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Preparing for an auction

Things to consider ahead of auction day.

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How do auctions work?

As a buyer, the prospect of attending and bidding at an auction can be daunting. Understanding the way auctions work is important so that you arrive feeling prepared and confident on the day.

Here are a few tips about taking part in an auction and a breakdown of some of the rules that govern how they actually work.

Before the auction

One of the best ways to familiarise yourself with the auction process is through observation.

Go along to several auctions of similar properties to the one you hope to buy. Speak to real estate agents about the properties to get some pointers on their qualities.

Factors like school zoning and access to public transport may ramp up prices, so do your homework to determine if an area is going to suit your lifestyle needs or if you can be flexible with certain features.

Rubbing shoulders with other bidders and professionals will make you feel less alienated when auction day arrives. It will also give you an idea of the value of the house you want relative to others in the area.

Online tools can also help provide data and a price guide for properties in specific areas.

Making dollars and sense

You will need to have your finances in order before participating in an auction. This means gaining home loan pre-approval and taking along a cheque for 10% of what you are willing to pay at the auction.

You should know exactly:

  • How much you can borrow
  • The amount of the deposit and fees

Both these tactics may act as a brake on what can be a natural tendency to over-commit financially.

Obtaining legal advice on contracts

Buying a home at auction is a big investment, so it’s worth involving a solicitor or conveyancer to review the contract.  

Real estate agents are not obliged to tell you everything, and are generally representing the seller not the buyer. It is the buyer’s responsibility to make sure they have reviewed the conditions set out in the contract before auction day and hiring a solicitor puts a professional in your corner.

Getting it right on the big day

When auction day arrives, you should have your 10% cheque in hand, a firm grip on your upper limit and the support of a friend or relative. You can also arrange for an agent or someone else to bid on your behalf if you’re too nervous or can’t attend on the day.

Buyers will need to complete a formal registration process before bidding, and prove they are who they claim to be with official ID.

Just before the auction, the seller will tell the auctioneer their reserve price — this is the amount they want to reach before they will accept an offer. A sale is complete (or cleared) only if a bid matches or exceeds this reserve.

The successful bidder will need to put a deposit on the final bid price immediately, and from that point their commitment to buying the property is legally binding.

Succeeding at auction can be a numbers game, one that may involve compromising on certain features — such as accepting two rather than three bedrooms or a car port rather than a garage. 

Doing your research, going along to other auctions and making sure your finances and paperwork are sorted ahead of time will help ease the nerves so you can bid with confidence on the day.

This article is intended to provide general information of an educational nature only. This information has been prepared without taking into account your objectives, financial situation or needs. Therefore, before acting on this information, you should consider its appropriateness having regard to these matters and the product terms and conditions. Information in this article is current as at the date of publication.

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