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 the information below may be of benefit to you.
Rules Applying to Property Auctions
If you are the successful bidder at an auction, the property is now yours. However all due diligence regarding the property will need 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 it is too late. Therefore after the auction there is an 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. Hence see the real estate 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 when you have spent money on a Registered Valuation, Builder’s Report, or with your solicitor. Consequently you then don’t win the auction then the money you have spent on these items is lost.
First Home Buyer Considering Home Auctions
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.
If you have less than a 20% deposit to purchase a property and want to purchase at auction you will need a Registered Valuation. This is a lender's 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 our Insurance Adviser, Shane Blummont on 021 343 655 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 begins.
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. Also possibly their finance is not confirmed before the new auction date.
Are you considering purchasing at auction?
Contact our mortgage and insurance team to guide you through the process. We can assist you through helpful pre-approval applications, guide you to sensible home insurance options, and answer any questions you might have specific to your circumstance.Contact Us >
Published by Scott Miller
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