Many homebuyers or property investors get totally overwhelmed at the thought of bidding for a property at auction. Buying at Auction can be an emotional roller coaster for many and there can be pitfalls if you haven’t done your homework before the big day. Below is an auction checklist for you to take into account if you intend on bidding at auction:
1. Are you borrowing money?
If so, have you got an unconditional approval in relation to the specific property that you are bidding on? If you have a
pre-approval to borrow up to a certain amount, this doesn’t necessarily mean that you will receive an unconditional approval to borrow this amount. A bank generally does not provide an unconditional approval until they carry out a valuation on the specific property you are buying. Usually, you are able to arrange for this valuation process to occur prior to bidding. Banks generally agree to lend a percentage of the valuation, not the purchase price. Therefore, you should not bid above the valuation unless you are certain that you will have sufficient funds over and above the percentage of the valuation the bank has agreed to lend you.
2. What about your legal costs?
Don’t forget about this in working out how much deposit you will need to chip in, over and above bank borrowings, for example Stamp Duty, solicitor’s fees and charges including search costs, GST and settlement agent fees.
GM Lawyers are able to give you an immediate estimate of what your costs associated with the transaction will be. You should also contact your bank to see what costs they will be taking out of the loan, for example Mortgage insurance, Transfer registration fees, application fees and search costs.
3. Have you got any concerns in relation to the property?
If so you should conduct a due diligence of the property before you bid at auction, because generally it will be too late to act on your concerns if you are the successful bidder at auction. To assist with the due diligence, click HERE to contact GM Lawyers. We identify what aspects of your enquiries we can assist you with and who you should contact in relation to any other issues of concern. Here are some examples of concerns that you may have prior to Buying at Auction:
♦ Has the pergola, built ins, underneath the house or garage got Council approval?
♦ Can your view be built out?
♦Are you able to renovate the property in a specific way or develop the property?
♦Where do the legal boundaries of the property lie?
♦ Are there any easements or other encumbrances over the property particularly those that could interfere with
of building a pool?
♦Where are the boundaries of any easement affecting the easement?
♦Who is liable to build/fix the boundary fence?
♦ What is going to be built on the vacant land next door?
♦ The selling agent or seller or a third party may have told you something, that may or may not be true and you wish to investigate.
4. What will some of the Terms of the Sale be if you buy the property at auction?
Even though the purchase price will not be known until the hammer falls, a selling agent will be able to advise you on matters such as:
♦ How much deposit you will have to pay upfront and when you will have to pay for the property i.e. the settlement date. The agent should also be able to show you a title search and provide you with a draft contract, which shows you, what some of the terms, including standard terms, will be.
GM Lawyers can look over this document for you prior to auction and provide prompt and practical legal advice.
5. Is this a mortgagee sale or a sale by the public trustee?
If so these contracts will generally include a number of special conditions in the contract that could pose a risk for you. We highly recommend you contact GM Lawyers to see what the ramifications of agreeing to these conditions will be for you.
6. Have you conducted an independent building and pest inspection to ensure the property is soundly built and free from termites?
7. Have you had financial advice and advice from a tax accountant or tax specialist to ensure that the property is a good investment and the buying entity you propose to purchase the property with is appropriate?
8. Have you conducted your own independent valuation or done your own research to determine what the market value of the property is?
Buying at Auction is a huge step and a lot of money is involved. We urge you to contact us for advice and peace of mind. GM Lawyers are professional, experienced Property Lawyers and we are on hand to discuss any of the above issues with you at your convenience.