House For Sale By Auction
Auctions are another common way to sell houses. A House for sale by auction is rarely advertised with a price. Auctions are used when there is likely to be multiple interested parties, when the sale price is hard to gauge, or when an unconditional sale is needed.
The date and time for an auction is included with marketing for the property, and if you want to buy a house for sale by auction, you just have to bid at the auction. You do not have to be at the auction in person, you can organise to bid over the phone, or you can send someone to bid on your behalf.
When you buy at auction you are buying unconditionally. This means that if you are the highest bidder, and the reserve is met, you have effectively made a cash offer that has been accepted and this is legally binding. If you are unable to make a cash offer, don't give up, if a property does not sell at auction, conditional offers will usually then be considered.
If you are planning on buying at auction, you need to make sure that all your conditions have been satisfied before you bid. Get your property valuation, building inspection, and your LIM, confirm your finance, get your lawyer to check the title and make sure you have done your personal inspections and research into the property.
Sounds painful! It is! Auctions are not for the faint hearted. By the time you are standing (or sitting) in front of that auctioneer you have probably already spent a fair bit of money on the house. It is very important to not let that affect your bidding. You need to set a budget and stick to it! Easier said then done when you already have an emotional and financial investment in the house. Perhaps someone bidding on your behalf is a better way to go...
Vendor bidding is something to be aware of when buying at auction. A vendor bid is when a representative of the vendor (usually the auctioneer) bids in an attempt to get the price up to the reserve.
Even though an auctioneer will make it clear at the beginning about vendor bids, sometimes it is very hard to distinguish which bids the auctioneer is taking off people in the room and what bids are being made by the auctioneer. Vendor bids can only be made up to the reserve. Try not to bid against the vendor, this is basically bidding yourself up. Definitely do not bid against vendor bids above your budget!
If a property is 'passed in' at auction, it has not sold as it has not reached the reserve price. The person who had the highest bid when this happens will get the first right to negotiate with the vendor.
Properties for sale by auction can also be sold prior to the auction (again, usually in the small print). If you are interested in the property, register this interest with the estate agent, that way if an offer is being submitted prior to the auction you can get a chance to put your offer in, turning the negotiations into a competitive offer situation.