How to buy a HomeSell property at Auction

So you’re keen on buying this property… How do you take the next step? Here are some guidelines for buying a HomeSell property that is being advertised as auction (unless sold prior).

The marketing period

During the marketing period the vendor will gather feedback from the buyers who inspect the property in order to set a reserve (usually on the day of the Auction). The vendor is simply aiming to get an indication of value, in order to be realistic with their expectations on Auction day.

If you are interested in buying the property, you need to arrange any finance approvals plus do your homework on the property to be ready for Auction day (or earlier if a pre-auction offer is made).

Auction day

At the completion of the final open home on Auction day, the Auctioneer will gather those attending, explain the Auction process and list out the Particulars and Conditions of Sale. They will then start the bidding.

What are the normal conditions I would buy under at Auction?

1. If you are the successful bidder, you will be required to pay 10% of the purchase price on Auction day (unless otherwise arranged with the vendor and/or the Auctioneer). You will need to have the funds in your account to cover the deposit once it is banked, or request the vendors lawyers trust account details and transfer money to this account electronically during the following 24 hours.
2. It is considered that if you bid at Auction, you are essentially making a cash unconditional offer i.e. if your bid is successful, you have bought the property. There are no conditions to be met, you have done your homework and have sought the correct advice prior to the auction.
3. Possession is as per the Particulars and Conditions of Sale, set out by the vendor, however you may however wish to discuss an amendment to the possession date with the vendor and/or the Auctioneer prior to the Auction.
4. Chattels are normally mentioned in the Particulars and Conditions of Sale. Check these to make sure these are exactly what you expect to be left in the property.
5. GST will also be mentioned in the Particulars and Conditions of Sale and you should check that this tallies with what is expected (NOTE, there is normally no GST payable on a residential home).

Pre-Auction offers

If you wish to make an offer before an auction is held, the offer must be on an Agreement for Sale and Purchase of Real Estate by Auction.

This offer must be unconditional and be accompanied by a 10% deposit, payable into the vendors lawyers trust account. This is held in safekeeping until the property changes hands, or is refunded in full if the offer is unsuccessful.

If the vendor is interested in the price, they will then contact other potential buyers to advise they have received an offer which is of interest to them. If there are other interested parties who are willing to make an offer, then the vendor can either;

1. Arrange with the auctioneer and interested parties to bring the Auction forward. Your offer (or any higher pre-auction offers) will become the reserve and the Auctioneer opens the bidding at that level. You can of course increase the bidding during the auction should you wish to do so.
2. Alternatively, the vendor may choose to accept an offer without going to Auction. They (or a vendor’s representative) may call each interested party to establish the highest cash unconditional offer. This method may involve several phone calls, but serves to give each buyer equal opportunity to be the successful buyer.

Need more info? Check out our blog here, which explores some of the questions we get asked frequently about buying privately.