Buying a property at auction can be an exciting, nerve-wracking time and sometimes emotions can get the better of us so it is vitally important that you understand the process, and your rights and obligations before bidding on a property to ensure you don’t end up in a sticky situation that could end up costing you thousands of dollars. This is where the experienced Gold Coast Lawyers at Affinity Lawyers can help ensure your transaction is smooth, hassle-free and cost effective.
First things first. If you are the winning bidder on auction day you will be required to sign the contract immediately, and there will be no cooling off period, and you will also not be able to include standard or special conditions in the contract, such as a finance or building and pest clause. These restrictions also apply to a contract that is signed within 2 days of the auction if the auction is unsuccessful.
Essentially what this means is that you won’t be able to change your mind about purchasing the property and will be bound to complete the sale, regardless of whether your personal circumstances change, for example you find another property you prefer, you are unable to obtain the finance to complete the sale, or if an existing property you were counting on selling to be able to afford the new property falls through.
Accordingly, it is vitally important you have all of your ducks in a row, including having undertaken any relevant property/local council searches that you may require to be done (to satisfy yourself as to the condition of the property), and unconditional finance in place prior to bidding on auction day. We would also recommend speaking to one of our Gold Coast Lawyers prior to attending the auction so you feel confident about the process.
The consequences of failing to settle the contract if you are the successful bidder include, but are certainly not limited to:
– The full amount of the winning bid/purchase price under the contract;
– Any costs associated with re-auctioning the property;
– The shortfall (if any) between your offer and the successful bid at any subsequent auction;
– Legal fees.
Before the Auction
We recommend that before you consider attending an auction and bidding on a property, that you:
– Have inspected the property in person;
– Have organised for a building and pest inspection to be conducted on the property to alert you to
any potential issues;
– If there is a swimming pool on the property, arranging for a pool safety inspection to be
undertaken;
– Have organised all the searches you require to be undertaken on the property and allowed enough
time for them to come back prior to the auction date. Two of the main searches which we would
recommend are:
– a title search
– a land tax clearance certificate
– Have organised a property valuation;
– Have secured unconditional finance for the purchase – this includes making sure you know your
price limit so you don’t get caught up on auction day and over extend;
– Understand the local market and have conducted your own research into the area so you know the
maximum you are happy to bid on the day;
– Obtain a copy of the proposed contract and have one of our Gold Coast Lawyers go through it with
you and provide you with professional legal advice;
– Ask the real estate agent how much deposit they will ask for if you are the winning bidder (it is
generally a percentage of the winning bid);
– Find out payment methods which will be accepted for the payment of the deposit;
Understand that you will often be required to pay the deposit on the day immediately after the contract has been signed by both parties and be in a position to make the payment via the method requested by the real estate agent.
On Auction Day
If you have decided that you want to bid on the property, make sure you have set a maximum budget prior to attending and make sure you stick to it! Often, the excitement and atmosphere at an auction can cloud your judgment and you don’t want to over-extend yourself. Particularly as you will be required to settle the contract regardless of whether you can afford it if you are the winning bidder.
You will be required to register with the auctioneer in order to bid at the auction. It is a good idea to ask the auctioneer at the time of registration if there have been any amendments or changes to the contract and/or ask them any questions you may have about the property. This might be your last chance so make sure you take a list of any questions you have!
The auctioneer must have a current and valid auctioneer licence, and they will have their name displayed prominently at the site of the auction (barring the impracticality of doing so such as inclement weather or the auction being conducted in large open area). If it is impractical to display their name they must announce it at the commencement of the auction.
The relevant conditions of sale will be announced, including the deposit that will be required to be paid by the winning bidder and any other relevant details.
Prior to the auction, the seller will likely have determined and set a ‘reserve price’ (that is, the minimum price that the seller will accept for the property) with their real estate agent. The auctioneer is able to announce that there is a reserve price on the property, but is not able to disclose the amount.
In Queensland, until the reserve price is reached, the seller is able to make bids on the property (either in person, via the auctioneer or a personal representative). Where the seller is making bids, the auctioneer must make this known.
Tip: If the auctioneer announces a vendor bid, you will know that there is a reserve price set for the property and it has not yet been reached.
Dummy bids (bids aimed at inflating the sale price made by the seller (except for bids up to the reserve price), or their family and friends) are illegal.
Once bidding has started, and the reserve price is reached (or if no reserve price was set for the property), the auctioneer can announce that the property is ‘on the market’ (although there is no requirement for them to do so).
This means that the auction must result in a sale and the highest bidder at completion of the auction is bound to buy the property, and the seller must sell the property to the highest bidder.
There are options available to negotiate with the seller after the auction to purchase the property if the reserve price was not reached on auction day, however if these negotiations lead to a sale within 2 days after the auction, you will still not be entitled to a cooling off period.
If you wish to contact one of our property lawyers prior to the auction, or if you need assistance on auction day, please contact Affinity Lawyers’ experienced property team to discuss prior to the day.
You Won! Now what?
Congratulations! You are the successful bidder.
You will be required to immediately sign the contract of sale and must attend to payment of the deposit as per the terms stipulated in the contract.
It is a great idea to write in Affinity Lawyers’ details on the contract so the real estate agent can get the signed contract straight through to our office and we can open a file for your matter.
Please be aware that time under the contract commences from the date of signing, and it is important that you are aware of the relevant terms, conditions and dates which you must comply with.
Affinity Lawyers will be in touch with you upon the receipt of your contract to discuss the contract, dates, processes, timeframes and settlement with you.
If you are considering purchasing a property at auction, or have any queries in relation to the process, please contact one of our friendly and experienced property lawyers today on 07 5563 8970.
