You found the perfect property, and then discovered it was going to auction. Does the prospect of buying at auction feel thrilling? Or does it feel overwhelming. Either way, if a property is going to auction and you want to have a chance at it, you need to know what you’re going to be dealing with. And part of that is understanding the financial aspects of bidding and buying at auction.
The best way to make the auction process as smooth as possible is by being prepared. Know the lingo, know the procedures and know what that property is worth. Going in with a clear plan is your best defence against getting overwhelmed and bidding more than you can afford.
Auctions can feel stressful, especially for first-time home buyers. It’s a pressure-cooker environment, with bids coming from all corners and constant cries from the auctioneer. You may feel like this is not the homebuying path for you.
But buying at auction has its advantages.
You should have completed several inspections of the property to be confident it’s a good buy. Arrange to have a building and pest inspection before the auction date so you’re aware of any issues. If there’s something major you’ll have to get fixed, you should subtract this from your bidding amount.
Request all the information you can from the real estate agent prior to auction day. And find out the terms of the sale. The more you know, the better prepared you’ll be.
Of course, no buyer wants to pay more for a property than it’s worth. And no bank wants to lend more money for a property than it’s worth.
Do your due diligence so you have a solid idea of the property’s value. This will be your threshold and generally you shouldn’t bid any higher than that amount. (Provided you have the home finance to cover it.)
It’s easy to get caught up in the panic and competition of an auction. So, knowing your limit and sticking to it is crucial. Be prepared to walk away if the bids go above your limit.
If you end up placing the highest bid at auction, you’ve essentially entered into a contract. There is no cooling-off period for auctions, so you need to be ready to follow through. And that means that you’ll want to have the home finance to back it up.
This will save you a lot of stress in the days after the auction. It could also save you money. If you pay a deposit without pre-approval and your home finance application falls through, you’ll likely lose your deposit.
We encourage you to secure pre-approval before auction day. That way, you’ll know exactly what your borrowing capacity is and how much you can afford to bid. You should also have your deposit ready so it can be paid shortly after the auction. Completing all of your lender’s paperwork prior to auction will help the process run smoothly.
One of the most efficient ways to sort your home finance before auction is by engaging a quality mortgage broker. Our team can help take a look at your individual situation and find the right loan for you. We can save you time, stress and money – all of which are vital when buying at auction.
It’s important to tell your mortgage broker that the property will be sold at auction. Pre-approval policies can also differ between lenders. Some lenders grant pre-approval before thoroughly checking your application.
This is not a great situation to be in when buying at auction in case your home finance application is refused. A good mortgage broker can guide you towards lenders that are more likely to follow through their pre-approval with home finance.
It’s worth paying for legal advice and having a trusted solicitor or conveyancer check over the sales contract before auction day. They can advise you if there’s anything to be wary of.
If the auction process is new to you, attend a few other auctions in your area before bidding day. This will help you to understand the process better and minimise the nerves.
It’s also a good idea to learn the terms used at auction. For example, the ‘reserve price’ is the minimum amount the seller will accept. If an auction is ‘passed in’, that means the highest bid hasn’t met the reserve price and the property hasn’t been sold. Do your homework so you can feel as confident as possible on auction day.
Keep your cards close to your chest and don’t share how much you’re willing to bid with the auctioneer, agent or other bidders. Stand somewhere the auctioneer can clearly see you and think through each bid through before raising that paddle. The most important thing is to know your bidding limit and stick to it.
As Brisbane’s most trusted mortgage brokers, we can help you find the right home finance for your needs, even if you’re buying at auction. Get in touch with the Stapleton Finance team today. We’re ready to help.
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