If you're attending an auction the secret is to be prepared. Here are some handy hints to help you manage an auction.
Buying at an auction versus private treaty
How do auctions differ from Private Treaty sales?
At an auction you're bidding against other potential buyers and the highest bidder wins. With a private treaty sale you make an offer to the real estate agent who then takes it to the property owners. Once you and the seller have agreed on the price a contract of sale is drawn up and signed by both parties - it's called exchanging contracts and it's when you put down part of the deposit.
A key difference between buying at auction and a Private Treaty sale is:
If you purchase by private treaty, once the contracts have been signed you usually have a cooling off period. During this time you can change your mind about buying the property but you may lose some or all of your deposit depending on your state.
Tips for buying at auction?
Go to as many auctions as you can to get a feel for what happens. Check out prices in the area. Once you've seen how auctions work, you'll be confident enough to start bidding.
Inspect before you bid
Make sure you get all your inspections such as pest and building done before you go to the auction. Once your bid is accepted, you're committed to buying.
You need a written mortgage pre-approval before the day of the auction, so talk to your lender about getting a mortgage pre-approval for the day. You'll need a deposit on the day too, usually 10% of the purchase price.
Set your budget
It's easy to get carried away with the excitement of an auction and spend more than you wanted to. If you set a budget before hand, stick to it.
You need to register to bid
You must register to bid at an auction. Take along your driver's licence as formal identification.
The vendor will nominate a reserve price, which is the lowest price that the vendor is willing to accept for the property. The reserve price is not normally disclosed to interested buyers. On auction day, if the reserve price is not reached the property will be 'passed in'. The seller will then either try and negotiate a price with interested bidders or put the property back on the market.
The Real Estate Institute of Australia, has also developed a 'Buying at Auction'fact sheet available at www.reia.com.au.