings,
furniture and other items to be included should be clearly listed.
Also check the Terms of Sale such as the deposit and balance of
payment details.
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HOW
AN AUCTION WORKS
By now you should have inspected the property, have an indication
of finance from your financial institution and have satisfied yourself
that the property to be auctioned meets your needs.
The
Auctioneer
An auctioneer is a person who must be licensed to conduct auctions.
Auctioneers are specifically trained to sell real estate and those
who are members of the REIQ are bound by a Code of Ethics. There
is an ongoing obligation to buyers and sellers alike.
The
Auction
The auction
will begin with the auctioneer reading the details of the property
contained in the Contract of Sale.
The auctioneer
will advise the general public of the rights of the seller and/or
the sellers representative to bid at their discretion.
The sellers
bid is a counter offer made for, or by, the seller at a price at
which property may be sold.
When bids are called
you can attract the auctioneer's attention by putting up your hand,
calling out your preferred bid, nodding your head or offering a
gesture that signifies your bid to the auctioneer.
As the auction
progresses, the auctioneer may nominate smaller bids. Be alert for
this, as your next bid may secure the property.
Once the bidding
reaches the reserve price, the auctioneer usually announces intentions
to sell. If the bidding does not reach the reserve price, the auctioneer
will often confer with the seller to obtain instructions
When the property
is sold - called "knock down - to you as a successful bidder,
you are required to sign a Contract of Sale immediately and pay
a deposit which is usually 10 per cent of the asking price.
Should you not
have a cheque account, talk to the agent to ascertain in what manner
the deposit can be made (eg: bank cheque).
The Contract
of Sale Must be signed by both the buyer and seller, or their representatives.
Should the reserve
price not be reached, the person making the highest bid usually
has the opportunity to purchase at the reserve price. If the highest
bidder does not purchase at the reserve price, then the property
will be placed back on the market for private treaty, when all the
interested parties may negotiate with the agent.
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Possible
Problems and How To Resolve Them
There are a
number of potential problems for those who are purchasing a property.
These can be avoided if you do your homework and folllow the rules
of auction.
1. Remember
your finance limit. Do not bid beyond your capacity in that regard
2. Unlike many negotiated
sales by private treaty, an auction Contract of Sale is unconditional.
Once you and the seller have signed the contract, you are obligated
to proceed with the sale.
3. It is important that you check all the details of the property
before the auction, otherwise you may find yourself with a property
not suited to your needs.
4. If the property has been passed in, respect the highest bidder's
right of option. If the property is placed on the market for private
treaty after the auction, and you are still interested, you can
make another offer.
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