Buying a house at auction
Buying a new home can be stressful at the best of times, but buying a house at auction can be doubly stressful. Here we look at some of the issues you will need to consider when buying your dream home at auction.
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Auctions becoming increasingly popular
With the recent boom in the property market throughout Australia, more and more houses and other real estate properties have been sold at auctions. For the seller, this offers the potential to fetch a high price for the property. For the buyer though, it can be a stressful way to buy your dream home if it means competing with other eager buyers to secure your new home.
How auctions work
When a house sells at auction, it will be sold by the auctioneer to the highest bidder on the day. The party selling the house at auction will set a reserve price. Once the bidding reaches the reserve price, the house will be sold to the highest bidder. However, if the bidding does not reach the reserve price, then the highest bidder may negotiate with the vendor to pay the reserve price or any other amount agreed to between the two parties. If the buyer and seller cannot come to an agreement on the price, then the house will be passed in at auction and will therefore not be sold.
If the bidding has reached the reserve price, then the house will sell to the highest bidder on the day. The highest bidder will need to sign the contract and they will also need to pay the holding deposit. The holding deposit will usually be around 10 percent of the purchase price.
When bidding for a house at auction, you should have a deposit, and you should have organised your finance prior to the auction.
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Tips for new bidders at a real estate auction
If you are intending to buy a house through auction, here are some tips that will help you through the process:
- Go to one or two auctions before you start bidding on any house you want to buy at auction.
- If you do not feel comfortable bidding yourself, get a professional or experienced bidder to do the bidding for you.
- have your finance organised already with a pre-approved home loan and do not go about your maximum price.
- Introduce yourself to the auctioneer beforehand. This way, they will know to keep an eye out for you.
- Ask for a copy of the contract prior to the auction.
- Get any pest and building inspections done before the auction, because if you are successful, you will need to sign the contract on the day of the auction.