Thinking of buying or selling a property at auction? Here are some crucial tips:
What’s the Process?
The contract for a property sold at an auction is required to be signed ‘on the spot’. This is different from other transactions, whereby the parties have time to have their respective legal representatives review, advise and amend the draft contract prior to you signing it.
Because of this, we highly recommend that you engage a conveyancer to review the contract prior to going to Auction. This can be done by contacting the sale agent and asking them to provide you with a draft contract for us to review on your behalf.
Whilst an Auction contract is typically not subject to any conditions, it is still important that we check over the details of the property to ensure that the correct information has been inserted. It is significantly more difficult to change certain aspects of the contract once it has been signed, thus part of our service includes a free review of the draft contract.
The Fall of the Gavel
It’s important to do any research regarding the property and confirm your financial ‘buying power’ prior to attending the auction and making a bid. This includes meeting with your broker or lender to ensure you have finance preapproval to purchase the property. You may also want to consider whether you can arrange a building inspection or obtain information from the selling agent prior to the auction to investigate the property.
As previously mentioned, an auction contract usually comes with no conditions (eg. they are not usually subject to you obtaining finance or being happy with the results of a building and pest inspection), so it is important to understand that as a buyer at an auction, you won’t have the standard termination options available and will be in hot water if you can’t complete the purchase for any reason.
If you cannot attend auction, you may elect to authorise a buyer’s agent to sign the contract on your behalf.
The Auctioneer’s Authority
We have seen instances recently where the contract has been signed by the Auctioneer as authorised representative of the buyer or seller. There are two main scenarios where this occurs:
- some Agents will specify in their Auction Terms and Conditions that by agreeing and signing them, you grant the Auctioneer an irrevocable authority to sign all documents and papers necessary to form the agreement for sale of the property with the Buyer. It is therefore extremely important that you provide clear instructions to your agent and auctioneer regarding the reserve price etc; and
- an Auctioneer also has authority pursuant to common law to sign a contract on behalf of the buyer or seller if the hammer has fallen and a party refuse to sign the Contract. Changing your mind isn’t that easy!
Final Auction Tips
Buyers - it is important that you don’t get carried away at auction and end up being required to purchase something that you may have ‘buyer’s regret’ in relation to. Make sure you do your due diligence prior to the Auction and that you don’t bid over your budget.
Sellers – make sure you are 100% comfortable that the agent and auctioneer have clear instructions regarding the price that you are happy to sell for and again, don’t get caught up compromising on the day.
In either case, it’s best to seek advice from your lawyer before buying or selling at auction. Contact Enterprise Legal's experienced conveyancing team now for more expert advice:
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