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HOW AUCTIONS WORK
Auctions have some unusual rules that only apply when purchasing at auction. Given so many are sold in this manner in the Canterbury region I thought the information below may be of benefit to you.
- If you are the successful bidder at an auction, the property is now yours, however all due diligence regarding the property will needed to be completed before the auction. If you win the auction there is no getting out of the purchase even if you find something negative about the property after the auction as the expectation is that you have completed your due diligence prior to bidding.
- A 10% deposit is required on the day of the auction although you can negotiate this before the auction to have this lowered – see the RE Agent you have been dealing with prior to the start of the auction to gain this approval.
- Only one person can win an auction. One of the downsides to auctions is that if you have spent money on a Registered Valuation, Builder’s Report, or with your solicitor and then don’t win the auction, then the money you have spent on these items is lost.
First home buyer – Things to be aware of:
- If you have less than a 20% deposit to purchase a property and want to purchase at auction you will need a Registered Valuation (a lender requirement) which costs around $750.00 -$850.00, and then you might not win at auction.
- Before you go to auction, house insurance will need to be confirmed. This is hard because you don’t actually own the house so only a promissory note can be supplied. It’s best to contact Jason Haskins on 022 018 9178 to talk through the options available.
- Insurance companies may require a builder’s report before committing to insurance. As with the Registered Valuation there is a cost to getting a builder’s report complete.
Bringing the auction forward – What does this really mean.
- Once a vendor has committed to selling via auction the auction will always take place, even if an offer is accepted before the auction.
- The auction still has to take place to give all interested parties the opportunity to purchase. However, the auction date is usually forced forward to try and catch other purchasers off-guard. Often this means purchasers (other than the person who has forced the auction forward) cannot get their due diligence completed in time, or finance is not confirmed before the new auction date.
To summaries – Auctions are not very ‘First Home Buyer’ friendly as there can be significant costs to going to auction with no guarantee you will win the auction – Feel free to call me if you have any questions.