Unlike private sales that enable buyers to add conditions to a contract, auctions require every buyer to conduct their due diligence before bidding at auction.
Buyers must ensure that any pre-auction variations to the contract (including payment terms and deposit size) are agreed to prior to the auction and within a solicitor’s office time frame.
There is little point in asking the agent for a contract variation or acceptance of a 5 per cent deposit at 4.30pm on a Friday afternoon before auction. It’s likely that most solicitors will either say no, or you won’t be able to track them down, meaning the variation requests will be unacceptable.
Deposits outside of standard settlement dates, conditions which are either added or struck, and payment types other than cheques, all need to be cross-checked and approved well before the auction day.
Only once the due diligence is completed is a buyer ready to bid. The likely selling price is an essential consideration and setting a reasonable and competitive limit is the challenge. Drawing on the comparable sales analysis findings will help in setting a sensible limit.
Buyers know that a rising market requires a competitive stretch, but being mindful of risk and overpayment is important. Asking the agents about the level of competing buyer interest can offer vital insight that most buyers miss simply by not asking the right questions.
Some prompts include understanding the number of buyers who have requested contracts, conducted building inspections or even just the number of groups who have inspected the property.
It pays to be well prepared for auction day. Picture: Mark Dadswell
Be prepared…here’s a handy checklist:
- Finance approval, and not just an online or over-the-phone approval, but a full credit assessed pre-approval with a real person.
- Assessment of likely selling price based on comparable sales analysis – a collation of recently sold, closely located, similarly sized and styled properties – in order to be confident that the preferred budget is aligned with the comparable sales.
- Agreement of acceptable conditions: the agent must be able to confirm that the buyer’s deposit size, date of payment, settlement date and any required conditions match the seller’s acceptable terms.
- Contract review: the buyer’s legal representative’s review of the contract must not reveal any findings that suggest the property is not what it seems – or show up potentially costly issues or risks.
- Building and pest inspection: be certain that nothing from this inspection reveals any concerning issues or affects the property’s value.
Next, get the low-down on auction bidding.
Cate provides opinions based on current market conditions. These opinions should not be treated as investment advice. Always obtain advice based on your individual circumstances.
