So, you have found a home you love. The location is perfect, you’ve already picked your new local and you’re ready to start packing boxes. You just have one little hurdle – the auction.
Then what is all the fuss, surely it’s not that hard to buy a house? To be honest, it’s not – if you have done your due diligence and have your cash flow sorted out, then it’s actually pretty easy.
People always ask me what my number 1 auction tip is. It’s the same every time, have a higher limit than the next guy!
There are a few other tips I’d recommend before you go to auction (aside from having the highest limit), here’s my top 4 (or you can watch Vincent run us through the tips):
1. Have a professional look over the contract of sale and section 32.
This is simply a must when buying any property. You can request the contract and section 32 from the real estate and they will be able to email it to you to pass on to a professional. You can either send it to a conveyancer or solicitor, be prepared to pay a fee to have it reviewed before the auction. Don’t get caught out with a clause in the contract that leaves you out of pocket.
Entourage has its own in-house conveyancing and do free contract checks for its clients.
2. Negotiate the “terms”.
When we refer to “terms”, we are referring to the settlement date and deposit required when you purchase the property. Settlements terms are generally 30, 60 or 90 days. Depending on the vendor and if they want to settle earlier or later, this could differ. If the settlement date doesn’t suit you, negotiate with the vendor, quite often people are happy to be flexible.
However, this has to be done before the auction.
The next thing to negotiate is the deposit. Pretty much every time, the agent will call for a 10% deposit. If you don’t have access to the full 10% cash on the day, which is required, then you can ask for a 5% deposit or a fixed amount. I always try to get my clients to pay a smaller deposit to keep more money in their account for longer.
One more thing on this deposit, how exactly are you going to pay it? Would you believe that agents still want a cheque on the auction day? Who under 70 has a chequebook anymore?
Therefore, while negotiating the terms with the agent, speak to them about how can you pay the deposit. A couple of options we see happen are below:
Borrow a cheque from Mum and Dad
Some banks will offer you a temporary personal chequebook of up to 5 cheques linked to your account. Will need to go into your bank well before the auction to do this.
Set a fixed amount for the deposit (for example $50K) and go into your bank and get a bank cheque. A bank cheque is different to a personal cheque as it’s locks the amount from your account and can’t bounce.
Pay a small cash deposit of approx. $1,000 on the day and transfer the remaining amount electronically on the Monday.
3. Get a building inspection done before auction.
We would always recommend getting a building inspection done when buying an established house. The difficult decision people have to make is, is it worth it – as they can cost up to $700 to a building and pest inspection.
If you miss out at auction, there goes $700 down the drain. Some of our clients know builders and they get them to inspect for free but it’s never as thorough as a proper building inspection.
If you don’t get an inspection and you do win at auction, you could be risking a lot more than a mere $700.
When buying apartments, it’s not as common to do a building inspection as an owner’s corporation covers the building. Any known faults in the building should be listed in the section 32. If there is planned works, it may be covered by insurance or a levy will be struck by all owners to pay for it.
4. Set your auction limit.
Probably the most important aspect in going to auction, yet very rarely people stick to their original limit. Auctions are intense and if you haven’t been to one, I’d suggest you join the spectators and go to a few before you decide to bid yourself. I’ve been to hundreds of auctions all around Melbourne and they are all different.
It’s emotional and it’s easy to get swept up in the fanfare (just $1,000 more!) and go over your budget. That’s why, Entourage works closely with all clients to make sure the cash flows are completed and we have set an appropriate limit.
You might also like to set yourself an odd number as your limit. For example, if your limit is $1,003,000 – you might just beat someone who set their limit at $1,000,000.
Bonus tip – Get a pre-approval
When buying at auction, it’s unconditional which means there is no cooling off on the property. If you have post purchase anxiety and want to get out of the purchase, it’s going to come at the cost of your deposit and potentially more if they don’t sell the property for what you paid for it.
Follow these top 4 tips – and of course have the highest limit – and you’ve set yourself up for auction success!
Got your Entourage? Let’s go to auction.
By Damien Roylance.
Image credit Pine Ave.