Located in the growing Sunshine Coast suburb of Mount Coolum, this investment property was purchased Home Scouts for…
If you’re looking to buy your Sunshine Coast home or investment property at auction, here are some key steps in this blog that could save you thousands.
Auctions can be exciting, but they can also be intimidating if you’re not familiar with the process. Heightened emotions can play a part for bidders, and there is a speed and intensity by auctioneers geared to draw out every bid possible. At an auction I attended here over the weekend in Noosa Heads on the Sunshine Coast I assessed the market value of the property was around $1.8 – $1.9 million, but after an intense bidding war I witnessed between two very interested parties, it sold for a whopping $3.5 million! Almost double the market value!
So how can you ensure that you don’t let emotions get in the way of good financial decisions when buying your Sunshine Coast property?
In this blog, I cover key steps to follow, to save you thousands.
What are Auctions?
An auction is a public sale, where buyers bid for a property, and the property is sold to the highest bidder. They are a common method of sale in a competitive property market in Queensland because they create the opportunity to harness all serious buyers in one place at the same time to compete on price in a high intensity and panicked environment.
In Queensland, there is no cooling-off period. So if you are the successful bidder, you will have to settle the contract even if:
- the house doesn’t pass inspections
- you change your mind
- you can’t afford it.
Key steps prior to bidding at an Auction
If your perfect Sunshine Coast home or investment property is being sold via auction, here are key steps for you prior to the event after you’ve inspected it:
- Arrange a building and pest inspection. Some agents will supply you with a Building and Pest Report, but in our experience, it pays to undertake your own report as issues can be missed which could potentially cost you thousands.
- Ensure you have finance approval to bid and have the deposit ready. If you’re successful, the contract is unconditional so you need to make sure you have the right finance approvals in place, and are also prepared to pay the deposit (generally 10%) if you are the successful bidder.
- Arrange a property valuation and review comparable sales in the area. Make sure you are clear on recent comparable sales and listings in the area of the property you’re looking to purchase, to ensure that you can determine how much is a realistic price you’re willing to pay. Also look at comparables of other nearby desirable areas so that you can weigh up the costs / benefits of each. It is illegal for an agent to give you a price guide for an auction property, as they won’t know how far the bidding will go on the day of the event.
- Get a copy of the contract and have it reviewed by your conveyancer prior to the Auction. You need to know what you’re signing and if there are any clauses or special conditions which are red flags. They will also be able to undertake Titles Searches, Encumbrances, Pool Safety Certificates, Smoke Alarm compliance, etc so you are aware of any legal risks relating to the property. They will also be able to advise on the legal implications for you if you sign the contract, including the waiving off of cooling off periods etc.
- Confirm with the agent the amount of the deposit required. (or percentage of purchase price), as well as timing of the payment of the deposit, along with any other key relevant terms such as settlement timeframe etc.
- Decide on your walk-away price/s, in consideration of all the above, and stick to it. In the event I referenced at the start of this blog, the underbidder realised late in the process that for the price she was about to possibly pay for this property, she could get another property in a better suburb that suited her. It’s worthwhile being clear on this before you to go to the auction so you can really see the opportunity cost of your purchase.
- Be familiar with key terms. There are a number of key terms to be aware of, including:
- Reserve Price: This is the lowest price that the seller will accept on the day. The seller sets the reserve price with the auctioneer beforehand in writing. The real estate Agent or Auctioneer aren’t allowed to tell you the reserve price, but some will announce the property is “on the market” during the event, which means the reserve price has been met and the property will be sold.
- The Successful Bidder: The successful bidder is the person who meets the property’s reserve price and wins on the day. If you’re the successful bidder you need to sign the contract immediately, which is legally binding and there are serious legal consequences if you cannot settle the property on time including the full price of the property, the cost of re-auctioning the property and any shortfall on your offer and the winning bid at the next event.
- Vendor Bids:An auctioneer can announce a vendor bid to increase the current bid if the property isn’t at the reserve price. A vendor bid means a bid on behalf of the seller of the property. This is sometimes used if an auction is not progressing and the reserve price hasn’t been met.
- Passed in: If the reserve price on the property isn’t met at auction, the property will be “passed in” which means it will be sold post-auction. If you are the highest bidder when a property is passed in, you have the first opportunity to negotiate with the seller.
- Get a quote for home insurance. If you are the successful bidder, you will be required to sign the contract immediately after the auction and in Queensland, the buyer takes on the risk of the property so you will need to get the property insured. It’s worthwhile being aware of the likely costs of home insurance on the property beforehand.
At the Auction
- Register as a bidder. For Queensland auctions, only registered bidders can bid for a property so you need to register your details (including provide identification such as a Drivers’ Licence), and the auctioneer will give you a unique identifier such as a numbered card that you will raise when you want to bid.
Make sure you also ask if there have been any late changes to the contract or if you have any other questions (or want to request change to deposit amount or settlement timeframe etc if you are the successful bidder).
- Understand the auction setting. Get to the auction venue early and use this as an opportunity to introduce yourself to the auctioneer and real estate agent, and get a sense of who else is likely to be bidding for the property. Remember that the selling agent and the auctioneer are representing the seller’s interests alone.
- Think carefully when bidding and have someone experienced with you. Keep in mind your walk-away price (and opportunity cost), don’t go beyond that and try to reduce the bid increments where possible to control momentum in the bidding.
- Keep your budget and price limit to yourself. Don’t go beyond your walk-away price you’ve already set, and remember there will always be another property if you miss out on this one.
- Use a support team if you need it. If you’re not local, or do not have the time nor experience in buying a Sunshine Coast home or investment property at auction, use an experienced local Buyers’ agent who can help. They are not emotionally tied to the property, but are working solely for you the buyer and protecting your interests, so can help you get the best purchase for your investment. In particular, they can give you:
- Experience and Expertise
A buyer’s agent has experience and expertise in buying properties at auctions. They understand the auction process, the bidding strategies, and the tactics that work best. They can help you navigate the auction, ensure that you don’t overpay for the property, and help you avoid common mistakes that inexperienced bidders often make.
- Access to Properties
Buyer’s agents have access to properties that may not be available to the public. They often have relationships with real estate agents and can find out about properties before they hit the market. This can give you an advantage when it comes to bidding at an auction, as you may be able to bid on a property that no one else knows about.
- Negotiation Skills
A buyer’s agent is skilled in negotiation and can help you get the best deal possible. They can negotiate with the seller’s agent on your behalf and make sure that you’re getting a fair price for the property. They can also help you understand the terms and conditions of the sale and make sure that you’re not agreeing to anything that’s not in your best interest.
- Reduced Stress
Buying a property at an auction can be stressful, especially if you’re not familiar with the process. A buyer’s agent can help reduce your stress levels by handling the bidding process for you. They can keep you informed throughout the event and let you know if you need to increase your bid or if it’s time to walk away.
- Post-Purchase Support
A buyer’s agent can also provide post-purchase support. They can help you with any questions you have about the property, assist with the settlement process, and help you find reliable contractors or tradespeople if you need to make any repairs or renovations.
In conclusion, buying a property at an auction can be a daunting process, especially if you’re not familiar with the process. A buyer’s agent can provide you with the expertise, access to properties, negotiation skills, reduced stress, and post-purchase support that you need to make the process as smooth and stress-free as possible. If you’re in the market to buy a property at using this method, consider engaging a buyer’s agent to help you through the process or speaking with us.
Best of luck!