Guide to buying at Auction

Loyal Realty Ltd | 09 412 7666

Buying At

Auction

How the Auction Works An auction is the process by which all interested parties can make competitive bids to purchase a property in a transparent, public forum. Auction is regarded as the best method of establishing true market value. The Advantage of Buying at Auction. The auction process allows buyers the option of increasing an offer while being aware of the position of the competition. This differs from other buying methods, where various parties are competing against unknown offers negotiated in their absence. You’ve Found the Property … Now What? So you’re ready to go. Before the big day, it pays to have these details covered.

Leave your contact details with the property consultant and request to be kept informed of any changes leading up to the auction.

Make sure you are acquainted with the local area, services and facilities of the property.

Questions? Be sure to seek professional advice. Get a feeling for the process. Attending other auctions will help you better

understand how they work. Have the money ready. Ensure that you have approved finance prior to

bidding, and that you can access the 10% deposit. Have your lawyer check the contract, title and any other information available. Advise the consultant if you have instructed a third party to bid on your behalf

Tips for Bidding

Establish a limit you wish to spend and start bidding when the figure is below or in your price range. When you start at your limit, there is little time to build momentum and establish yourself as a bidder.

Bid clearly and promptly, as a last minute bid could be missed. Also, show the competition you’re serious. Place each bid with authority and do it quickly. If others sense you are wavering they might think the hesitant bid is your last one. So they’ll be encouraged to keep going.

Be aware that In the vendors best interests, the auctioneer has the right to accept or reject any bids and will also set the bidding increments. When the auctioneer is about to sell they will call three times and, if there are no further bids, knock the hammer down, signalling the sale.

When you succeed: You will immediately sign the contract and pay the 10%

Frequently Asked

Questions

Do I have to be in a cash position to bid? The straight answer to this question is yes. To bid at an Auction you need to be bidding cash. 10% only is required on the day of the Auction, balance is due on possession date. However, as explained below, you may talk to the Auctioneer about extending the possession date and giving you longer to arrange money. Also with an Auction you may have a lead-up period of up to 4 weeks that also should allow you to get into a cash position. How do I work out the price? The auction system allows you, the market, to firstly appreciate the house and then determine the price. We as marketers, find that some people become experts in a particular price range and they are able to indicate pretty well exactly what a home is worth. They do this by drawing on the experience of the homes they have looked at in that particular price bracket. If you need help with a guide to the price, ask the consultant for guidance. Whilst you will not get actual figures, a consultant will normally be able to supply you with a list of similar homes that have sold in the area which compare with the Auction home. You may also decide to get a valuation. What About Selling My House? One of the benefits of buying at auction is the fact that if the home does reach auction you may have up to 3 months with prior permission from the vendors, to organise and get your own home sold. The fact that you own a home is not detrimental to your bidding at auction. Talk to your consultant about whether they might have somebody “waiting” for a home like yours as an early sale might be closer than you think. It’s worth remembering other buyers will be in the same position you will are, and if you get a cash offer on your home, you are in an extremely strong position to either buy the Auction property before Auction or on the Auction day. If you believe your home is “saleable” you may also consider talking to the Auctioneer via your sales consultant about extending the possession date on the Auction property, thus giving you extra time to get your home sold. How Do I Borrow Money When I Don’t Know The Price? Most lending institutions are now conversant with modern auction techniques and once you have worked out the price you believe the property is worth, as in question 2, when you discuss this with banks or lending institutions, you will find they believe it quite acceptable to agree to lend you up to a certain “bidding price”. You will then know just how high you can bid at the auction. Overall though, the fact that you are borrowing money should not prevent you from bidding at an Auction. Can I have Someone Else Bid For Me? Yes. Anyone may bid for you on the auction day. They may, if they are a professional person, require written advice as to how high you wish them to go. Other bidders (if you find it too traumatic) would be your solicitor, the real estate consultant, perhaps an experienced member of your family or valuer. With the permission of the vendor and with prior notification, you may also bid by phone.

1

2

3

4

5

Frequently Asked

Questions

What Are The Normal Conditions That I Would Buy Under? 10% of the purchase price is requires to be paid on the auction day if you are the successful bidder. Therefore you need your chequebook and the ability to have a balance in your account to cover the deposit once it is banked. It is considered if you bid at auction that you have bid unconditionally and for cash, i.e. if your bid is successful, you have bought the house. There is no subject to finance or subject to sale clauses, you have bought the house. There is nothing to be wary of so long as you have done your homework and have sought the correct advice along the way. You are essentially making a cash offer. Can I Buy Before Auction Day? Some owners may consider selling before Auction day, some may not. They would normally need to believe that the offer was a very good one to convince them to sell prior to auction. Because the property is going to auction, if an acceptable pre-auction bid is tabled all interested parties are contacted. What is a Vendor Bid? The conditions of sale state that the vendor has the right to bid himself or through an agent or through the auctioneer. This bid may be used to start the auction or by the auctioneer during the auction to increase the bidding. The auctioneer will disclose all vendors bids. If someone else will be bidding for the vendor, other than the auctioneer, that person will be identified before the auction. Vendor bids WILL NOT be exercised once the reserve is reached. What Are The Particulars And Conditions of Sale? This is the contract that you will sign if you are the successful bidder on the day. It is simply contract that spells out the conditions under which you have bought the home (see Q6), and binds you to the purchase of the home. It also binds the seller to sell to you as per the auction bidding. The Particulars and Conditions are available prior to the auction. If you have any doubts on wording and clauses included, you should consult the sales consultant concerned or your solicitor.

6

7

8

9

side agreement Variation to Terms and Conditions

The Vendor agrees that the terms and conditions for auction of the property at:

………………………………………………………………………………………….

Include:

…………………………………………………………………………………………………….............................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................

Purchaser…………………………………….… Date…................................................

Vendor………………………………………… Date………………………………...

|Loyal Realty Ltd

Pre-auction sale form

1. All pre-auction offers must be unconditional. One of the Business Owner, Branch Manager, Sales Manager or Auctioneer must be involved.

2. The offer is prepared on the Particulars and Conditions of Sale of Real Estate by Auction with the following time clause added

as a special condition.

3. This offer shall remain open until it is accepted, rejected or withdrawn, but the purchaser shall not be free to withdraw it before …………………am / pm on …………………………….(Date)

4. The offer is presented to the vendor for consideration with a deposit of 10% of the purchase price or such other deposit as the

vendor has approved.

5. If the offer is not at an acceptable level, no counter offer is made, it is merely communicated to the purchaser that at this stage the offer is not at a level that would stop the auction. The deposit is returned.

6. If the offer is at an acceptable level, all other interested parties are then contacted and told that an unconditional offer to

purchase the property has been received and will be accepted by the vendors unless a better offer is received. They should then be informed of the time, place and manner for the opportunity to make their better offer.

7. If there is an auction conducted with the interested parties, the opening bid announced will be the offer already made.

8. This should all be done within a 48 hour time frame, which should include at least one working day. It is recommended that

time records be kept of the procedure followed, and contacts made.

Subject Property Address……………………………………………………………………………………………..

The intending Purchaser and Vendor Agree With The Procedure Outlined Above.

Purchaser…………………………………….… Date…................................................

Vendor………………………………………… Date………………………………...

|Loyal Realty Ltd

authority to bid on behalf of buyer Auction of property at :……………………………………………………………………..(“the Property”) Auction Date:………………………………………………………………………………… To:…………………………………………………………………………………………(“the Authorised person”) (Name of person appointed to bid on behalf) By: ……………………………………………………………………………………….. (print full name(s) of buyer) I / We hereby appoint you to bid on my / our behalf at the auction of the Property. I / we acknowledge :

1. I/ we have viewed the particulars and conditions of auction and have had an opportunity to take legal advice in relation to the proposed purchase of the Property

2. I / we authorise you to bid on my / our behalf at the auction in accordance with instructions to be given to you prior to the auction or by telephone during the auction.

3. In the event that through you I / we am/are the successful bidder: 3.1 I / we authorise you to sign the memorandum recoding the sale on completion of the auction, which I / we acknowledge will bind me / us as if I / we had personally signed. 3.2 I / we will pay the deposit payable on a successful bid immediately on conclusion of the auction. 3.3 I / we hereby indemnify you from personal liability in any manner or form arising from your role as my / our agent in bidding at auction on my / our behalf.

Signed……………………………………….. Date……………………………………………. Witness Signature………………………………………. Witness Name…………………………………… Witness Address………………………………………………………………………………………………. Witness Occupation……………………………………………………………………………………………

Vendor Acknowledgement: I / we as Vendor of the property agree to the buyer bidding through the authorised person and acknowledge that should the above bidder be the successful bidder that the above buyer is liable for the obligations of purchaser under the agreement, not the above bidder. Signed………………………………………………. Date…………………………………………..

|Loyal Realty Ltd

HARCOURTS

KUMEU 86a State Highway 16

Kumeu, Auckland

DX DP90513, Kumeu

www.kumeu.harcourts.co.nz

Phone: 412-7666

Fax: 412-6444

enquiries.kumeu@harcourts.co.nz