12 Aug Your Guide to Buying at Auction in NSW
Selling by auction has become a popular way to sell residential property in New South Wales. On average, 38% of homes went to auction and more than 95% of homes were sold via auction in some areas
Selling property at auction is advantageous when the housing market is tight and buying are competitive. Well-informed buyers can quickly close a deal on a property at auction, avoiding a lengthy negotiation process common to private sales.
There are different procedures of sale by auction in each state or territory. Buyers who plan to purchase at auction in a state other than NSW should refer to the rules of that state.
Important Facts About Auctions
Auctions allow multiple buyers to bid publicly on a property for sale. In NSW, auctions are often held by estate agents who have authorisation to assume the role of an auctioneer.
There are several differences in rules and procedures between buying at auction and buying a house on the market. Buyers must be aware of their obligations and responsibilities when purchasing a property by auction.
Most importantly, the highest bidder is obligated to follow through with the purchase after the hammer falls.
There is no cooling-off period and no means to negotiate terms of a contract. If you are the highest bidder, you must pay a deposit and exchange contracts immediately. Failure to do so may result in penalties, loss of deposit or payment of damages to the vendor.
Bidders must register with the selling agent. Registration gives you the right to bid. It does not mean that you must bid.
To register, proof of identity that shows both your name and address must be presented. Examples include a driver’s license, council rates notice or vehicle registration.
If you do not have these types of document, two alternate sources may be used. One must show your name, and the other must show your address.
Acceptable combinations include passport, ATM card, credit card or birth certificate along with a utilities bill, rental agreement or any official document that shows your address.
If bidders pre-register, this documentation must be presented on the day of the auction.
After registering, bidders will be given a unique number. The number and the registration details provided by the bidder will be recorded in a Bidder’s Record. This record is kept by the selling agent for three years after the auction.
The contents of the record cannot be disclosed to the seller, only to authorised representatives of NSW Fair Trading, a consumer rights arm of the Department of Finance, Services and Innovation.
Preparing for the Auction
Because there is no cooling-off period, bidders are urged to inform themselves about the property before auction day.
Research the Area
Be familiar with the value of property in the area. Examine recent sales data to know how much houses are selling for in that suburb. Attend other auctions to see how bidding is done and what the final sales prices are.
Visit the House Several Times
Look at the exterior, the garden and overall general condition. Have a building and pest inspection done by a certified inspector to identify defects or problems with the property.
If the property has a swimming pool, include a pool inspection. An inspection will not only identify problems. It will provide recommendations and cost estimates for repair.
For community properties or properties in a strata scheme, review strata reports.
Examine The Contract
If you have any questions or feel that the contract is unfair, have your solicitor review it. You can negotiate changes to the contract with the seller’s agent before the auction.
This amended contract should be presented to the auctioneer at the time of the auction. The bidder must inform the auctioneer that bidding is according to the terms of the amended contract.
Obtain Finance in Advance
Know how much you can afford and get funding in place before the auction. The winning bidder must pay a deposit, usually 10%, after the auction.
Ensure that enough money is on hand to pay the deposit. Even if financing is not in place, the winning bidder is expected to sign the contract and complete the sale.
On Auction Day
A property often is open for inspection on the day of the auction before the event begins.
Reinspect the property, review the contract and make sure that you understand the rules of the auction.
The auctioneer or agent must provide each bidder with a unique number, a copy of the Bidder’s Guide and a list of conditions governing the auction.
An owner may set a reserve price which is the minimum amount the owner will accept for a sale.
If the reserve price is not reached, the agent can ask if the owner would sell at a lower price.
If the seller chooses not to accept a lower price, the property is withdrawn from the auction – passed in.
Bidders have no obligation to buy if the reserve price is not reached. However, the highest bidder may be invited to negotiate a sale with the seller.
If a property is passed in and contracts are exchanged on the same day as the auction, a cooling-off period is not allowed.
If the reserve price is reached, bidding continues until the fall of the hammer.
No bids are accepted after the hammer. The highest bidder becomes the buyer. Auctioneers can refuse bids that are not in the seller’s best interest.
After contracts are exchanged, your conveyancer will conduct searches of the property.
At settlement, the remainder of the purchase price will be paid to the seller.
Pre-auction offers are allowed in New South Wales. A buyer may submit an offer to the seller’s agent before the date of the auction. The selling process is the same as that of a private sale.