Buying a home at auction can be thrilling and rewarding, but it also comes with its own challenges. For those new to the auction world, the process can seem overwhelming. With so much to consider, it’s essential to be well-prepared before diving into the bidding.
In this article, I’ll share the exact strategies and insider tips that helped me build a property portfolio of over eleven homes. Discover the 12 golden rules for successful auction buying and learn proven techniques that are working GREAT in 2024.
One quick word of advice before we dive in: if you’re buying at auction, you’re going to want to make sure that your finances are all sorted. That’s where we come in. The team at Hunter Galloway – Mortgage Broker Brisbane can help with pre-approval and securing finance.
What Are Property Auctions?
An auction is a public sale where potential buyers submit bids to buy a property, which is then sold to the highest bidder. Auctions are common in the property market because they are seen to increase the competitiveness of a sale by getting all the serious buyers in one place competing on price in a high-intensity and panicked environment.
At an auction, you do not get a cooling-off period, so a sold property at auction is FINAL.
So home buyers BEWARE! If you make an offer at auction and you win, you will have to settle the contract – even if you can’t afford it!
1. Know The Property's Value
Information is power in Real Estate, and spending the time to research a property’s value will help you determine the maximum amount you should pay when buying at auction (and save you from overpaying)!
According to the Queensland Government, it’s illegal for a seller or their agent to give you a price guide for an auction property. This is because they cannot know how high the bidding will go. A property may appear on a listing website when you search by price. This is only for the web search and is not designed as a price guide. In other words, just because this home has appeared on realestate.com.au or domain.com.au for homes selling between $550,000 and $700,000 doesn’t mean it will sell for a maximum of $700,000.
At this point, it could be worth obtaining a bank valuation prior to the auction, which Hunter Galloway can assist with arranging.
Property research checklist
We’ve put together the ultimate property research checklist to help you when buying a property at auction:
- Work out your property criteria
- Research your suburb & surrounding areas
- Research rental income per week
- Calculate (potential) rental income
- Research recent property sales
- Determine the property’s value
- Confirm value with a free RP Data valuation
- Research the history of the home
- Find out if your home has gone swimming
- Order a bank valuation with Hunter Galloway
Read more: 12 steps to research a home
2. Don't Tell The Agent Much When Buying At Auction
Always keep in mind that a good real estate agent will work hard for the seller to get the best price, as most of them are paid on commission. So, they aren’t working for you as the buyer, so don’t give them too much information. Instead, ask questions. Asking the real estate agent the right questions can help you in the following ways:
- You can quickly identify potential issues on the property.
- You can get a better idea of the value of the property.
- You will be able to understand the seller’s motivations and make an offer that will put you way ahead of your competition.
Questions to ask a real estate agent
- Why are the vendors (sellers) selling the property?
- How long has the property been for sale?
- Are the sellers willing to take offers before the auction?
- Have any other offers been received?
- Have any of these offers been refused?
- Have the owners bought another property?
Even if you feel comfortable with the real estate agent, the important thing is to tell them almost nothing. Just ask lots of questions, and don’t give them information they can use to get more money from you. They may ask how much you have been pre-approved for, the amount you have for your deposit, or if you currently own a property. Stay strong and answer their questions by ONLY saying you have finance approved and a good deposit in place.
3. Have Your Support Team Ready.
Having the right home-buying team around you is important, especially when going to an auction. Here are some key team members you should consider having:
Team member 1 - lawyer/solicitor
If you have found the right home, and it’s being sold at auction, you must consult a lawyer (or solicitor) before signing anything. The home will cost hundreds of thousands of dollars, and a lawyer may only cost a few hundred but will provide you priceless independent advice to double-check the contract and ensure there are no odd terms and conditions.
Team member 2 - mortgage broker
Remember to also consult your mortgage broker. You want to make sure you have a reliable pre-approval in place that fits with the maximum amount you will bid at auction. It’s also important that you have the right type of home loan that fits in with your goals today and tomorrow. When you meet with your mortgage broker, make sure you discuss the specific property that is going to auction, as some banks have issues with properties that have non-standard features, like when the floor area is under 50 square metres. Others have restrictions on certain suburbs and postcodes.
If you have discussed the property with the broker before the auction and even ordered a valuation, you can be sure you are sitting in a strong financial position come auction day!
As a rule of thumb, make sure you double-check with your Mortgage Broker before buying any property that fits these criteria:
- Smaller than 50 square meters inside
- Land size over 2 hectares
- Doesn’t have standard title and zoning
- Not in a major town or city
- Includes incentives like furniture packages or rental guarantees
- Is run down or in disrepair and needs lots of work to fix up
Team member 3 - Buyer's agent
Buyers Agents are real estate agents that represent you as a buyer, and they are becoming increasingly common these days. Buyers agents can help with sourcing, researching and even bidding on your behalf at auction. If you are nervous about bidding, are living interstate or need help with a detailed property analysis, a buyer’s agent could be a good option to consider. Depending on the property’s value, they generally charge a fixed percentage fee on the purchase price, ranging from $2,000 to $10,000.
Team member 4 - building inspector
And finally, Building & Pest reports are a mandatory cost when buying a home. Building and pest reports look at the building (structural soundness) and check for pests to make sure you aren’t flatting with termites or white ants.
Buying a home is expensive., Some home buyers will try to save a few hundred dollars by skipping building & pest reports, which can risk thousands of dollars. Don’t let this happen to you.
A building and pest report will typically cost you at least $500-600 but save you hundreds of thousands of dollars.
If you need help with a lawyer, building & pest inspector or buyers agent, get in touch with us, and we would be happy to recommend someone.
Home buying team checklist for buying at auction:
- Have you found a mortgage broker, and have they provided you with an RP Data Valuation & Home Loan pre-approval?
- Have you found a lawyer, and have they checked your contract of sale?
- Have you found a building & pest Inspector, and have they completed and walked you through their report?
- Do you need the help of a buyer’s agent, and will they help bid on your behalf at the auction?
Read more: putting together your homebuying team.
4. Have Your Finance Sorted – BEFOREHAND!
If you are buying at auction, you need to have your finance approved and ready to go because buying a home at auction is final, and you cannot pull out once the hammer is dropped. There is no cooling-off period, so if you’re the successful bidder at the auction, you will have to settle the contract even if:
- The house doesn’t pass inspections
- You change your mind
- You can’t afford it.
That’s right; there are no finance or building and pest clauses. For this reason, before the auction, you want to work with a good mortgage broker who can help with sourcing finance, applying for a pre-approval and completing the bank’s paperwork.
At the end of the day, there are lots of lenders out there, all with different pre-approval policies, which can be confusing. Having a broker like Hunter Galloway who can look at 30+ different banks and lenders to find the right one that fits you will remove some of the stress from buying at auction.
Just remember: Not all pre-approvals are created equal…
In most cases, a pre-approval is just an indication that the bank is “ok” with considering approving your loan. The bank may just complete a credit check and not check any of your documents and then wait until you lodge a full mortgage application to do this. This type of pre-approval is unreliable, and your loan may be declined after pre-approval.
With some banks, a full mortgage application is only made when you have signed the contract to purchase property – which is not possible when going to auction. Lenders like this will only verify your payslips, bank statements and income information when they receive this contract of sale, putting you at risk when going to auction because you can’t be 100% sure they can lend you the money.
This is where a Mortgage Broker comes in.
At Hunter Galloway, we work with several lenders who fully verify your documents before issuing a pre-approval, making a much more reliable pre-approval with fewer conditions when buying at auction.
You may be asking: What are some common pre-approval conditions?
In most cases, a pre-approval has conditions that need to be completed before the loan can be unconditionally approved. This is quite common, and these conditions range from generic conditions like a bank valuation to specific conditions like getting a letter from your employer confirming your employment start date.
A few common pre-approval conditions include:
- Our validation of all details that are provided to ensure they are true and correct.
- Our receipt of all necessary supporting documentation.
- Satisfactory valuation for the proposed security property(s).
- Lender’s Mortgage Insurance approval, if required.
- No significant change in the customer’s financial position.
Questions to ask about your Home Loan:
Aside from ensuring that you have a reliable pre-approval, it is important to ask yourself the following questions:
- What should my auction budget be?
- How much deposit will I need?
- What will the repayments look like after I’ve bought the property?
- Will I be able to afford the monthly mortgage payments?
Some questions to ask your Mortgage Broker when buying at auction include the following:
- What is my maximum home loan, i.e. borrowing capacity?
- What are the eligibility criteria for the loan?
- How long does the loan approval process take?
- What documents are required for the loan application?
- What will be the repayments?
- What is the loan term?
- What is the interest rate?
Some additional questions to ask your mortgage broker about their background to make sure they are the right broker for your personal situation include the following:
- How many years of experience do you have?
- How do you help homeowners at auction?
- Do you have any recent examples of homebuyers who have bought at auction?
- How can you help me after I buy this home?
- Who owns your aggregator, and are there any conflicts of interest?
- What qualifications and accreditations do you have?
Auction home loan checklist
Before the auction, you want to work through this Home Loan Checklist to ensure your loan has been sorted and you are ready to buy on auction day!
- Collect Home Loan Documents such as:
- Personal Identification: Passport, Drivers License and Medicare Card
- Income Details: 2 x Most Recent Payslips, Group Certificate, and possibly Income Tax Return
- Assets & Liabilities: Last Months Day to Day Bank Statement and 3 Months’ bank statement to show genuine savings.
- Meet with a mortgage broker to discuss your lending requirements
- Apply for a pre-approval from a reliable lender
- Go shopping!
Read more: What is a pre-approval?
5. Always Be Questioning – That Means Everything!
The majority of Real Estate Agents in Australia use the philosophy of “Always Be Selling”. Likewise, as an educated buyer, you need to use the philosophy of “Always Be Questioning” when buying a property, especially when buying at auction.
Should I use the building & pest report supplied by the Real Estate Agent when buying at auction?
While third parties generally complete these Building & Pest Reports, they are completed under the instruction of the Real Estate Agent who is employed by the seller to sell the property – as soon as possible and at the highest price they can get.
The Real Estate Agent isn’t there to work for you, so it’s important to be wary of this fact. You want to maintain your independence and get a Building & Pest Inspector to do your own report. While it might cost you an extra $500-600, it could save you tens of thousands over the long term.
As harsh as this sounds, it’s good practice to always assume the Real Estate Agents are lying to you! More importantly, it’s critical for you to maintain your independence when it comes to getting reports and researching facts about the property.
6. Follow Your Auction Buying Checklist
When you go to an auction, you must assume you will succeed. Remember, if you are the highest bidder at the fall of the hammer, the property is yours – you do not get any finance clauses, cooling-off period or chances to double-check the property’s structure.
At an auction, if you win it, you buy it.
So, it’s critical to be prepared for all eventualities on the day by following our Auction Buying Checklist, which you want to have completed before the day of the auction.
Auction Buying Checklist:
- Complete Inspection Checklist
- Arrange Building & Pest Inspection
- Arrange Home Loan Approval
- Get a property valuation
- Complete market research
- Understand Auction results in your area
- Decide on your highest & final price
- Obtain a copy of the contract of sale
- Get legal advice about the Terms & Conditions of the contract
- Arrange title search & other checks with conveyancer (title search, encumbrances)
- Confirm with the real estate agent how much deposit is required and how to pay.
If you win at auction, you will need to pay a deposit. This can be a percentage of the winning bid (for example, 5% of the $500,000 purchase price— $25,000), which you must pay on the day. Before the auction, you must ask the Real Estate Agent how you can pay this and if they will accept a personal cheque, bank cheque, deposit bond or electronic transfer.
Read more: How much deposit do I need for a home loan?
7. Understand The Auction Mindset
When looking at potential auctions in your area, remember that Real Estate Agents put properties to auction for 2 primary reasons:
- The first is to try to sell the property as quickly as possible. A property for sale at auction is usually one that has just been listed on the market, and a typical auction campaign involves 3 weeks of heavy campaigning, with the auction taking place in the 4th week.
- The second reason a Real Estate Agent puts a property to auction is to try to flush out buyers by putting that 4-week deadline on the property and creating a sense of competition to increase the property’s sale price.
Auctions are very common in rising property markets like we have seen in the past 4 years (Post-COVID lockdowns in Australia), where there is increased competition. Auctions are also common in situations with multiple buyers for one property. For this reason, it is critical that at an auction, you set a budget beforehand and stick with it. If someone makes a higher bid than you are prepared to pay, walk away.
Remember, If you are successful at auction and win, you must settle the contract even if you can’t afford it. If the property fails to meet the reserve price, it is passed in, which means it won’t be sold at auction. The good news is if you were the highest bidder at the auction, you have the first opportunity to negotiate with the seller.
8. The Basics of Buying A Home At Auction
So, how do you actually buy a home at auction?
It may seem like a silly question, but remember, there are never any silly questions when buying a home – it’s the biggest purchase decision you’ll make in your entire life!
To be eligible to buy at auction in Queensland, you need to be a registered bidder. To register, you need to provide the selling real estate agent with a copy of your Australian driver’s license about 10-15 minutes before the auction is set to take place. In some other states like Victoria and Western Australia, there is no requirement for you to make yourself known to the auctioneer before sticking your hand in the air!
The real estate agent will give you a unique bidder number (a paddle with a number at the top), which you can hold up during the auction to make an offer to buy the property. If the property meets the reserve price, and you are the highest bidder at the fall of the auctioneer’s hammer, then you have now bought a property!
Can first-home buyers buy at auction?
Yes, first-home buyers can buy at auction. Most first-home buyers find buying at an auction quite daunting, but it can present good buying opportunities… You can try to negotiate with the real estate agent before the auction to secure the home, but if that fails, you should have your finances in place to buy at auction. Remember, real estate agents sometimes try to undervalue a property when bringing it to auction to draw a large crowd of buyers, so before the auction, work out your maximum or walk-away price.
Is there a cooling off period?
When buying at auction, there is no cooling-off period, meaning if you buy the property, it is final, and you cannot get out of it. The cooling-off period also does not apply if you sign a contract on the property within 2 days of an unsuccessful auction or after being a registered bidder on the auction. So be careful; if you are unsuccessful at the auction but end up signing a contract of sale afterwards, you may have waived your cooling-off period!
Buying at auction — terms to be familiar with:
- Reserve Price: This is the lowest price that the seller will accept at auction. The seller sets the reserve price in writing with the auctioneer. While the Real Estate Agent or Auctioneer isn’t allowed to tell you the reserve price, they can say if the reserve price has been met during the auction.
- The Successful Bidder: The successful bidder is the person who meets the property’s reserve price and wins at auction. If you are the successful bidder, you must sign the contract immediately. The contract is legally binding, and there are serious legal consequences if you cannot settle the property on time. The penalties may include the full price of the property, the cost of re-auctioning the property and any shortfall between your offer and the winning bid at the next auction.
- Vendor Bids: During auctions in Queensland, an auctioneer can accept a seller (or vendor) bid to increase the current bid all the way up to the reserve price. Before the current bid reaches the reserve price, the auctioneer can bid on behalf of the seller or accept bids from the seller (or their representing real estate agent). This is a way to keep the auction moving and increase the bid closer to the Reserve Price.Pro-tip: if you hear a vendor bid, you know the Reserve Price has not been reached yet.
- Dummy Bids: A Dummy bid is also a way to increase the bidding during an auction by the seller, a family member or friend, or any other individual who isn’t a serious buyer. Unlike vendor bids, dummy bids are illegal In Queensland and across Australia. They should be reported as they artificially inflate the property’s price at auction.
9. Know Your Competition
On the day of the auction, arrive early. Firstly get comfortable with the setting to help ease your pre-auction nerves, but secondly, use this as an opportunity to get a lay of the land and see who else will be bidding at auction.
You can usually see if there are any other serious bidders as they will be with the real estate agent inspecting the contract of sale or registering as a bidder. Otherwise, many people could be gathered around who are just onlookers (good news for you)!
In a strong property market like Brisbane, where auctions are becoming increasingly common, use the psychological advantage of projecting your confidence and making other potential buyers think you have deep pockets with no limits.
10. Take It Slow When Bidding - Advanced Tips
When bidding, say the full number rather than the increase. For example, say “Four hundred and fifty-seven thousand dollars” instead of waving your hand and saying “seven” (i.e. indicating that you’re raising the current bid by $7,000). When you say it, be confident and make sure everyone hears it. It reminds people how much they’re paying for the property and can turn off other bidders if they’re close to their budget.
Try not to bid until the property is announced to be on the market or until there has been a vendor (seller) bid, moving the price closer to the reserve. Doing this might take a bit of momentum out of the auction. If there are no genuine bids and it looks like the auctioneer will pass the property in, make sure you bid, as it gives you the exclusive opportunity to negotiate with the vendor after the auction. To secure this right, you can put in a lowball offer.
11.Keep Your Price To Yourself
Always set a budget, stick to it, and never tell the real estate agent. From experience, slightly higher and uneven numbers can make really good budgets (and give you a competitive advantage)!
For example, say you think a property is worth $450,000 – and a few other people, including your competition, could have also set this number as their budget. If you set your budget at $457,500, it could be enough to put you slightly ahead and win the property at auction!
Auctions are a pretty foreign experience for most of us and can be quite scary. If you’re emotionally connected with the property or not a confident bidder, get a friend or family member to bid for you. Even better, you can use the services of a reputable buyer’s agent to bid for you as they have plenty of experience (we can recommend a buyers agent if you need one).
Property Expert John McGrath recommends controlling the momentum of the auction to your advantage, saying, “Sometimes it’s advantageous to slow an auction down and ask the agent to accept smaller increased bids. Other times, it’s better to make higher, more confident bids to ‘scare’ other purchasers and kill any momentum. Only experience can tell you what to do here, but the point is – there’s no hard and fast rule.”
Lastly, make sure you stand in a good position where the agent can see you clearly and where you can spot all the other bidders in the crowd. Try as much as possible to look confident and relaxed (which is more often easier said than done) – and in the blink of an eye, you’ll be hearing “going, going, sold”!
Summary: How do you win when buying at auction?
- Set your budget and stick to it.
- Stand in a good position where the auctioneer can see you
- Use slightly uneven numbers for your bidding (e.g. raising by $7,000 to $437,000).
- Consider getting a friend or Buyers Agent to bid for you at auction if you’re nervous.
- Control the momentum of the auction.
- Look confident & relaxed.
- Stick with your walk-away price
12. Be Prepared To Walk Away
As Benjamin Franklin said, by failing to prepare, you are preparing to fail. Although it might take you weeks and weeks to prepare for an auction, the reality is that the auction itself will be over in a matter of minutes. You still need to spend time preparing your figures, spending money on reports and hoping for the best that you will win – but also be prepared to miss out if the price exceeds your budget.
Ultimately, you need to stick with your walk-away price. After all, you’ve done your homework and know what that particular property is worth to you. If you miss out on a particular auction, you must accept that it wasn’t to be and realise there is always another house.
The sooner you move on from it, the faster you will find something better. While it’s not nice to think of yourself as a loser in the auction, it’s much better to walk away to find a better home than over-commit to a property that you’ve become emotionally blinded by.
As the saying goes in Real Estate, ‘The money is made when you buy, not when you sell. In other words, the price you pay for the property is the main factor determining how much profit you make later.
Bonus: The Online Auction Process
There are two ways an online auction can be done.
The first is live streaming. This is very similar to a normal auction. However, the main difference is that it’s completed via correspondence. There are registered bidders that are approved to bid prior to the auction. The live stream runs with bidders remotely bidding in separate locations via their phones or laptops, and the auctioneer can accept or decline the bid. If the reserve price isn’t met, the auctioneer can pick up the phone and negotiate with the highest bidder. Agents typically use platforms such as Gavl, Realtair (formerly Auction Now) or Anywhere Auctions.
You will need to register your interest by creating an account on one of the above platforms. The real estate agent will tell you which platform they’re using. In the platform, you’ll need to submit 100 points of ID – usually that’s your driver’s license, Medicare, and passport – and put your credit card details down on the platform. A holding deposit of $1,500 is usually placed on your credit card before the auction day. The real estate agent will then need to approve you as a bidder to allow you to access the online auction.
The second is through an open or time-based option similar to selling an item on eBay. There’s a start time, a finish time, and minimum bid increments. The second method is referred to as a genuine time online auction. The auction is overseen virtually by an auctioneer as it progresses and gets closer to the end. Platforms extend the auction finish time by five minutes if there’s a late bid with less than one minute to go. This allows time for counterbids and gives everyone a chance to bid higher. The process is easy and transparent, and you see where the bids are up to throughout the auction. Real-time platforms real estate agents use here are Sold Online and Openn Negotiation.
Jump bidding strategy to win at an online auction
Here is a more advanced technique that has actually helped one of our customers recently win an auction. It’s called the jump bidding technique, which is practiced by increasing the current price at the auction substantially more than the minimum allowed. Effectively, you want to start higher and get rid of your competition.
Now, at first glance, jump bidding seems irrational. In an auction, it is a dominant strategy for each buyer to always bid at a minimum increment above the current bid. By bidding slightly higher, the bidder gives up the opportunity to win at that lower price. However, jump bidding is about putting your best foot forward. To succeed at an online auction, be strong at the start by bidding close to your limit. Bidding boldly at the beginning is more likely to discourage others from bidding, thereby enhancing your chances of winning.
Here’s an example to ponder over. Suppose the initial purchase price of a property going to auction is $500,000, the minimal increment is $10,000, and in this example, there are two bidders, Kate and John, going for the same property.
Without jump bidding, the auction will start with John bidding at $510,000; Kate will increase the bid to $ 520,000 – John will come back at $530,000, and Kate will come in at $540,000. John will then quit, so Kate wins the auction at 540,000. But if John had jumped from $ 500,000 to $ 540,000 at the first bid, then Kate might have quit, and John would win the auction at $540,000.
Bonus: Get Insurance right away
Many people aren’t aware, but it’s really important that you arrange Building Insurance (also called Home & Contents Insurance) as soon as you purchase a property—that is, from the date you sign the Contract of Sale! And on an auction, this means from the date you bought at the auction!
There are a few reasons to get insurance right away:
- The seller’s insurance policy may no longer be valid now that the property has been sold
- The seller may not have insurance
- In Queensland, it is common for the Contract of Sale to specify that insurance is the purchaser’s responsibility.
So, in Queensland, you need to get insurance from 5 pm the next business day after signing a contract of sale (unless it’s a strata apartment, in which case the Owners Corporation might have insured the building). Not having home insurance is very risky, as it covers you for any loss or damage to the building. Your bank or lender will want proof that the property has insurance, so it’s best to get it immediately because you will need it eventually.
Bonus: Submitting An Offer Before Auction [with template]
In some cases, even though a property is going to auction, the seller may be willing to take offers before in order to sell it even quicker. It could be worth submitting an offer before the auction to secure it before auction day. This is the same process you would follow when normally making an offer on a property, and the advantage is that in Queensland, you can submit an offer on the property subject to finance and building & pest.
How to make an offer on a property (before the auction)
Submit an offer in writing to Real Estate Agent
Use our Offer to Purchase Template
Include the following details on your offer:
- purchase price,
- deposit,
- finance (days to complete),
- building & pest (days to complete),
- settlement (days from the contract),
- and other conditions.
Negotiate over email or in writing
The real estate agent must present all offers in writing to the sellers, so it doesn’t matter how silly you think your offer might be. It is still worth putting it in writing and getting it in front of the sellers.
Sign the contract of sale.
If your offer has been accepted, the real estate agent will complete the contract of sale (with your offer details) for you to sign. You can get your solicitor to review this if you would like.
Get your finance approved
Now that your contract has been accepted, it’s time to talk to your Mortgage Broker, get a final valuation ordered and get your home loan unconditionally approved.
Something to remember when making an offer before auction - A case study.
Sam has been looking for a home for months. Finally, the perfect unit hits the market, but it is going to auction in 2 weeks. So Sam speaks to the real estate agent, who tells him the seller is willing to take offers before the auction and Sam should fill out the offer to purchase form. So Sam fills in the form and hands it in. Sam is excited; it is his 1st home. Happy days-right?
Wrong!
An hour later, the agent replies and says the owners would like to go to auction but would be happy to sell at the price he offered if it ends up going for this price at auction,
Wait, the agent initially said the owners are happy to take offers before the auction, but suddenly, an hour later, they’ve backflipped? Sam is confused. What is going on?
Sadly, this is a common trick some real estate agents use for properties going to auction, and it is meant to condition sellers before auction. You see, real estate agents sometimes overpromise sellers in order to get the listing. So they may promise that they will sell their property for $2 million instead of $1,5 million. But a few weeks before auction, they invite offers in as a tactic to beat down the seller’s expectations.
This is a nasty little trick, but unfortunately, they do it. So, just be aware of this when making an offer before auction.
Another real estate agent trick to be aware of
Also, be careful of this auction strategy that real estate agents sometimes use. Sometimes, an agent may try to negotiate before the auction day if they know they’ve only got one interested buyer on the property. They’ll try to sell you the property before the auction because the last thing they want to do is rock up to the auction, and there’s one interested buyer.
They are afraid that you will begin to hesitate, thinking you are overpaying for the property. You may even reduce your bid since you are the only one at that auction, so they will try to pressure you to buy before the auction. We have seen auctions getting pulled earlier because of that factor.
Real estate agents call this buyer a price leader. You might come with an offer of a million dollars. But the other buyers may be offering $500,000, so if they go to auction, it will be wild with the price leader trying to bid with these low bidders. So, they will try to negotiate with the price leader beforehand and get a deal done because they know the price leader will pay way more than everyone else. This is where making an offer before auction can be tricky.
Bonus: What To Do When Seller Backs Out Of Contract?
The standard contract provides a lot of clauses of the penalties the buyer has to pay if they default on the sale – for example, the buyer has to forfeit any deposit paid to the seller. The contract does not mention what happens when a seller backs out.
But that doesn’t mean the seller can just back out of the contract without consequences. After all, a contract is a binding legal agreement if it is made in writing.
Here are some of the steps you can take when a seller backs out of a contract:
- Talk to your conveyancer or lawyer, as this is a legal matter.
- The seller has to give back any initial deposit you paid them.
- The seller can be given an order to pay damages like money spent on building and pest reports, legal fees and any other expenses you incurred in the process.
- Sometimes, the seller can be forced to go through with the sale. In this case, you must prove that the seller just paying damages is not enough to compensate for your loss if you don’t get the property. For example, if the property is so unique, you will never find another like it.
- If the seller refuses to cooperate, there is always the option of taking them to court. Now, bear in mind that this is costly and extremely time-consuming, and you may not get the results you want. However, on the flip side, a court case is also expensive and time-consuming for the seller. So, this motivates level-headed sellers to settle the dispute out of court.
Next Steps And Buying At Auction:
Our team here at Hunter Galloway is here to help you buy a home in Australia.
Unlike other mortgage brokers who are just one-person operators, we have an entire team of experts to help make your home loan journey as simple as possible.
If you want to get started, please give us a call at 1300 088 065 or book a free assessment online to see how we can help.
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