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Buying a property at auction

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Things you need to know BEFORE the auction day

Buying a property is perhaps one of the most important financial decisions of your life. It can often be an intimidating process, especially at auction where you are competing with other buyers and there is no cooling off period. If you a purchase a property privately, and not through an auction, then the law permits you 3 clear working days to terminate the contract, with only very minor financial imposition. The property purchased at auction cannot be bought subject to any conditions such as securing finance from your lender or subject to inspect of the property by a builder and/or architect.

Many properties are sold at auction, particularly in a rising market, so it is important for
buyers to understand the processes involved so they can bid confidently on the auction
day.

There are many things that need to be done before the auction to ensure that your
interests are protected and that you are fully informed about the property you are
intending to buy, these things are outlined below.

Contract Review

The most important thing to do is to bring the contract of sale inclusive of the Section
32 Statement to us well before the auction date. RRR Lawyers have been undertaking
commercial work such as conveyancing for the last 30 years. The firm has a legal
practitioner who specialises in conveyancing namely Rajvee Kapadia. Prior to Ms.
Kapadia joining this firm she worked exclusively in the area of conveyancing with a wellknown property law firm in the city.
RRR Lawyers will review the contract and Section 32 Statement, advise you of any risks
and help to protect your interests by identifying any terms that might need to be
negotiated on your behalf or that you wish to have altered, for example; longer
settlement periods, reduced deposits and/or additional terms and conditions.

Alternatively, we may be able to advise you of restrictions applying to that particular
property, which may be an imposition of Council rules preventing two dwellings on one
block or the substantial part of the property containing an easement, being a right of
access retained by including water authorities, electrical authorities etc. In the
circumstances, you would be prevented from building any property over the easements.
In the event that you are planning to subdivide the land or put an additional dwelling on
the property, the purchase of that land/property will not assist you with that endeavour,
and you will be advised accordingly.

RRR Lawyers will also make sure you are buying exactly what you intended to and that
it is in the condition you expect by arranging any pre auction inspections that should be
carried out such as building and pest inspections.
If you are the successful bidder at the auction the reviewed contract can be signed with
confidence.

Inspect the Property

You should thoroughly inspect the property before the auction day and satisfy yourself
that all inclusions are in proper working order and that the gas, water and electricity are
functioning properly.

If you are successful on the auction day you will be buying the property ‘as is’, and will
be required to pay a 10% deposit and the balance at settlement. If you cannot come up
with the 10% deposit, the vendor will be able to issue proceedings and make a claim
against you for the deposit, and potentially even further payments for loss and damages.
Research

Thoroughly research the area and surrounding suburbs before the auction day, so that
you are comfortable about the amount you are prepared to pay for the property, and can
bid confidently.

Finance

Make sure that you have your finance in order before making an offer. If you are
obtaining mortgage finance, you should have your finance unconditionally approved (not
just pre-approved). Confirm with your lender the maximum amount you can borrow.

Pre-approval is not confirmation of how much the lender is willing to provide you, it is an
indication of what you might be able to borrow depending on the value of the property,
determined by a formal valuation appointed by the vendor after the auction. Furthermore
there may be additional conditions on the pre-approval such as providing proof of
additional income disclosed in the application.

It is important to ensure that you have adequate funds available to complete the
purchase within the timeframe stipulated in the contract. In addition to the purchase
price sufficient allowance will also be made for the stamp duty and legal expenses.

Please feel free to contact RRR Lawyers to secure information as to the amount of
stamp duty and other amounts payable. If you are borrowing funds from a financial
institution, the lender will reduce the available loan amount by deducting the applicable
stamp duty, registration, and perhaps their own application and valuation fees. This will
bring down the total loan funds available for you to apply towards the sale. Consequently
you may require more funds than you may have initially thought.

Register to Bid

To participate or bid at an auction, buyers must register with the selling agent and be
given a bidder’s number. You can register with the selling agent at any time prior to the
auction, such as when you inspect the property, or on the day itself.

To register you must provide ID, a card or document issued by government or a financial
institution showing your name and address, for example:

 driver’s licence or learner’s permit
 vehicle registration paper
 council rates notice.

If you do not have this kind of proof of identity you can use two documents that together
show your name and address.

Reserve price

Before auctioning a property, the seller will nominate a reserve price, which is usually
not advertised. If the bidding continues beyond the reserve price, the property is sold at
the fall of the hammer.

Bidding

Make sure you have a strategy going into the auction and that you set yourself a
maximum purchase price. Stick to that maximum price. If you feel as though you may be
too emotionally attached to bid at the auction yourself, then organise with the Agent to
have someone bid on your behalf. If you elect to do so, you must provide a written
signed authority to the Agent authorising the person to bid on your behalf.

Successful Bidder

If you are the highest bidder, immediately following the auction, you will be asked to:

 provide our contact details to the Agent;
 sign the contract of sale; and
 pay the deposit.

You will be entering into an unconditional and legally binding contract, and there is no
cooling-off period.

The signed contract will then be delivered to our office and we will contact you to discuss
the next steps.

Conclusion

Getting the right advice, being fully informed and prepared before the auction day is a
critical part of ensuring that the purchase of your next (or first) property runs smoothly.
The purchase of a property, at auction or otherwise, should not be too stressful and our
expert team can help guide you through the process and make sure your interests are
protected.

If you or someone you know is looking to purchase a property at auction and needs help
or advice, please contact us on 03 9387 2424 or email info@rrrlawyers.com.au.

Posted in: Conveyancing and Property Law