How to prepare for buying at auction in NSW
When you buy property in NSW, there's a high chance you'll be buying at auction. Here are some key things you need to know.
The first thing is to prepare in advance. Don’t leave it till the day before the auction!
There are three main things to get right.
- Have your finances in order
- Do a building inspection, including pest inspection
- Have your conveyancer or solicitor review the contract
Why? One simple reason.
There is no cooling off period when buying at auction
When you buy a house at auction, the moment the hammer comes down, you are bound to complete the purchase.
It doesn’t matter whether you have finance or not. It doesn’t matter what the terms of the contract are. You are bound to buy under those terms.
And remember, it’s the seller’s contract. They set the terms, not you.
It may be that there’s nothing you need to change in the contract. That's fantastic. But it pays to be sure in advance.
What if the contract says the granny flat at the back of the property isn't actually Council approved? Even if the marketing said it was, it’s too late.
What if the land is subject to landslip?
With no cooling off period, you need to do everything before the auction date.
Prepare the same way for every single auction
It’s very common for buyers to participate in more than one auction before they manage to buy. You have to be as prepared as possible every single time.
It’s frustrating. Pest and building inspections are not cheap. They can come to $500 or $2000 each time. As conveyancers, we have to charge to cover the cost of our time as well.
It’s tedious. Time consuming. Exhausting. But consider the risk you take if you skip the inspections or the contract review. A few thousand dollars lost on inspections is better than buying a house and finding you need to spend $25,000 on a new roof.
We have supported clients who went through seven auctions before they succeeded in buying a house. In that instance, we reduced rates for the last contract review because we felt so sorry for them. (Some real estate businesses do have a heart!) We were almost as happy as the client when they finally settled on a new home.
How far in advance should you prepare?
As a general rule, you need to be pretty sure that you’re planning to bid two weeks before the auction. It can be difficult when you first start looking, if your dream property is going to auction the very next week.
At the very least, have your finances organised.
Some banks will give you an approval up to a certain dollar figure. Others will do the enquiries on that specific property and set a top limit. It’s important to communicate with your bank as well as with your conveyancer.
Make sure you’re in contact with a building and pest inspector.
Depending on the council, you may need two weeks to complete council searches. You may not have that time. Only you can decide whether to take the risk on that issue.
Can you negotiate before buying at auction?
You can. We negotiate for clients buying at auction in the same way we negotiate for private treaty sales. Of course, we make sure we have written confirmation of any variations to the contract before you head off to auction.
What if you want to change something in the contract after the auction?
Once the hammer has gone down, you have no negotiating power.
You can request changes to the contract, but the other party does not have to agree. You’re asking for a favour.
The same thing applies to the seller, by the way. For example, they might not find a place to move to, so they might request a delayed settlement. In this case, you don’t have to accept it. Or you can negotiate some other term in exchange.
At KLH Conveyancing, we like clients to have a good experience buying a property. Moving house is stressful anyway. The amount of money involved is huge and that’s stressful too. Anything we can do to make the process easier, we do.
That includes making sure you’re prepared before you even consider buying a house at auction!