Don’t be afraid of fall of hammer
Buyers and sellers should not be daunted by auctions – it can be the most transparent way to sell or buy property
WHILE the inexperienced may be hesitant, buying and selling at auction can be the most transparent way of participating in the property market. Auctioneer Haesley Cush of Ray White said it allowed buyers to see their competition and know what others were prepared to pay, and it also allowed sellers to get a real time idea of what buyers thought their home was worth.
Mr Cush said his best advice to those thinking of selling or buying at auction was to attend as many auctions as they could to see how it all worked.
If you are buying at auction
Register in the name which is going on the contract. It seems obvious right?
But some buyers have come unstuck. “You must know the entity you are buying the property in. Is it your name, your partner’s name, is it a trust fund? ‘’ Mr Cush said. “Take your driver’s licence or passport when registering and if you were keen to bid, it was a good idea to register before the auction day, so nothing was left to chance.
“One of the other most important things to do on auction day was to make sure you were ready to pay the deposit if you were the successful bidder.
“You need the deposit at the auction. “Unless the owner allows for something different the standard terms of an auction call for a 10 per cent deposit, on the day.
“Almost every modern auction accepts a five per cent to 10 per cent deposit, but this is at the seller’s discretion and will be announced to potential buyers on the day.’’
As few people still had personal cheque books, Mr Cush said it was important to work out beforehand how you would pay the deposit. Some sellers may allow funds to be transferred within 48 hours, or they may set a dollar amount which they can submit as a bank cheque, but this needs to be nutted out before the bidding starts.
As do any other variations including longer settlement periods.
It is too late once bidding gets under way. And if you can’t make it on auction day someone else can bid on your behalf as long as they have a written letter stating that they can sign a contract on your behalf – that is a power of attorney or bidding authority.
“I’ve found a few buyers of late seem to have a limited understanding of auctions and subsequently are turning up yet planning on not participating,” Mr Cush said.
“However by not bidding and letting the property pass in this has only led to a far more competitive and uncomfortable situation straight after the auction as they enter a closed door negotiation or what is commonly referred to as a Dutch auction.
“These negotiations see all buyers given one chance to submit their best offer without any idea of their competitors’ price or even the number of other offers.
“It really amazes me when people turn up to an auction with a pre-approval from the bank, have inspected the property a number of times and have a game to buy the property that falls into line with ‘I’m not bidding, I’m just gonna watch and see’.
“Mostly these buyers are just ignorant about auctions.
“They are nervous about the unknown and don’t want to pay too much.
“But usually it only takes a minute to remind them of the reasons as to why they should participate, all in line with what I’ve listed above and they usually warm into the bidding.”
If you are selling at auction
Mr Cush said one of the most important things to take into account when going to auction was to choose the right auction agent.
“Auctions are a specialist way of selling real estate. There is no price, the contracts are unconditional and working with buyers to prepare them to bid takes expert precision,’’ he said.
He said generally for a seller the campaign was short and sharp, four weeks.
The campaign gave buyers a deadline to make a decision and could stop the selling process dragging on.
There may be offers made before auction and sellers needed to weigh up whether they wanted to accept those nor not, but they could still accept pre-auction bids under auction conditions, that is no finance or building and pest clauses.
A couple of other things to keep in mind
If you are the successful bidder, you are the buyer. That means you need to pay the deposit. You cannot add in a finance clause or building and pest inspection into the contract. These things need to be done before auction day.