Buying property can be an exciting yet intimidating experience, especially if you are planning to do it through a public auction.
If you’re in New South Wales, there are specific legal requirements you should know before attending an auction. Here’s a short guide to help you understand some of the rules that matter.
Understand the Auction Rules
- Registration: In NSW, you must register to bid at an auction and be given a bidder’s number. Bring identification to prove your identity.
- Reserve Price: The vendor will set a reserve price, which is the minimum amount they are willing to accept. If bids do not reach this price, the property may be ‘passed in’ or withdrawn from auction. The highest bidder then gets first right to negotiate with the seller.
- Cooling-off Period: There is no cooling-off period when buying at auction. Once the hammer falls, the sale is legally binding and you are legally required to pay the deposit and settle the purchase on the settlement date.
Do Your Homework Prior to Auction
- Due Diligence: Before you attend the auction, familiarise yourself with the property you are interested in. Organise a pest and building inspection report before you attend the auction as most contracts in NSW state that you are buying the property as-is. Contact a solicitor to review the property title and to carry out a legal due diligence in respect of the property.
- Contract for Sale: Request a copy of the contract for sale from the agent marketing the property and engage a solicitor to review the contract for you prior to attending the auction.
- Finance: Make sure your finances are in order. It is highly advisable to secure pre-approval for a home loan before attending an auction. Remember, on the fall of the auctioneer’s hammer to your bid, you’re obligated to buy.
The Bidding Process
- Starting Bid: The auctioneer will often start the bidding below the reserve price to encourage participation.
- Incremental Bids: Bids usually go up in increments set by the auctioneer.
- Vendor Bids: In NSW, the auctioneer is allowed one vendor bid. The auctioneer must announce that the auctioneer is permitted to make one bid on behalf of the vendor before the auction begins.
Winning the Auction
- Deposit: If you are the winning bidder, you’ll need to sign the contract and pay the deposit immediately—usually 10% of the purchase price unless you negotiate a different deposit with the vendor prior to the auction. Your solicitor can negotiate with the vendor’s solicitor prior to the auction.
- Settlement: After winning, the property will move into the settlement phase – usually 42 days in NSW but can be shorter or longer depending on what the auction contract states. Your solicitor will prepare settlement with you including having your stamp duty assessed, liaising with your mortgage financier for the loan, calculating the balance of the price payable on settlement, etc.
Conclusion
Attending a public auction can be an effective way to buy property, but it requires careful preparation. Make sure you are familiar with the rules, consult professionals for advice prior to attending, and keep a cool head during the bidding. If you have more questions or need legal advice on buying property at auction in NSW, don’t hesitate to contact us. We’re here to assist you every step of the way.