What You Need to Know About Property Auctions
House auctions can be exciting affairs. Bidding on and winning an auction is something worth celebrating, and can be the first step to your very first home. What you may not know is that there’s a surprising amount of preparation behind the scenes – both before and after the auction. To ensure you are well-prepared, it’s important to use a property lawyer before going to an auction, because they are unconditional offers.
What is an Auction?
An auction is a public event where, either arranged privately or through the real estate agent, someone (the seller) invites all interested purchasers to attend on a specific day to place bids in competition to purchase the property.
Usually the seller will personally set a reserve price, the minimum price which they will sell the property for, but as long as the winning bid is over that reserve, they will sell the property.
While bidding itself may be straightforward, one of the most important things to know is that auctions are ‘unconditional’ offers. This means that if you win the auction, you are bound to pay that offer, no matter what.
There are many things to consider before and after the auction, including making sure your finance is approved, understanding the true value of the house on the property market, inspecting the property related legal documents, and more. The process can be daunting, especially if you are a first home buyer.
Getting a property law specialist to advise you through the process is the best way to avoid legal pitfalls and ensure your interests are protected, now and in the future.
Getting Your Finance in Check
It’s important to keep in mind that if you win the auction, in addition to being bound to buy, you will usually be immediately required to sign the Auction Agreement and pay a deposit (which is generally 10% of the purchase price).
Therefore, as well as being absolutely sure about wanting to buy the property, it is essential to get prior unconditional approval of finance from your bank. If you would like us to check your offer of finance before the auction, please contact us.
Doing Your Homework
Generally, a real estate agent will provide you with a property information pack including the Title, Land Information Memorandum (LIM) and Auction Agreement. These are all legal documents so it is beneficial to have a lawyer to check them to make sure that there aren’t any problems with the property.
For example, there may be differences between the outline of the property and the title plan. This could present an expensive legal problem down the track that requires the property to be re-surveyed and new title documents lodged. Even if you decide not to worry about these sorts of problems when buying, they can become a major issue if you sell the property in the future.
Generally, it is best to get a lawyer to check the Title, LIM Auction Agreement and other documents before bidding at auction. We can help you to make sure everything is in order through our fixed price property conveyancing services.
After the Auction
Once the auction ends, the journey is not over. You should notify your bank that you won the auction, so they can prepare the necessary financing documents. You will need to organise house insurance, update any trusts and wills, and of course deal with telephone, power, gas and water.
Our team of property solicitors can help take some of the time and burden off your hands, sorting out and checking the paperwork for you, and ensuring that the correct apportionments are made, so that you don’t need to worry.
Would you like to know more about property auctions? We provide fixed price property conveyancing across New Zealand. Call 0800 773 377 or send us a message.