Who you gunna call?
Buying your next home, especially if it’s your first home is a tremendously exciting, and nerve wrecking time. If your dream home is being sold by auction, it’s good to be prepared as there are some differences between a usual sale and an auction. To avoid getting caught out, arm yourself with knowledge and follow our tips.
Don’t buy at auction on impulse. Once the auctioneer’s hammer has fallen you’re obliged to pay that amount and at the vendors terms as outlined by the auctioneer prior to the auction. There’s no room to put conditions in as with a sale. So be sure to read the contract before bidding.It’s a good idea to have your conveyancer read through it as well.
Deposit bond or Cash?
You may not have the deposit required up front to pay when you win at auction if you are borrowing the maximum you can against the property, or using a parental guarantee. This is where a deposit guarantee comes to play and is a very useful tool in your arsenal. It’s best to inform the agent prior that you will be bidding and using a deposit guarantee. These are common in Victoria, and growing in popularity as prices (and deposit sizes)rise.
Know your limit!
Know your limit, and stick to it! Auctions are very fast paced and exciting and it’s easy to get carried away. Arrange a preapproval prior to attending the auction, know how much you can spend, what the repayments will be at that limit and take someone else with you who can help you enforce the limit. It’s too common an occurrence that clients call up on Monday after winning at auction, only to find the house is too far out of their reach and they’re put into a hard position trying to beg borrow or steal to pay for it. It can make a dream quickly turn into a nightmare.
Don’t catch auction fever!
Worse than the flu is auction fever. An auction is a fast paced exercise, often over within 10-15 minutes. They’re full of excitement and nerves, with the auctioneer doing his best to squeeze more and more money from the audience. Remember, the auctioneer is working for himself and the vendor,not you. Know your limit. If you’re thinking of creeping marginally over your limit, as most do – don’t forget the other costs. Stamp duty is the main one,as the value of the property rises, so too does the stamp duty. If you’re a first home buyer, there is a 50% reduction in the stamp duty up to a $600,000limit. So if your auction price is $600,000 the stamp duty will be $15,535. If your auction is $600,001, just one extra dollar, the stamp duty will be$31,070. Buyer beware!
Keep these four tips in mind when you’re headed out to the auctions over the weekend. Remember, it’s not all doom and gloom though if you’re well informed. Buying at Auction is fun, exciting, and quick, there’s no lengthy waiting and offers and counter offers as with a non-auction sale.
We wish you the best of luck in your search. Don’t forget to get in touch if you’re interested in buying your new home.