What is a Real Estate Auction?
Auction is a form of marketing a property through intensive advertising designed to capture the maximum attention of buyers within a set time frame. The process is a system of purchasing Real Estate through public negotiations to determine the fair market value of the property.
What is the reserve price?
The Vendor usually sets the reserve price on the day of the Auction with the auctioneer. The only person who will know this is the auctioneer. The Reserve is generally established after reflection on the prospective purchaser’s market feedback.
How do purchasers bid at an auction?
Simply by attracting the attention of the Auctioneer by:
- Putting up their hand;
- Calling out;
- Nodding their head when they catch the auctioneer’s eye.
The auctioneer usually nominates the amount of the bid he is looking for. The successful bidder will be asked to sign the contract and pay the deposit.
Can the property be sold before the auction?
Yes, in most cases it can. Purchasers simply submit their offer to the agent on an auction sale and purchase agreement and if the price is agreed to the contract is then completed and the property is sold before Auction. For obvious reasons purchasers will need to submit their best offer at this point.
Purchasers can't buy at auction because they have to get finance?
That’s ok. Purchasers can organize, through their bank or mobile mortgage manager, approval to bid up to a price that they are prepared to pay, prior to auction. This is simple to organise and only takes a couple of days.
Purchasers want to buy but have to sell a house first?
If they are in a sound financial position they may organise a bridging loan. They may buy with a longer settlement date, giving them time to sell your house. They may also not bid at auction and put a conditional agreement in place after the auction has finished, obviously this is only if the property does not sell at auction.
What price do purchasers have to pay to buy the property?
This is the price they are prepared to pay. Other people will perceive different amounts. Generally, their price will be established by what property has sold for around the area and also the particular features that the home offers them.
What if the home doesn't sell?
If the reserve price is not reached, the Auctioneer will pass in the property. The highest bidder then has the first right to negotiate for the property immediately after the Auction and if their negotiations are unsuccessful the property will be offered for sale to all other interested parties.
What contract do we sign and what are the standard conditions?
The contract is the standard contract and the sales agent will make a copy available to you or your lawyer on request. A copy is also available at the Auction. The usual conditions of purchases at Auction are:
- 10% of the purchase price paid as a deposit either by cash, bank cheque or personal cheque;
- Settlement date is normally 30 days from the signing of the contract.