For those that have never had to compete at an Auction, it can seem like a daunting experience. Don’t let that overwhelm you, as auctions offer many benefits to keep in mind! When the market is very buoyant, it is difficult for vendors, agents and buyers to predict what properties will sell for. With a tender, there is so much guesswork involved, as you don’t want to place an offer too high that you end up overpaying, or too low that you miss out completely. With an auction, you have complete visibility of what other people are prepared to pay, and you can decide accordingly when you are ‘in’ or ‘out’. Another benefit is that all bids are unconditional, so buyers with finance conditions or those that haven’t done their due diligence will be excluded, resulting in less people to compete against.
Below we have come up with some steps to get you ready in preparation. Please also be sure to check out our Top Strategies to Win the Auction blog to give you confidence on the day!
- Do your research
Before you go through the process of preparing for an auction, you need to fully understand the market and the area that you are buying in. To help you come up with a figure for what you will bid up to at the auction, find out what similar properties in the area have recently sold for. You can do this by asking your real estate agent for a list of comparable sales. It is also important to factor in the big costs that will need fixing in the future- such as a new roof or bathroom. You should become aware of these when your Building Inspection is done.
- Make sure all of your conditions are satisfied:
It is crucial that all your conditions are satisfied before the day. There is no backing out once the hammer goes down!
It is imperative that you:
- Obtain all of your reports such as a LIM (Land Information Memorandum) and builders report.
- Study the ‘Conditions of the Sale’ to find out important details such as the settlement date and which chattels will be included in the purchase.
- Complete an independent building inspection so that the builder can assess the condition of the home and prepare you for what costs are ahead. The building inspection is recommended to be done well ahead of auction to ensure the bank will allow you to bid depending on what these costs might be.
Get your finance approved:
Your bank or mortgage broker needs to give approval for bidding in an auction, to ensure that you are able to participate.
- You will be expected to pay a 10% deposit immediately after winning the auction. Once the settlement date is here, the remainder of the payment is due. You can use your KiwiSaver, however this variation will need to be discussed with your agent prior to Auction and stipulated in the contract.
- Because properties are currently often going higher than expected, you may find that you don’t have the required 10%. This will also need to be discussed with your agent prior to Auction Day to present all possible variations to the vendor.
Consult with your solicitor:
It is highly recommended that you get legal advice before bidding at an Auction. Your solicitor will review your LIM report, the Title and the Conditions of the Sale so you do not end up with any unexpected problems that can arise further down the track.
Come up with a strategy
Lastly, it is important to come up with a strategy to put you in the best position to win an auction. Please check out our Top Strategies to Win the Auction blog.