An auction is a public sale where the property is sold to a buyer with the highest offer. Bidding at an auction can be an exciting and a competitive experience. You will be able to potentially see the other bidders and therefore will understand how many people are interested in the same property.
The seller of the property will have a “reserve price” which would usually be the lowest amount they wish to obtain on the property for sale. Potential buyers can register their interest in purchasing the property with the real estate agency managing the sale and ask to be informed of all offers made to the sellers before the auction.
The key to being a successful bidder, is doing your research! This can be done by collecting as much information as possible from the agent in charge of the property listing. Understanding the buyers reason to sell, whether there has been a lot of interest in the property and potentially having discussions with property specialists will certainly help you on your bidding path.
Before you make an offer, make sure you can afford any additional costs that come with bidding. Things such as building inspections and registered valuations may be required.
Buying a home is a big decision and often if you’ve found your dream home, you may be prone to overpay when bidding. This can be a dangerous thing as you may go over your limit. It is important to remember that you need to stick to your limit. Having a visual reminder of the number you will not go above may help and always remember that even if you don’t win at this auction, you may find an even better house around the corner.
In most cases you will need to pay a deposit upon winning at auction. The deposit amount is normally 10%, but this will be confirmed in the Sale & Purchase agreement that you should review before bidding at auction
When you are planning to use your KiwiSaver funds as a deposit, you should get your KiwiSaver withdrawal confirmation from your provider prior to auction. This will help you know whether you indeed qualify for the withdrawal and it will also confirm the amount that you can withdraw.
For sale by auction the real estate agent (or on the listing agent’s website) will have the auction pack including a sale and purchase (S&P) agreement available to be viewed and checked. This S&P agreement will have the vendors conditions, deposit percentage amount and settlement date. Usually this will note a standard 10% deposit and 4 week settlement.
If the conditions do not suit you, you can request to make an amendment with the vendor. You would approach the real estate agent and ask for a variation form. Any conditions can be requested to be changed; this doesn’t mean the vendor has to agree to them. If they do, they will sign the variation agreement and those terms will be followed if you win at auction. Note that this variation agreement is only for you if you win. Other bidders may be going with the standard terms provided or have their own variations.
Whilst a thrilling experience, it is important that you do not get caught up in the rush of excessive bidding that outweighs what you are able to afford. Keep calm, stick to your strategy and happy bidding!
Right now, it's not possible to pay the deposit on auction day with funds from your KiwiSaver. You could organise instead, to use your KiwiSaver money for settlement day.
Alternatively you could ask the real estate agent if the vendor would consider changing the terms of the auction so that the deposit is paid at a later date, but this is only at the discretion of the vendor.
In short, yes. Winning at a property auction means you have committed to purchasing the property. After the auction, you will sign the Sale and Purchase agreement, which you would have reviewed prior to the auction, and pay the deposit.
It is important to have finance sorted prior to going to auction as you must pay the remaining amount for the property purchase on settlement day.
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