Buying your first home at an auction is an exciting opportunity and a great investment in your future. But many potential homeowners throw themselves into an auction head-first without fully understanding how they work beforehand. Getting the best deal possible on a place that you can call home is ideal, but you're probably wondering just what is the best way to approach an auction?
The Auction Process
It's a good idea to do your research prior to the auction date, so you have an idea of your budget range and how much the house is worth. Remember that auctions are fast-paced and you can easily get swept up in the atmosphere of the event, so the work that is done before the auction date is very important.
Decide precisely how much you're willing to spend before the auction, and be sure to obtain a copy of the contract of the home that you are considering purchasing at the auction prior to the day. Your solicitor can review this paperwork and advise you if any terms of sale strike them as red flags.
Pest and building inspections should always be carried out prior to the auction. The inspection will expose any structural issues of concern or highlight any problems which will affect the future price or value of the house. Surprises are common after a property auction, and you don't want to be left holding the key to a property that is going to decline in value or require additional repair and maintenance costs.
If you're the highest bidder on the day and are successful in obtaining the property, immediately following the auction you must put down a deposit. This is typically 10 percent of the purchase price (unless you have negotiated differently). If you've been pre-approved for a mortgage and you've had your finance checked, you can eliminate any difficulties during this phase. A mortgage broker can help you with the pre-approval process. Bring along picture identification and register when you arrive at the auction.
Once they begin, property auctions move quickly and can be intimidating for first-time buyers. Legally appointing someone else to bid for you is a good idea if you're not totally comfortable with the auction atmosphere and bidding practices.
Key Tips for Buying At Auction
An auction can often be overwhelming for first-time buyers. Review these tips before attending an auction to ensure your best chance of success on the day:
- Learn about the market value in the area around the property. Knowing prices and other key information about the neighbourhood can help your confidence when it's time to bid.
- Stay calm and stick to a pre-agreed bidding limit during the auction. Not only does this help you to avoid bidding too high on a property, but appearing to be calm and collected during an auction shows other bidders that you are confident of winning.
- Attend a few auctions before you front up to bid on the property you're interested in. Doing this will familiarise you with the atmosphere and processes so you're comfortable when it comes time to bid on your own property.
- Enlist the support of your family and friends on auction day to keep you calm and focussed.
- Even if you aren't successful in winning your property, remain optimistic – there are plenty more opportunities out there.
- It helps to talk to a mortgage broker beforehand, because of their extensive knowledge of the home buying process.
Buying a home at auction offers more transparency than buying through negotiation with a real estate agent. You could potentially secure a good price, but it may not always be the case. It is important to know that there is no cooling off period when buying a house at auction, as the decision is final. Prepare yourself for the auction by knowing the property details, market value and making prior arrangements for your finances.
To learn more about the auction process and to ensure you feel confident when it comes time to bid, get in touch with one of our expert mortgage brokers at Mortgage Choice.
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