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Buying a house at auction.

Buying a house at auction.

Old May 17th 2009, 3:51 am
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Default Buying a house at auction.

Hubby and I would like to buy a house that has come up for auction. It was put up for auction a few weeks ago, but was pulled out the day before. At the time, we had only just accepted an offer on our UK home, so we didn't do anything about it at the time. However, I got an e-mail from the agent last week to say it is back up for auction in two weeks time, so we have been to have another look. We are about to exchange contracts on our UK home, and we have enough for a deposit in our Aus bank. We have seen a mortgage advisor and have him coming over tomorrow to do the pre-approval thing.

I have searched on here and on google, and have a fairly good idea of what the process of an auction is, however, there are a couple of other questions that I have that I can't find answers to. Hopefully, you might be able to help, or point me in the right direction.

When we spoke to the agent yesterday, he said that the property was being offered with 'no reserve'. Does that mean exactly that? Can we make an offer before the auction, or is that more likely to tell the agent what we can afford and therefore push the price up? I gather from what we have been told (very little) that the vendors have to sell, and that it will go at the auction.

Because there is a shortage of time until the auction, the agent has instructed a pest/property inspection which we are able to buy should we be interested. Should we still arrange our own, or do you think that providing this inspector is independant, the one they arrange will be fine?

When we have bought property in the UK, we have always arranged buildings insurance from the time of exchange. Would this be the same in Oz, i.e if we win the auction, I presume that we would have to insure the house?

What about mortgage insurance? Because we have a fairly big deposit (more than 20%) we have been told that we do not have to have the compulsory mortgage insurance from the lender. We would have some savings left (we want a cushion in case we have to return to the UK for any reason) so we could afford to pay the mortgage for some months without working, but surely it would still be prudent to have insurance. If so, would we get that from the lender, or can we buy it from anywhere?

How would we pay the deposit? Would it be a personal cheque?

We have the mortgage chap coming round tomorrow to do the pre-approval. If we were to win the auction, are there any circumstances in which the mortgage company would then refuse to loan the mortgage? I don't want to get stuck with a house I can't afford to buy and lose the deposit. Can you put in the contract that it is on the condition that the lender will lend?

And finally, the thought of bidding in an auction myself terrifies me, and as hubby works on Saturdays, there is no chance of him getting to any before the day. So, has anyone used a buyers agent? If so, what sort of cost are we talking about and how did it go? Is it a good idea? Where can I find one? I have googled, but the ones I can find seem to be north Sydney and we are south. Or, will they travel?

Sorry about the questions, and thank you in advance!
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Old May 17th 2009, 4:38 am
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Default Re: Buying a house at auction.

There's a poster on here called Jacque who is a buyers agent.

She's given lots of sensible advice to others and I'm sure she could help you with your questions - or even do your bidding for you, if you want.

Why not get in touch with her?
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Old May 17th 2009, 7:10 am
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Default Re: Buying a house at auction.

I'll try and answer what I can.

Mortgage Insurance (LMI) - This is what you have to pay when you take out a mortgage over 80% of the value of the property. It protects the lender, not you, should you default and house prices drop. If this was to occur you could still be chased by the insurer for the shortfall.

No reserve means the seller has said the property will be on the market as soon as the auctioneer has accepted the first bid. They could still have a vendor bid which they could use to force the auction up to the minimum level they are willing to sell at.

When I enquired with the bank around the risk of them rejecting me once I had bid and won at auction I was advised that would be a risk. I had pre-approval which was the best they could do but there could always be a risk which nothing could be done about until I had an agreed purchase price.

You can pay the 10% deposit by personal cheque if you win the auction.

You can make an offer pre-auction, they may or may not accept, probably depends on the interest that has been shown by potential buyers. If this happens and your offer is accepted you will need to be unconditional before the auction date.

You cannot put any conditions in contract exchanged at auction as there is no cooling off and the contract is unconditional. you can get some items changed (i.e. deposit amount % or settlement period but these must be agreed in writing in advance if the auction with the vendors solicitor.

Insurance for you is available from multiple sources. Do a google for retrenchment or income protection insurance.

If the buildings & pest is available from the agent at no/little cost why not take a look at it and decide whether you feel it is OK or if you want to commission your own. Phone around a few local inspectors to check the cost and if the agent is trying to pass a large % of the cost on it may be worth getting your own for piece of mind any way.

I would recommend watching some auctions before bidding on one. They can be quite nerve wracking especially when you get the agents constantly pressuring you to make or raise a bid. Its not been unheard of for people to end up bidding against themselves without realising. I would certainly take a couple of friends with you so they can at least shelter you from the agents constant whispering.

There is a book about buying at auction by Patrick Bright which is well worth reading.

Remember the agent works for the vendor not you. Over here they seem much more willing to stretch the truth than UK agents and will say anything they think will help attract you to offer or increase your offer.

I would expect a buyers agent will travel. No idea on the cost. Don't forget though to check that hubby will be OK to sign the contract if necessary as that needs to be done immediately on winning the auction.

Make sure you know your market and maximum price and stick to them. It not unusual for no reserve auctions to go over expected sale price as people can think they are getting a bargain.

HTH
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Old May 17th 2009, 7:24 am
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Exclamation Re: Buying a house at auction.

Here in Melbourne the process follows below:
  • Estate agents starts talking up the:
  •  
    • Area
    • The economy
    • The street
    • The house/land/plot
  • Starts bidding
  • Nothing happens
  • Vendor bid
  • Nothing happens
  • Go inside to let buyers sweat over uncertainty
  • Either Vendor bid and quick pass in or let the bidding really begin
Wait until 2nd drop of hammer before showing your cards.
You don't have to follow the amounts the vendor suggests just yell out your figure - ie at $750k he says looking for $790k yell out $751k (or $730k to confuse the bugger)
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Old May 17th 2009, 8:07 am
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Default Re: Buying a house at auction.

Have a read of this article.
http://www.lawyersconveyancing.com.a...ns_exposed.asp

edit : the most important parts are at the very end of the article under "Here's what we advise clients who are considering bidding at auction"

Last edited by asprilla; May 17th 2009 at 8:20 am.
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Old May 17th 2009, 10:26 am
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Default Re: Buying a house at auction.

Thank you for the help and info guys. I now have some more things to think about. We have researched the area thoroughly, we have also been over there again this afternoon so we have been on different days and at lots of different times. We have done nothing but talk about it, lists of pros and cons, done budgeting on a spreadsheet etc. We have been to the local shops, researched local schools (though the kids are a bit little for school at the mo), done the drive to the train station, researched train ticket prices for hubbys commute (only 20 mins). We have talked about how we would use the house, which rooms for whom and so on. I think that we have come to the conclusion that we really do love the house and the area that it is in.

So, now we have to decide what the next step is. The mortgage guy is coming around tomorrow evening so we will know for sure what we can afford, then I guess we could make an offer on the house, although I have no idea what we should offer. Do you offer the max you could afford at auction, and then go to the auction with the same budget if you are knocked back, hoping that it doesn't get that high, or do you offer low? The pest inspection etc is being done tomorrow, so we can go and look at that at the agents on Tuesday or Wednesday.
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Old May 17th 2009, 12:14 pm
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Default Re: Buying a house at auction.

Originally Posted by asprilla
Have a read of this article.
http://www.lawyersconveyancing.com.a...ns_exposed.asp

edit : the most important parts are at the very end of the article under "Here's what we advise clients who are considering bidding at auction"
Great link. Any idea if the same rules apply to Qld auctions?
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Old May 18th 2009, 12:02 am
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Default Re: Buying a house at auction.

Just thought of one other thing, its recommended to get the contract checked out by a solicitor/conveyancer prior to auction to as once a contract is unconditional that's it, you are agreeing to everything in it.

I would base any offer on what similar properties in the are have sold for, back it up with examples if necessary. realestate, domain & onthehouse all have sold prices.
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Old May 18th 2009, 12:25 am
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Default Re: Buying a house at auction.

Originally Posted by fish.01
Great link. Any idea if the same rules apply to Qld auctions?
I don't know, if I were you I would contact the consumer law reform in Qld and ask their opinion.
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Old May 18th 2009, 2:27 am
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Default Re: Buying a house at auction.

Originally Posted by LittleKittyCat
Hubby and I would like to buy a house that has come up for auction. It was put up for auction a few weeks ago, but was pulled out the day before. At the time, we had only just accepted an offer on our UK home, so we didn't do anything about it at the time. However, I got an e-mail from the agent last week to say it is back up for auction in two weeks time, so we have been to have another look. We are about to exchange contracts on our UK home, and we have enough for a deposit in our Aus bank. We have seen a mortgage advisor and have him coming over tomorrow to do the pre-approval thing.

I have searched on here and on google, and have a fairly good idea of what the process of an auction is, however, there are a couple of other questions that I have that I can't find answers to. Hopefully, you might be able to help, or point me in the right direction.

When we spoke to the agent yesterday, he said that the property was being offered with 'no reserve'. Does that mean exactly that? Can we make an offer before the auction, or is that more likely to tell the agent what we can afford and therefore push the price up? I gather from what we have been told (very little) that the vendors have to sell, and that it will go at the auction.

Because there is a shortage of time until the auction, the agent has instructed a pest/property inspection which we are able to buy should we be interested. Should we still arrange our own, or do you think that providing this inspector is independant, the one they arrange will be fine?

When we have bought property in the UK, we have always arranged buildings insurance from the time of exchange. Would this be the same in Oz, i.e if we win the auction, I presume that we would have to insure the house?

What about mortgage insurance? Because we have a fairly big deposit (more than 20%) we have been told that we do not have to have the compulsory mortgage insurance from the lender. We would have some savings left (we want a cushion in case we have to return to the UK for any reason) so we could afford to pay the mortgage for some months without working, but surely it would still be prudent to have insurance. If so, would we get that from the lender, or can we buy it from anywhere?

How would we pay the deposit? Would it be a personal cheque?

We have the mortgage chap coming round tomorrow to do the pre-approval. If we were to win the auction, are there any circumstances in which the mortgage company would then refuse to loan the mortgage? I don't want to get stuck with a house I can't afford to buy and lose the deposit. Can you put in the contract that it is on the condition that the lender will lend?

And finally, the thought of bidding in an auction myself terrifies me, and as hubby works on Saturdays, there is no chance of him getting to any before the day. So, has anyone used a buyers agent? If so, what sort of cost are we talking about and how did it go? Is it a good idea? Where can I find one? I have googled, but the ones I can find seem to be north Sydney and we are south. Or, will they travel?

Sorry about the questions, and thank you in advance!
Also beware of the 'Dutch' auctions...this is where you bid over the phone. I did this and had a horrible experience. We put in an offer before auction, signed the contracts and waited for the vendor's answer (we did put a sunset clause in for when the offer expired). The vendor verbally accepted but hadn't actually signed the contracts on their side, when all of a sudden out of nowhere, someone else counter-offered. So that's when the phone bidding started. I was on the phone to the agent, whilst his colleague was on the phone to the other bidders. I got so fed up with ringing, that it ended up with me bidding via text. I kept upping my offer by a considerable amount and the agent came back with $1k more every single time...he kept telling me it was their last bid...he was obviously telling them the same thing cos they kept upping theirs. In the end, I pulled out...but not before the agent rang me absolutely begging me to put in a final $1k cos 'this will win it for you'. He said he'd even put in $500 of it out of his own commission if I did that. Stupidly I said yes as I thought it would be ours. Guess what...the other party upped by $1k again. That was the final straw. I pulled out and said stuff you. I can't believe I allowed myself to get that emotionally involved in the bidding war that we went $18k over what we were prepared to pay for the house. I reckon the agent was lying about the other party being 'on their last legs' just to push the bidding up. Can't prove it though. I'm now so glad that we lost out on that house, as we found a bigger and better house round the corner for less money that same weekend.
I agree with spottydog about agents willing to bend the truth here. The moral of the story is not to get emotionally involved, and stick to what you want to pay, even if you can afford more.
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Old May 18th 2009, 4:12 am
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Default Re: Buying a house at auction.

Thanks again for the advice! One of the things that I am finding hard, is knowing how estate agents come up with the figures they do, and knowing what is a realistic price for the property. I got hold of a suburb guide which included sold prices for the area the house is in, but there seems to be no logical pattern to how the houses are/were priced and what they eventually sold for. Just as a comparison in the UK, if you want to buy a mid-terrace in a particular town, it will be priced similarly to other mid-terraces in the same street, unless it has something like an attic conversion or conservatory, in which case you can see why it is more. Over here, the properties seem to be so different (which I love, by the way) that getting a feel for how something should be priced is hard. We think that the house we are interested in should be in the $700's, but there is a huge difference between $700K and $799K!

If we were to make an offer before the auction, I have no idea of what. Would it be usual to offer very low and hope that the vendors bit, but knowing that they probably wouldn't, or would you put your cards on the table and give an offer more towards the top of what you know you can afford, telling them that it is the most you can go to, hoping that it is accepted, but knowing that if you are knocked back you could still always go and see what happens at the auction?
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Old May 18th 2009, 5:20 am
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Default Re: Buying a house at auction.

Offer on the house before auction has to attractive to the sellers (and with limited time to consider before being withdrawn) so they would accept and not risk an auction.

One bit of advice.
Do not worry too much if you will not get this house at the auction. Another one will come up sooner or later in this area.

And another bit.
Take your time learning about the area, how much are the houses there actually selling for (as opposed to what they used to sell for) and you will know what will be a good price to pay.
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Old May 18th 2009, 6:07 am
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Default Re: Buying a house at auction.

Originally Posted by LittleKittyCat
Thanks again for the advice! One of the things that I am finding hard, is knowing how estate agents come up with the figures they do, and knowing what is a realistic price for the property. I got hold of a suburb guide which included sold prices for the area the house is in, but there seems to be no logical pattern to how the houses are/were priced and what they eventually sold for. Just as a comparison in the UK, if you want to buy a mid-terrace in a particular town, it will be priced similarly to other mid-terraces in the same street, unless it has something like an attic conversion or conservatory, in which case you can see why it is more. Over here, the properties seem to be so different (which I love, by the way) that getting a feel for how something should be priced is hard. We think that the house we are interested in should be in the $700's, but there is a huge difference between $700K and $799K!
How many houses have you been shown through so far?
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Old May 18th 2009, 10:49 am
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Default Re: Buying a house at auction.

Originally Posted by LittleKittyCat
If we were to make an offer before the auction, I have no idea of what. Would it be usual to offer very low and hope that the vendors bit, but knowing that they probably wouldn't, or would you put your cards on the table and give an offer more towards the top of what you know you can afford, telling them that it is the most you can go to, hoping that it is accepted, but knowing that if you are knocked back you could still always go and see what happens at the auction?
Dealing with this sort of strategy is one of the reasons for using a buyers' agent. I used Jacque who was mentioned above just to bid for us at auction (it was a deceased estate so was always going to go to auction), but a good buyers agent can help with the whole process.

I'd suggest you contact Jacques Parker (do a Google search). I think she only deals with North Shore/the Hills district, but she might be able to point you in the right direction for how to find someone good who does cover your area.
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Old May 23rd 2009, 2:28 pm
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Default Re: Buying a house at auction.

Hi KittyCat, Nicky and Louie

Haven't been on the forum for a while and just noticed this thread! An independent BA can certainly save you considerable worry, stress and hopefully money by doing both an appraisal and bidding at auction for you.

Depending on how far down south you are, I may be available to help. Give us a call or visit my website for further information etc www.housesearchaustralia.com.au

Some great advice given so far- it's a dog eat dog world out there in auction land and it does help to have an agent on your side.
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