KEY TAKE OUTS
- What to keep in mind when looking at purchasing at auction
- There is NO Cooling Off Period at an auction
- How to protect yourself as a purchaser at an auction
- What to keep in mind when selling at auction
Going to Auction can be a crazy time for both parties. The Vendor is wanting to make sure they get a good price, and the potential purchasers are hoping to clinch that winning bid at a premium. There are certain legal protections that can be offered by obtaining good legal representation prior to auction.
Purchasing at Auction
NO Cooling Off Period
The number one thing to note when purchasing at auction is that unlike a regular sale of property in NSW there is no legally mandated cooling off period. Auction Sales are legally binding on the day.
All research needs to be done prior to the day. We recommend if you are planning on purchasing at auction that you get the contract reviewed prior to the day. You should let the agent know you are interested in purchasing the property and they will provide you with the Contract of Sale which you can then pass on to your Lawyer or Conveyancer for review. It is also important for you to become familiar with the contract, so you do know what you are potentially entering into. As your Lawyer or Conveyancer, we can give you advice as to any potential risks that come with purchasing the property you are interested in as well as means of protecting yourself against these risks.
Your Lawyer or Conveyancer is also able to negotiate any changes or requests you may have. This can include such things as negotiating an agreeable settlement period.
The key to these negotiations that occur between Lawyers and Conveyancers is that there will be documentary evidence of any changes to the contract negotiated prior to contracts being exchanged on the day of auction and as such there is a strong degree of accountability.
It is important not to base impulsive decisions and bidding on auction based on what you have been told by an agent for instance. The contract you sign will generally include an entire agreement clause as standard. That means by signing you will be agreeing to the fact that the contract contains the entire agreement and you have not made any reliance’s based on what you have been told by anyone else.
We recommend on the day of auction ensuring the contract of sale is the same as the one you have previously seen and had reviewed.
It is also a good idea to do other due diligence such as pest and building inspections and strata reports so you are aware of any issues or potential issues prior to having contractual obligations. Even new properties can have issue you are unaware of. You can then use the knowledge garnered from these reports to make sure you are buying for an appropriate price.
In regards to these pre-purchase inspections if a fault or issue is identified you are able to address this and factor it into your decision making. For instance, you would be able to take a builder in and get an idea of the likely costs. This can become integral to what you are able to put into the property.
Another important thing to ensure when bidding in an auction is that your finances are in order prior to purchasing at auction. As there will be no cooling off period, we do recommend that you have unconditional loan approval on the day. It is also important for you to have your finance and bidding limit decided before you go to auction taking into consideration the interest rate and realistic repayments that you can afford. There are also other costs you should be aware of and factor into your limits such as legal costs and stamp duty etc.
We strongly advise against making a bid at auction without at least a loan pre-approval. This will also give you as a bidder confidence when setting that bidding limit.
Payment of the Deposit
You should also have your deposit ready to go. Most auction contracts of sale have the deposit specified to be 10% of the price. This means that you must pay this as soon as possible upon signing to the agent usually on the spot. You may be able to get your Lawyer or Conveyancer to negotiate an arrangement prior to the auction.
Research, Research, Research!
It is important when looking at purchasing at auction to do some research. You should research the area thoroughly, so you are aware of general pricing so that your bidding is reasonable. You may also wish to attend an auction where you are not interested in purchasing so you become familiar with the process.
How will you be Held Accountable?
In NSW you must be registered to bid there are strict requirements that come with this. This is to ensure the integrity of the auction process. These requirements include showing ID and verifying your identity. The same rules apply if you were to use a proxy bidder.
You must be sure about all of these things that have been mentioned before bidding at an auction. Getting out of a Contract after the fact can be an expensive process especially when money is generally limited and finding another property can be limited by and money lost.
Selling at Auction
If in the alternative you are thinking about putting your property up for auction at Coutts, we have the expertise to be able to draft contracts in a way to meet your specifications and any special requests that you might have. We also have strong relationships with local real estate agents. It is important when going to an auction to ensure that the contract is appropriately drafted to your specific instructions because as stated previously there is no cooling off period, and you will be locked into the contract the same way the purchaser is.
This blog is merely general and non-specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever to this blog, including all or any reliance on this blog or use or application of this blog by you.