Tips for Buying at Auction – Part 2
Auction Tip No.3
The third tip for anyone looking to buy a property at auction is to get your ducks in a row.
First is finance. I know it sounds very straightforward and simple but the amount of people who actually do turn up at auction without having their finance done is really does amaze me. But the other thing is you need to have it look at really specifically, so talk to your bank or your mortgage broker because its not enough to just say, “The bank is good for it, they will lend me the money”. In my opinion, its best to get it all sorted prior to turning up on the day so you get your equity release, you know where you are going to get your deposits from, you got your stamp duty and other costs, everything is ready at settlement. The other thing to keep in mind is if you’re bidding over 80%, you don’t want to be buying a property in a suburb where you are setting a premium or a really high benchmark for price because what’s going to happen is, the bank may send out a valuer and if they don’t think that the value is the same as the price you pay they might come out at lower. If you’ve got a loan to value ratio (LVR) that is a bit higher than that, maybe 90% or 95%, they might put you under a lot of pressure. So its important to know that if you are bidding over 80% and if you are going into lenders mortgage insurance territory, you need to make that the price is realistic and reflective of the prices that are being paid in the rest of the suburb.
Now it’s important that you remember that when you go to auction, it is unconditional. There’s no cooling off period, no second chances.
So you need to get building and pest inspections done prior to actually turning up on the day. You can make sure that the structure is OK and to make sure of courses, there is no termites eating the place inside out. Again, the amount of people that I see bid at auction who haven’t done these two really basic things often staggers me. It’s really going to put you into the box and give you the confidence you need on the day cause let’s be honest, when you are bidding, when the focus is on you and when the adrenaline is kicking in, you really do need all the confidence that you can get. So having your ducks lined up in a row before you get there on the day can certainly help you with that.
The last thing is actually to get the contract reviewed by your solicitor or your conveyancer well in advance of turning up. If you are actually going to make any changes or change any condition in that particular contract, once the hammer gone down, you can’t do it. You need to have these agreed upon prior to turning up on the day. For example, one of the once that I like to put in is, I want the vendor to give me the permission to use the campaign photos for us to advertise for a tenant – a couple of weeks out. They actually own those photos and we can’t use them without their permission. The other clause I put in is allowing the vendor to give us the permission to actually advertise for rent prior to settlement because in effect, its still not our property yet. So a couple of things like that where we get it approve prior and give us that confidence to make sure that when we are bidding on the day, we are doing the right thing by our clients and it’s something that you can also do in advance to give you the amount of confidence that you need to bid on the day.
Here are other parts of Bryce’s Auction Series: