Buying a property
at auction
Buying a property at auction can be one of the most exciting and rewarding
buying experiences of a lifetime. It can also be a daunting experience,
particularly for an inexperienced bidder. The most important tips
for buying at auction are to be well prepared and fully understand
the process.
An auction is held at a pre-determined place and time. Interested
parties are invited to bid for a property in competition with other
interested parties.
Unless advertised otherwise, the property will be subject to a reserve
price. This is the price that the vendor is willing to accept for
the property. Should the highest bid be below the reserve price, the
property will be passed in unless the vendor aggress to sell at a
lower price. Once the property is passed in, the highest bidder will
usually have the first opportunity to negotiate for the property.
When a property is sold “under the hammer” at auction, the highest
bidder is required to sign the contract for sale and pay a deposit.
The deposit is usually 10 per cent of the total purchase price and
is payable on the day, unless prior arrangements have been made. So,
before bidding at an auction, it is essential that your finance is
approved.
It is also very important to remember that, when you buy a property
at auction, you are not entitled to the two clear business days “cooling”
off period that may be available when you purchase a property by private
treaty.
Before bidding at auction, it is a good idea to attend some other
auctions as a spectator to familiarize yourself with basic auction
procedures. If you are concerned about bidding at auction, or feel
unsure about some aspect of the process, you may consult a real estate
professional for assistance.
Before bidding at auction, it is imperative to establish a price
limit and to adhere strictly to it. This will ensure you do not get
carried away in the momentum and spend more than you can afford, or
more than the property is worth. If you are concerned about falling
into the trap of emotional bidding, you can ask someone else to bid
on your behalf.
REISA members adhere to an Auction Code of Conduct, which upholds
the strictest standards of service. Dummy bidding is strictly prohibited
at REISA member auctions and all vendor bids are clearly declared
to ensure the genuine transparency of the system.
Want to know more?
For further information, call the Real Estate Institute of South
Australia’s information service on (08) 8366 4345. This is a free
service offered to members of the public on real estate-related queries.
