Investors Ask: Any must know info about auctions?
Q. The vast majority of properties I have been looking at seem to be going for auction rather than private sale. Is an auction better for the seller or for the buyer? What do I need to know about buying at auction?
A. Vendors sell by auction when they believe (usually on the advice of their selling agent) that an auction will get them the best price. This is especially so in a ‘hot market’ or for properties in sought after locations where strong demand will likely push up the price. Auctions are basically competitions where the winner is the one who outlasts and outbids their opponents.
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From a buyer’s perspective there are both pros and cons to an auction. The advantages include transparency and openness, a level playing field (everyone competes on the same terms and conditions), speed (they’re often over in 15 minutes), there’s no drawn out negotiations, if the property is passed-in you know what other buyers are prepared to pay which can help your negotiating position and once the reserve is met you know the minimum asking price.
The major downside of course is that you can get caught up in the emotion and blow your budget – remember it’s the auctioneer’s job to squeeze as much out of you as possible. Other cons include a late arrival into the sales campaign may not give you enough time to do all your checks and inspections, you don’t really know what the end price will be, there’s no cooling-off period and the sale is unconditional – if you win you buy.
Before bidding at auction you must prepare. You must work out your budget and have your finances in place. You should also decide on your top price, understand the auction process and carry out all inspections and have the contract of sale checked by a solicitor or conveyancer before you start bidding. If you’re not sure you can handle the stress of an auction, get help from family and friends or employ the services of a buyers’ advocate who for a fee, will act on your behalf.
Peter Boehm, author, The Great Australian Dream
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