Why do I need a Land Information Memorandum?
A Land Information Memorandum contains the local council’s records about the property. You should check this and make sure you are happy with the details of the property. If you want any other background reports, such as a registered valuation, title or trade report, these are also your responsibility.
How do I know what the property is worth?
Do your research before the auction. Visit similar properties in the area. Most buyers can establish an idea of a fair price by themselves by comparing the auction property to other properties on the market or recently sold.
You can pay for a registered valuation if you wish. However if other people think the property is worth more money than your valuer does, then you may miss out.
What are the "Particulars and Conditions of Sale"?
These are the terms and conditions of sale which are set out prior to the auction. They will include the chattels and expected Settlement date. This document is available prior to auction and it would pay to have a solicitor look it over for you. Your solicitor should check the title for you as all bidders on auction day are deemed to have accepted the title.
Note any special conditions mentioned. These conditions will be read aloud by the auctioneer at the beginning of the auction but you should an already familiarised yourself with them.
What is a Reserve Price?
This is the price below which the owner will not usually sell the property. The reserve price is usually known only by the auctioneer and the owners, and will not be made public. Once the reserve price is met, the auctioneer will announce that the property is “on the market” and it will be sold to the highest bidder.
If I want a longer settlement is this possible?
You can ask the agent for a variation of terms before the auction; for example you could ask for settlement in 90 days rather than the more standard 30 days. If the owner agrees to this variation, it will need to be in writing before the auction.
I can’t raise the full 10% deposit, does this mean I am unable to bid?
No, prior to the auction you can apply for a variation of the terms. This should be in writing and applies only to you. Once this variation has been agreed to, you can then bid with confidence.
If I am successful at the auction, do I need to pay any money immediately?
Yes, you will be expected to pay the deposit, usually 10% of the purchase price. You will also need to sign the special auction sale and purchase agreement. The balance of the money is due on settlement day which is usually 30 days after the auction.
A Bank cheque is not required unless specifically asked for. A personal cheque is fine. If it bounces or is cancelled then the purchaser is in default and special clauses contained in the agreement will be triggered.
What does “Unless sold prior” mean?
Can a property be sold before the auction?
The seller can choose to withdraw a property for sale before the auction. They may also choose to accept an offer before auction day provided the price and conditions are acceptable to them.
Because of this, you should register your interest with the salesperson before the auction so that if a pre-auction offer is made, you can be contacted and invited to make your own offer. The vendor will consider all offers together. Alternatively, the auction date and time may be brought forward, with the opening bid being the original offer.
It is becoming increasingly rare for owners to sell before Auction. From the owners point of view they have invested in a marketing campaign to see what the market thinks their property is worth. Why would they sell prior to auction unless your prior offer was very attractive.
I want to buy the property but don’t have the finance arranged.
You cannot bid unless your finance is pre-approved. When you buy at auction, the purchase is unconditional.
You have two choices if you want to bid.
1. You can see your bank or a mortgage broker and arrange bridging finance. This puts you in a cash position on auction day. You have your existing house and the new property to offer as security to the bank.
2. You can take a calculated risk on your existing house selling within a set time frame, say 90 days, and ask for a variation of terms before the auction, e.g. ask for settlement in 90 days rather than the more standard 30 days. This variation needs to be in writing before the auction. It would also pay to talk to your financier for a backup plan should you have difficulty selling your house.
I can’t attend the auction but still want the property?
You can nominate another person to bid on your behalf. This may be a trusted friend or your lawyer. Extreme care is required however. It would be advisable for an authority to be completed in writing between yourself and your bidding representative which spells out clearly that the person is bidding on behalf and what amount they can bid up to.
If you get another person to bid and you are also attending the auction then there is no problem.
You can also bid by telephone providing you have made prior arrangements to do so. A telephone bidding authority is normally prepared, signed by the person requesting it and given to the auctioneer who will normally confirm with the crowd at the auction that we have telephone bidders being handled by (name of agent handling the phone bidding).
What is a Vendor Bid?
If the conditions of sale allow, the seller may bid themselves or instruct the auctioneer to bid on their behalf. Not all real estate companies will make Vendor Bid’s but, if they do, it is considered good conduct to advise all those present that a vendor bid has been made.
How does the auction run and how do I bid?
First relax; you won’t buy the property accidentally by coughing at the wrong time.
The auctioneer will open the bidding by asking for an opening bid. For example, an opening bid of $200,000 may be placed.
The auctioneer then asks for further bids going up in specified increments of $10,000, for example. This means that the next person to bid will be offering $210,000.
To place a bid, you simply need to attract the attention of the auctioneer by raising your hand and/or calling out your bid. Once the auctioneer knows you are bidding they will look for signals from you for further bids and a nod of the head or more subtle signals will be sufficient.
Once bidding reaches the reserve price, the property is “on the market” and will sell to the highest bidder when the bidding stops.
The auctioneer is taking bids in $10,000 increments. Can I offer less?
Yes, you can do this by calling out an amount less that the auctioneer is asking for, e.g. “I bid $5,000” However the auctioneer can refuse your bid. The auctioneer will usually do this if there are other bidders actively competing for the property and they believe your bid will slow the other bidding down.
What if the house doesn’t sell at the auction?
If the reserve is not reached the property is “passed in” to the highest bidder. The highest bidder then has the first right to purchase the property at the owner’s reserve price.
If the first buyer is unable to reach an agreement with the owner then the agents can negotiate with any other buyer. If these negotiations are unsuccessful the path is now open for conditional buyers to make an offer.
What does “Private Treaty” mean?
Private Treaty essentially means "confidential agreement". It is the sale of a property by negotiation between parties and is not being sold by an auction or tender process.
If you need further assistance while looking to buy your property, please contact us.