Property auctions have become popular in Australia for a reason. They allow bidders to find the right property instantaneously, and often more cheaply than a traditional property transaction could allow.
Of course, these types of auctions also come with pitfalls, and some of them can quickly become significant. For instance, contracts tend to be vague and allow for more liability on behalf of the bidder. Blink, and you may commit to a property that does not hold up to its initial promise.
How do you take advantage of the trend and its benefits, without falling into the trap of one of these drawbacks? The key is strategy. Here are 8 tips that can help you make sure you make the right decision at your next (or first) property auction.
1) Know Your Budget
First, it’s absolutely crucial to know just how much you can afford in terms of the property. Before even thinking about bidding, you have to understand your budget, both in terms of the overall sales value and the individual monthly payments you can afford.
This should be your first step in the auction buying process. Any property expected to sell above your budget should not even enter your radar.
2) Stick To Your Budget
Just as important as setting your budget is sticking to it throughout the entire process. That means only visiting properties that fit within this framework, and not shopping above your sticker price.
It also means that during the day of your auction, you shouldn’t get carried away. Instead, when the budget hits, stop the bidding. It might seem like your dream home, but that won’t matter if you cannot afford it in the end.
3) Visit the Property Before the Bid
To make sure that you’re actually bidding on the right home, it makes sense to visit the property at least once before you bid on it. On the day of the auction or, even better, before the big day, organize a walkthrough that allows you to fully understand what you’re bidding on.
In a regular property transaction, this step is routine. Unfortunately, that isn’t always the case during property auctions. But considering that this is one of the largest purchases you will make in your lifetime, you should absolutely do your due diligence before placing any type of bid on the home.
4) Get Financial Pre-Approval
Next, it’s time to get your finances in order. Once you have determined your maximum budget, it makes sense to actually get pre-approval for a mortgage in that price range. Whether or not you can afford a home theoretically matters little if you cannot actually get a home loan for that amount.
Again, the common theme remains true: you want to make sure that you have all theoretics straightened out before placing a bid. It’s the only way to make sure that when the actual auction starts, you can make sure that you are making the right choice in what will be one of the largest transactions in your lifetime.
5) Familiarize Yourself With the Atmosphere
First time at an auction? In that case, it also makes sense to familiarize yourself with the atmosphere you will encounter. If you’re unprepared, it’s easy to get swept away in the adrenaline of busy bidding.
To prevent that from happening, visit an auction for a home you’re not interested in. Study the speed and atmosphere in which the bidding occurs. Now, you will know what to expect when it starts to matter.
6) Find Alternatives as Necessary
A surefire way to not outbid your own finances is to make sure that the house in question is not your only option. Instead, find at least one other alternative that you can fall back on, should your bid fall through.
It’s difficult to overstate this: your rational decision making will decline drastically if you feel cornered. By doing your research into alternatives beforehand, you can prevent that danger from becoming reality.
7) Understand the Stipulations of the Contract
With these tips in mind, you can start the bidding. However, even if you win the bid, you also have to make sure that you understand what you actually sign up for when you sign the contract.
Auction property transactions can come with some stipulations that are not always beneficial for the buyer. Pour over the contract to see what liabilities you may have, and what will happen if the actual property does not turn out as desired.
8) Get Legal Expertise as Necessary
That previous step, of course, may seem complicated for a typical first-time auction participant who is not familiar with the ins and out of the concept. In that case, it tends to make sense to look for legal help before you start the process.
Your solicitor, for instance, will be able to help you better understand a contract that will need to be signed by the winning bidder. The same professional will also be able to help you understand your financial fees, and responsibilities once you win the bid. In other words, they can help you with any questions or concerns you might have throughout the process.
Without a doubt, buying your property at an auction can be beneficial. However, it’s important to note that the same process is also complicated, and often differs significantly from typical home buying. The above tips can help you get started on avoiding scams and making sure that the winning bid you place will actually change your life for the better.
Titlexchange can help you wether you are buying or selling property at auction. Speak to one of our friendly team members today about our fixed fee conveyancing packages and digital on-boarding process.