How house auctions work in Australia

February 24, 2022
How house auctions work in Australia

The Australian property market rose by an excess of 21% in 2021. It is a new year and we assume that the Australian property market is predicted to grow steadily. There are multiple ways to buy property in Australia, and auctions are a rather popular way of buying them. Whether it is commercial buildings and estates, or private residences and homes – auctions are a popular means of buying property across all states in Australia. Auctions can really enable you to get a house for a really good price since the price is majorly bidder-driven and not controlled by the seller of the property entirely. Auctions can be a great way to get a more valuable house than the price you pay. However, to buy a good house via auction, you need to keep more than a couple of things in mind.

A house is put up on auction mainly for four reasons:

  1. Debt

    An owner who cannot pay back the debt, chooses to sell their property in order to clear their debt and rid them of the financial burden. This is a common reason for many houses that are put up on auction. Being unable to pay back debt can have a very negative effect on an individual’s credit score. It is easier for a homeowner to sell off their property and clear the debt rather than have the bank seize the property due to non-payment.

  2. Unusual or special properties

    Properties that are not typical in their construction – that is, they do not have the typical layout of a residential home are often auctioned to be sold. A special property may have been owned by somebody important, or was constructed in a rustic or royal layout of construction can usually be listed at an auction. Usually, property enthusiasts or collectors keep an eye out for unique properties being sold at an auction. Sellers of such properties are more likely to get higher prices in an auction.

  3. Quicker sales

    Selling a house via auction is definitely the quickest way to sell it. A Real Estate agent making a sale definitely takes longer because they meet with many different clients, and house visits are often part of the deal. Buying a house is quicker via auction, and so is selling.

How Australian House Auctions Work 

The rules for auctions vary from state to state, but here are a few standard rules you must know of before you enter the auction. These are a few rules

  1. Registration

    Registering for the auction is basic. If you have not registered for an auction, your bid will not be considered even if you get the winning bid. You can pre-register with the seller before you arrive at the auction or register when you arrive. Do not be late to the auction as you want to participate right from the start to get an idea of the closing price as well as competing bidders.

  2. Reserve Price

    Reserve price is the minimum price at which the property will be sold to the winning bidder. An auctioneer may try to get the bidders up to this price so that the vendor agrees to sell the property. If an auctioneer is unable to fetch the reserve price for the property, the property will not be sold. However, if the winning bid comes close to the reserve price and the vendor/seller agrees to it – the property will be sold to the highest bidder.

  3. Contractual Obligation

    The person with the winning bid is obligated to buy the property and cannot back out of the purchase. If you have made the bid and won – you MUST buy the property. Backing out from your bid would mean that your deposit will not be returned back to you. Considering Australian standards – the deposit amount is a handsome one so make sure you make the winning bid only if you can afford to buy the property.

Tips for Buyers 

Following these tips will make sure you get a good deal on the property that is to be auctioned. There are different kinds of bidders but a calculative and prepared bidder is better than all of them.

  1. Home Loan pre-approval

    As you know already if you make the winning bid, you are going to have to pay the deposit on the property. It is better to get a home loan pre-approval according to your budget so that you do not need to back out of the contract. Doing this will make sure you have a better idea of your budget and this will enable you to place more confident and logical bids.

  2. Inspect carefully

    An inspection will be scheduled for interested buyers/bidders before the auction begins. You can ask the auctioneer to schedule a pre-inspection, or there is a standard rule to conduct a round of inspections before the auction begins. If you are buying a house and are going to live in it, it is best to inspect it carefully. Have a checklist like checking for infestations or checking construction quality. It is best to hire a house inspector to go along with you to the auction or pre-inspection. This will make sure that the house has no problems so that you can bid confidently. It is a pre-assumption for many home buyers that houses up for auctions will always have problems, but it is not true. However, it provides great peace of mind to be sure about the quality and condition of the house that you are bidding on.

  3. Have an upper limit

    Make sure you decide on an upper limit to the budget before you go into the auction. Do not be instinctive about winning the bid and most definitely do not get into a bidding war. If you want to buy a property for a good and fair price, be very calculative and planted in your approach to the auction.

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