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Purchasing a property is achieved in one of two ways: By Auction or by private sale.
Auctions can be quite overwhelming which is why you should start attending auctions to get a feel for the environment you will find yourself in. This will ensure that you don’t get flustered on the day, or feel intimidated.
Below is a general format of an auction and what you can expect:
- Open for inspection - The house for sale is open for inspection for 30 minutes before the auction to give prospective bidders one last look at the property. This is also a good chance to look at the auction rules and information statement, and any additional conditions that may impact the auction.
- Before the bidding starts - The auctioneer must:
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State the auction will be conducted under the auction rules
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State any additional conditions that apply to the auction
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State that law prohibits an intending bidder from making a false bid, hindering another bidder, or disrupting an auction
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State that substantial penalties apply to those who engage in prohibited conduct during the sale of property.
- The aim of the agent is to encourage as many bidders as possible to compete in order to achieve the highest price on the property for sale. Prospective buyers bid in amounts as set by the agent during the auction. These are called ’Bidding advances’ or ’Rises’.
- At one point, the property agent may go inside to seek instructions from the vendor. This is when the vendor decides if the price is high enough to declare the property for sale to be sold to the highest bidder, or ’On the market, at the sellers discretion.
- If the agent returns and continues to take bids, it’s likely that the reserve price hasn’t been met, and the property will be ’passed in’. this means the highest bidder will be given the first opportunity to purchase the property at the sellers asking price. Alternatively, if the reserve price is met and is declared ’on the market’ the property will be sold to the highest bidder. However both the buyer and seller must sign the Contract of sale for the sale to be legally binding.
Property auction rules stipulate how the auction for the property will be conducted. Auction rules relate specifically to whether there will be vendor bids meaning the auctioneer can act on behalf of the vendor and place a bid and co-owner bids which means that one of the co-owners who want to purchase the property outright can bid from the crowd.
The Auctioneer cannot make these bids.
Any other bidding that is not stipulated in the auction rules made on behalf of the seller, is illegal and is called Dummy Bidding.
The golden rules for bidding at an auction are:
- Get to an auction at least 30 minutes before it commences so you can have one last walk through the property for sale, read the relevant paperwork and see how many registered bidders there are. This will give you an idea of the competition you have for the property
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Make sure you stick to your financial limits.
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Until the property is ’on the market’ the reserve price of the vendor hasn’t been met, and the property isn’t really for sale.
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If the agent says he is going to ’pass in’ the property (which means the reserve price hasn’t been reached, and the property will be withdrawn from sale), it pays to be the highest bidder, as you have the first right of negotiations with the vendor to purchase the property after the auction.
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If there are many people at an auction, you want to have a good vantage point of the other bidders and the auctioneer. This allows you to gauge what others are thinking.
If the property is being sold privately you may approach the seller at any time to submit an offer. Before submitting, ask the vendor the lowest price they will accept as you may be surprised.
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