Buying Property at Auction: The Mortgage Broker’s Guide to Preparation and Financing

Purchasing a property at auction can be both exciting and nerve-wracking. You’re trying to make an important decision in a very high energy, fast paced environment.

It also comes with strict rules and instant commitments. It’s important to enter the auction fully prepared. Below, we’ll explore the unique aspects of buying at auction and share essential tips to help you bid with confidence.

1. Understanding Auction Rules and Processes

No Cooling-Off Period

This is a hugely important rule to know. Unlike private treaty sales, auctions typically don’t come with a cooling-off period. Once the hammer falls and you’re the highest bidder, you’ve entered a legally binding contract on the spot - you can’t change your mind.

Immediate Deposit

If you are the highest bidder, you must pay the deposit and sign the contracts immediately following the auction. This varies by state and auction conditions, but it’s crucial to confirm the required amount with the agent in advance so you’re not caught short on auction day.

Unconditional Sale

Sales at auction are unconditional, meaning you can’t add conditions such as “subject to finance” or “subject to building inspection.” For this reason, it’s essential to handle all due diligence before you even consider placing a bid.

2. Preparing Your Finances Pre-Auction

Set a Firm Budget

One of the biggest mistakes buyers make at auction is letting adrenaline push them beyond their means. It doesn’t help that sometimes the auctioneer is incredibly charming and good at what they do! But try not to be sucked in. Set an upper bidding limit based on your current financial situation—and stick to it. Remember, the final figure will include not just the hammer price but also the deposit and any other buying costs.

Arrange Building and Pest Inspections

As the sale is typically unconditional, arranging a thorough inspection is vital before you start bidding. The cost of an inspection is minor compared to the risk of discovering major issues after you’ve committed to purchase.

Review the Contract of Sale

Request a copy of the contract from the selling agent well ahead of auction day. Have it reviewed by a legal adviser to ensure you understand any special terms, inclusions, or exclusions. If anything looks unusual, clarify it with the agent or consider negotiating changes prior to auction (though success rates vary).

3. Securing Pre-Approval for a Home Loan: Your Secret Weapon

What is a Home Loan Pre-Approval?

This is when a financial lender assesses the maximum amount they are willing to sign off on for your home loan. Pre-approval (or conditional approval) from a lender gives you a clear sense of your borrowing capacity, and means should your bid be successful you have the means to pay for the house secured. It also shows sellers you’re serious which can be useful if the property fails to sell at auction and you enter post-auction negotiations.

How to Get Pre-Approval

You’ll typically need to provide recent payslips, bank statements, and other financial documents. A mortgage broker, like our team at IDEAL Financial Group, can save you considerable time by matching your situation to the most suitable lenders and guiding you through the application.

Be Mindful of the Expiry Date

Pre-approvals usually last for three to six months, depending on the lender. Make sure yours won’t expire just before the auction date. If the timeline is tight, speak to your broker about requesting an extension.

4. Planning Your Auction Day Strategy

Attend Practice Auctions

If you’re new to auctions, observe a few before your own. Not only will you become familiar with the fast pace and language, but you can also pick up bidding strategies by watching seasoned buyers in action.

Consider a Bidding Assistant

Some buyers hire a buyer’s agent or ask a trusted friend to bid on their behalf, helping maintain composure and avoid emotional overspending. This can be especially helpful if auctions make you anxious or if you’re concerned about sticking to your limit.

Have Your Deposit in the Right Form

Confirm with the selling agent whether they accept bank cheques, personal cheques, or direct transfers. Ensure any cheques are made out to the correct party and, if required, have proof of your ability to provide the full 10% deposit quickly.

5. What Happens if You’re the Successful Bidder?

Sign the Contract Immediately

You’ll be asked to sign the contract of sale on the spot. Read it carefully one last time—though there shouldn’t be any surprises if you’ve done your homework.

Pay Your Deposit

Have your deposit method ready (e.g., bank cheque). The remainder of the purchase price will be due on settlement day, as outlined in the contract, which can range anywhere from 30 to 90 days or more, depending on conditions agreed upon before the auction.

Finalise Your Mortgage

After you’ve won, it’s time to switch from pre-approval to a formal mortgage. Your mortgage broker will liaise with your lender to finalise any remaining paperwork and arrange settlement. If everything matches your pre-approval details, it should be straightforward.

How IDEAL Financial Group Can Help

At IDEAL Financial, we specialise in guiding buyers through every stage of the mortgage process, including property auctions. We can help you:

Obtain pre-approval swiftly, giving you confidence in your maximum bidding limit.

Understand your loan options, ensuring you get a product that matches your budget and goals.

Streamline the documentation, liaising with lenders on your behalf to minimise stress.

Buying at auction can be fast-paced and intense, but the key to success is preparation. If you’d like personalised guidance on getting ready for auction day—or if you have questions about pre-approval or loan products—feel free to contact us for a no-obligation chat. We’re here to help you navigate the auction process like a pro and secure the home or investment property you’ve been dreaming of.

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