Buying a property is the biggest transaction most people will ever enter into. Purchasing a property on auction does differ from buying through an estate agent. In this article auctions expert and CEO of the ClareMart Auction Group Jonathan Smiedt looks at some regularly raised questions.
Q: WHAT DO I NEED TO SECURE MY BID?
A: At the time of auction, the purchaser must have 5 - 10% (may vary from auction to auction) of the purchase price available as a deposit. This will be held in a trust account to ensure legal compliance. Auctioneers commission is payable at varying rates and will be contained in the property catalogue. Single cheque payments for both the amounts are preferable, but other payment methods can be arranged with the auctioneer. Remember that the purchaser is responsible for all the costs in the transaction. This is one very clear difference between buying on auction and through an agent. The purchaser must pay the commission unlike the seller who would pay the commission to an estate agent.
Q: CAN I BOND A PROPERTY PURCHASED ON AUCTION?
A: It is not essential to have the entire purchase price in cash at the time of auction. Auctioneers can, through their affiliated bond originators, arrange the necessary bond or finance you may require. This is a unique service not offered by many auction houses. In addition to the purchase price, buyers will be required to pay the usual transfer costs, stamp duties and other nominal costs normally associated with any property transfer.
Q: WHEN DOES THE PROPERTY BECOME MY RESPONSIBILITY?
A: Standard practice is for possession and occupation to pass on the registration of transfer. This can vary depending on the nature of the auction. In the case of liquidation and legal auctions, possession and occupation pass on confirmation of the sale.
Q: HOW DO I KNOW I’VE PAID THE RIGHT PRICE?
A: Before attending an auction, decide on an amount that you are comfortable to pay. The auctioneer should be able to give you an indication as to the estimated value of the property. Do your homework and research prices of other properties in the area. This should give you a realistic idea of the value of the property.
Q: WHO PAYS FOR THE ADVERTISING OF THE PROPERTY?
A: Most auctioneers will advertise properties in the dedicated auctions section of newspapers and will also advertise in the various property guides that are produced by newspapers. Auctioneers will normally negotiate with the sellers about who covers the cost for advertising. It is often the case that both parties will contribute. Discuss the advertising budget and schedule with your auctioneer when you negotiate the mandate.