At an auction, the purchase price of a property is determined through competitive bidding. By doing this you can be sure you’re negotiation fairly and on the same terms as all other interested buyers.
Auctions are most popular in the Auckland property market. Of 12,077 residential properties listed for sale on realestate.co.nz on May 1, 9.7% of those were up for auction. This is down from 19% in December.
Just 3.4% of properties outside of Auckland were looking to be auctioned in May.
Before you start waving around that auction paddle, here are seven things to think about:
1. Do your homework
Start attending auctions as an observer - this will give you a better understanding of the auction process.
2. Ask questions
If you're unsure about any steps in the auction process, ask your real estate agent for clarification or advice.
3. Make sure all the i’s are dotted and the t's are crossed
Have your solicitor examine the Contract of Sale prior to the auction to ensure everything is in order. Also have any building, contamination and/or pest inspections carried out prior to auction day.
4. Get your finances in order
You should know exactly how much you can spend on auction day and, most importantly, you need to stick to your limit. If you're the successful bidder, you will be required to pay a deposit on the spot, usually 10% of the purchase price - so make sure you have the funds available. Remember, once it is sold under the hammer the place is yours.
5. Register to bid
If you register with the company prior to auction day, the agent will be able to keep you informed of progress during the marketing phase leading up to the day.
6. Come prepared
On auction day arrive at the venue early, with a chequebook in hand. Position yourself so you are close to the auctioneer and have a clear view of other bidders. When you are ready to bid, do so with confidence. However, if you don't feel confident about bidding, you can hire a buyers' agent to do the job for you (ask your real estate agent for advice).
7. Going once, going twice
If yours is the successful final bid, congratulations! You will then be required to sign a contract and pay your deposit immediately. The balance of the purchase price will be paid on settlement.
If you are not successful this time around, keep in mind that there will always be other properties to choose from. If you really want a property but don't want to bid at the auction, you can try to make a pre-auction offer through the selling agent. Some vendors will prefer to see the auction through, but others may be willing to negotiate.