Buying At Auction
Your dream home has just come onto the market and with a certain amount of trepidation you realise that it is being sold by auction. You’ve never been to an auction before – never mind purchased a house at one – and you’re a little worried that you won’t know what to do.
How to get a good deal
Make sure you have finalised all important details before the auction date. Extensive preparation is essential to a happy auction experience.
- familiarise yourself with the auction process by visiting as many auctions as you can. Ask questions of the marketing agents and find out everything you need to know about bidding.
- Inspect the property before the auction date. Be objective and make sure you inspect other properties as well. Inspecting other properties means you can make an educated guess as to a fair purchase price. Work out how much you are willing to pay and do not exceed your maximum on auction day. If necessary, arrange an independent valuation.
- Make an appointment with the real estate agent and ask as many questions as possible, including bidding strategies. Also request a copy of the contract, including condition reports, and study it carefully.
- Visit your lender and finalise any home loan arrangements. A deposit, often as much as 10% of the purchase price, will need to be paid on completion of the auction, so ensure you have these funds available.
- On auction day it’s important to remember that while the auctioneer is employed by the seller to get as good a price as possible for their house, they are also there to help you buy the property.
- Work out your tactics before the auction and stick with them. Your visits to other auctions should give you an insight into bidding tactics, such as changing the increments of the bids away from the auctioneer’s chosen amounts or those of the other bidders. This can intimidate other bidders; it shows confidence and a strategic plan. More often than not, a confident bidder ends up buying the property!
Vendor, dummy and co-owner bids
The main difference between vendor, dummy and co-owner bids is that dummy bidding in Australia is illegal. A vendor bid is where the auctioneer will place a bid on behalf of the seller with a view to assisting the property reach its reserve price. Vendor bidding can only be done by the auctioneer or another legally permitted person and should be declared as part of this auction’s process before the auction begins.
Alternatively, dummy bidding is just false bids made by non-genuine crowd members. They have no intention of buying the property and are there purely to inflate the price. Unfortunately, some unscrupulous agents still partake in this illegal act so don’t bid until the house is placed on the market as dummy bidding is generally only used until the reserve price is met.
A co-owner is a person who has a financial share in the house, such as a divorced spouse, who wishes to buy out the other owners. Co-owner bids cannot be made through the auctioneer and are not announced during the auction. However co-owner bids are declared in the rules set out before the auction starts.
How are auctions regulated?
Auctions are a recognised and widely used form of selling. Not just property but livestock, household goods and cars are auctioned, just to name a few. Each state and territory in Australia has their own set of regulations governing auctions, designed to protect both the vendor and vendee.
The Real Estate Institute in each state and territory sets down guidelines detailing their code of practice for the industry. By ensuring your chosen agent is a member of the Institute, you can guarantee a high standard and an auctioneer who will adhere to each and every regulation.
Not many complaints are made about auctions in Australia, however if you do have any problems, contact the Real Estate Institute in your state who will be able to refer you to the relevant authority. To find your state’s Real Estate Institute visit www.reiaustralia.com.au.