I am interested in a residential property that is going to auction – what needs to be done before I bid?
In the current property market more sellers are taking their sales to auction in a bid to obtain the best possible price they can. Generally this method can be quite successful for both buyers and sellers particularly in very popular suburbs. At auction, if you are a successful buyer, the property will not only be at your risk from the day after you sign the Contract but you will be unable to terminate the Contract under most circumstances. Accordingly, to ensure that the property you are locked in to buying is satisfactory there are few things you should do prior to opening your cheque book!
Once you have your property in sights and it is a few weeks until the auction you should express your interest with the agent and request a copy of the proposed Contract and any accompanying documents if available. On receipt of the Contract you should contact a solicitor and organise for a review of the proposed contract and various property searches to be carried out. A review of the Contract will ensure that you are fully aware of your rights and obligations, which will vary depending on whether the auction is by the owner or a mortgagee in possession. Carrying out various property searches will ensure that any issues whether council, structural or government related affecting the property are exposed and you can incorporate the impact of those issues when making your bid.
It is important to note that in addition to having the Contract reviewed and searches carried out you should arrange for pre-approved finance as well as a building and pest inspection of the property prior to the auction. If these things are done following auction and the results are not satisfactory, you will be unable to terminate the Contract.
At auction the auctioneer will guide you through the bidding process and if successful, require you to pay a 10% deposit on the spot when you sign the Contract. Generally under a residential contract you would have a cooling off period of 5 business days, however as an auction contract is essentially unconditional there is no cooling off period allowed for under 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 This piece of legislation is set to be repealed with the Queensland Government passing the Property Occupations Bill 2013 in May this year. The commencement date of this legislation is yet to be announced but it is expected to be late 2014; this Bill is one of four in which PAMDA is set to be split and ultimately simplified.
As mentioned above, currently under PAMDA, the cooling off provisions do not apply to properties sold by auction. Under the Property Occupations Bill 2013 that exemption will extend to include a contract entered into with a registered bidder before 5pm on the next clear business day after the property is sold at auction.
If you are looking to purchase at an auction please do not hesitate and call our team now to ensure that your purchase is stress free!