A house auction can be an exciting event, especially if you’re the one buying a home. However, buyers need to exercise caution when they’re bidding and not get carried away.
There’s no doubt that winning a house at auction is a feeling of pure elation. However what happens when the moment wears off and you realise you may have gotten yourself into a bit of a pickle? For a start, many buyers can often become swept up in the emotion when they’re bidding at auction and end up bidding over their budget. What’s more, because you are buying at an auction there is no cooling off period. So, if you do win the property, the real estate agent will have the contract ready for you to sign. This often means you are unable to negotiate your own terms and will have to agree to the sellers terms only. Consider these three factors before you get your paddle ready …
Before you begin bidding at an auction, you will naturally have inspected the property several times. You should also have received a copy of the contract that they expect you to sign and the disclosure documents.
Speaking to your lender well before the auction is very important as you need to know that you will have the money to complete the purchase. Furthermore, given that any pre-approval given to you by the lender is going to be subject to a valuation of the property, it’s a good idea to get your own valuation done. That will also give you a guideline as to how much you should bid. Should you be close to the limit of either the required Loan to Value Ratio or serviceability, you should be very cautious about purchasing at auction. Discuss this with your lender.
If you plan to bid on the house you should also get a building condition report and a pest report done for the property. These involve significant expense, so you will want to consider carefully how serious you are about that particular property.
If you are fortunate enough to live in the ACT, part of this problem is solved as the vendor (seller) is required by law to provide a building and pest report as well as an energy rating report, unless the property is less than a year old. The vendor is then repaid for the cost of these by the successful purchaser at settlement.
For a start, provide your solicitor or lawyer a copy of the contract of sale and disclosure documents. Legal advice should then be provided as to whether or not you should require any changes to the contract of sale or whether or not there are other issues to consider. Carefully read the building condition and pest inspection reports. Ask the provider of the report about anything that they have highlighted as a potential problem and anything else that you don’t fully understand. If there is a problem, ask what it would likely cost to have it rectified. If it’s something significant and you are still inclined to make the purchase, get an actual quote.
It’s always a good idea to have a chat with your prospective lender prior to attending the auction. They will be able to help you understand what is needed, especially with regard to coming up with the money to pay for it. Our friendly credit managers here at State Custodians are more than happy to assist. Give us a call today on 13 72 62.
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