The key to successfully buying real estate is to arm yourself with as much knowledge about real estate in your area as possible.
This can be done by talking to your local Real Estate Agent or real estate salesperson, by regularly reading property pages and publications such as Property Press, going to open homes and by researching property on internet sites.
Some answers to commonly asked questions about auctions
What is a real estate auction?
Auction is a way of selling property through intensive advertising media designed to capture the maximum attention of buyers within a set time frame. The process is a means of purchasing/selling real estate through public negotiations to determine the true market value of the property at that time.
What is the reserve price?
The vendor usually sets the reserve price prior to the auction. The reserve is established as a result of feedback during the marketing period from interested parties. The reserve is the minimum figure that the auctioneer is instructed to sell the property for.
Will the auctioneer be bidding on behalf of the vendor?
No. It is strictly against our company policy to have the auctioneer or any other person placing bids for the vendor in order to increase the price.
How do I bid at the auction?
The auctioneer will ask for an opening bid and will then nominate the increments by which the bidding can be raised. Simply attract the attention of the auctioneer by:
- Raising your hand
- Calling out your bid
- Nodding your head when you catch the auctioneer's eye
If you are the successful bidder, you will be asked to pay the 10 percent deposit and sign the auction contract.
Can I buy before auction day?
Yes, in most cases you can.
1. The Auctioneer or branch manager must be contacted first and only when the offer is in writing (ie no verbal offers). NO contact with the vendor should be made regarding the offer. All pre-auction offers must be unconditional.
2. The offer is to be written up on the "Real Estate Agent Auction Particulars & Conditions of Sale" with the following clause added as a Special Condition of Sale and initialled by the purchaser. The purchaser agrees:
a) The offer shall remain open for acceptance by the vendor and
b) may not be withdrawn or revoked by the purchaser until 4pm on the second working day after the offer has been first presented to the vendor.
3. The offer is communicated to the Vendor/s by the auctioneer for consideration, with a deposit of 10% of the purchase price; this deposit must be attached to the written offer.
4. If the offer is not at an acceptable level to the vendor, no counter offer is to be made. It is merely communicated to the purchaser that, at that stage, the offer was not at a level that would stop the auction. The deposit is returned un-banked.
5. If the offer is at an acceptable level to the vendor, all other registered buyers will be contacted and told that an unconditional offer to purchase the property, at a level that is acceptable to the Vendor, has been received. All other registered buyers will then be informed of the time, place and manner for the opportunity to make their best offer (taking into account the holding period for the first offer in clause 2 above).
6. If other registered buyer/s wish to make an offer we will either: a) bring the auction forward or b) present the offers as multi-offers in accordance with Real Estate Agent's "multi-offer" procedures (with the initiating purchaser having the right to increase their offer).
In the case of 6b, all purchasers shall be asked to sign a "Multiple Offer Acknowledgement' form, which will accompany the offer.
7. If the auction is brought forward, the opening bid announced will be the instigating written offer already made, which will be the declared reserve price.
8. This should all be done within the two working days time frame, after the offer has been communicated to the vendor. It is recommended that time records be kept of the procedure followed and contacts made.
Can I bid when I have to get finance?
Because you must be in a position to bid on a cash unconditional basis at the auction, you should organise through your bank or mortgage broker pre-approval to bid up to a price you are prepared to pay.
Can I bid when I have a property to sell?
There are two options:
If you are in a sound financial position you may arrange bridging finance to cover any delay in settling your property.
Ask the vendor for a longer settlement date, giving you time to sell and settle your property.
What price do I have to pay to buy the property?
This is the price YOU are prepared to pay, and the vendor will accept, bearing in mind that other buyers may have different ideas regarding the value of the property. It is sometimes prudent to fix a figure you would pay to secure the property, but also a higher amount just in case. Remember, if it sells to another buyer at auction, you won't have another opportunity.
What if the property doesn't sell?
If the reserve price is not reached, the property is passed in to the highest bidder. The highest bidder is then offered the first right to purchase the property immediately after the auction at the vendor's reserve price. If a sale is not completed immediately following the auction, the property will be offered for sale to all other interested parties.
What contract do we sign and what are the conditions?
The contract is the auction contract. This contract and other helpful information, is available from the salesperson during the marketing of the property and on auction day. It is important that you read and understand this contract prior to the auction. If you are the successful purchaser you are required to sign this contract and pay 10 percent of the purchase price as deposit; either by bank cheque or personal cheque. Settlement date is often flexible. You should discuss this with the salesperson prior to the auction commencing.
Before signing any agreements, both the buyer and vendor should seek legal advice.