In the right circumstances an auction can be an effective way to buy a property. There are a few things to keep in mind however when buying at an auction.
Before the Auction.
If you are a successful buyer at an auction no cooling off period will apply. Nor will the contract usually be subject to finance or building inspections. In addition to this the property will be at your risk from the next business day after you sign.
Accordingly, before you start bidding there a number of things you should do including:
expressing your interest with the agent and requesting a copy of the proposed Contract and any accompanying documents if available before the auction;
On receipt of the Contract have a solicitor a review the proposed contract. A review of the Contract will help ensure you are aware of your rights and obligations, which will vary depending on whether the auction is by the owner or a mortgagee in possession;
Carry out property searches to ensure you are aware of any issues affecting the property;
Arrange for pre-approved finance;
Have building and pest inspections carried out in time to receive the reports prior to the auction.
At the Auction.
Consider talking to the auctioneer prior to the auction commencing to see whether you can bid on modified terms (such as only paying a 5% deposit instead of 10%);
Make sure you register as a bidder before the auction commences;
The auctioneer will guide you through the bidding process;
Remember – bids cannot be withdrawn so bid rationally;
If successful, the buyer will usually be required to pay the deposit when they sign the Contract;
Generally under a residential contract you would have a cooling off period of 5 business days. There is no cooling off period for an auction contract.
Legislation.
The Property Agents and Motor Dealers Act 2000 (PAMDA) is the key piece of legislation which surrounds auctioneers duties as well as cooling off periods. This legislation is set to be repealed with the Queensland Government passing the Property Occupations Bill in May 2014. The commencement date of this legislation is yet to be announced but it is expected to be late 2014. Under the Property Occupations Bill there will be no cooling off period for contracts entered into with a registered bidder before 5pm on the next clear business day after the auction.