Complete Guide to Buying at Auction: Part 1 of 3

*the following information pertains to bidding at property auction in NSW specifically. For auction bidding in other states, please consult local rules and legislation.

Property auctions can be fast-paced and exciting, offering a unique opportunity to secure your dream home or an investment property with full transparency, avoiding many of the things buyer dislike about the purchasing process.

However, the process can also be intimidating for newcomers and even seasoned buyers alike. Bidding on a property at auction requires not only preparation and financial readiness, but also a solid understanding of local rules and strategies.

In this three-part guide, we’ll break down the key steps pre, during, and post auction to get you ready for the big day!

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PART 1: PRE AUCTION

1. Get Your Finances in Order

Bidding at a property auction requires you to be financially prepared from the outset. Here’s what you need to do before attending the auction:

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• Pre-Approval of Home Loan: Arrange for a pre-approval from your lender to know exactly how much you can borrow. This gives you a clear idea of your budget and ensures you can act quickly if you win the auction.

• Deposit on the Day: In NSW, if you are the winning bidder, you’ll need to pay a deposit—typically 5-10% of the purchase price—on the day of the auction. Ensure you have quick access to these funds, either through a bank cheque or a pre-arranged transfer. There is an excellent system called Auction Pay (by Macquarie bank) that is safe and secure and bypasses normal internet banking transfer limits, but check with the agent beforehand as not all agents use this and if you are unable to pay the deposit, technically you will be in breach.

• Additional Costs: Factor in additional costs such as stamp duty, legal fees, and any other expenses like inspections or repairs. NSW stamp duty rates are tiered based on the property price, so it’s essential to understand what your total financial outlay will be.

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2. Inspect the Property Thoroughly

Buying property at auction means you are purchasing it “as is,” so it’s crucial to do your due diligence well before auction day.

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• Property Inspections: Attend open inspections or arrange a private inspection of the property. Take note of any visible defects or repairs that may be needed, as you cannot negotiate these post-auction.

• Review the contract and lodge any requested contract changes well in advance: Have your solicitor or conveyancer review the contract of sale and other legal documents, such as the title deed and zoning certificates. They will advise you on any potential legal complications or terms that may affect your purchase. Lodge any requested changes well in advance to give the other side time to respond.

• Pest, Building and Trade Inspections: Organise pest and building inspections to identify any hidden issues with the property. In NSW, this is the buyer’s responsibility before bidding, as auction purchases are final. You should also consider plumbing and electrical inspections as these often have findings not readily found in standard building inspections and can be very expensive if found after the fact e.g. drainage problems.

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3. Set a Budget

Setting a firm budget is critical when it comes to bidding at an auction. Without a clear limit, it’s easy to get swept up in the excitement and overspend.

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• Research Comparable Sales: Before the auction, research similar properties in the area to get a realistic idea of what the property is worth. This helps you set a maximum bidding price based on market conditions. If there are specific traits of the property that you really like and are unique, you may want to price these in based on scarcity value e.g. triple car garage.

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In part 2, we will discuss the auction itself, including rules, bidding process and bidding strategies. Stay tuned.

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