Question on Financing a Property Purchase via Auction or on Auction Terms

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  GG57 on 03/05/2021 - 11:58

  You can bid (and win) at an auction without your finances being approved. But it is at your risk and not the risk of the seller.

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  pharkurnell on 03/05/2021 - 12:42

  … for considerably more than the asking

  Ignore the 'asking prices'… they are fictional - not even useful as a guide.

  • 

    tsunamisurfer on 03/05/2021 - 12:45

    Yes, I have now experienced what Eastern states people feel about under-quoting (if that's what it is called).

    But at the end of the day the vendor is not in control of how much the market offers them, especially in this market.

    • 

      pharkurnell on 03/05/2021 - 13:02

      not auction but sale - mine sold for 100k over asking..
      And there was 77k difference in low to high offers..
      This is last week.

  • 

    Quantumcat on 03/05/2021 - 13:02

    not even useful as a guide.

    You can kind of use them as a guide, especially if you go to a couple of auctions by the same real estate agent to get an idea of their level of underquoting, just add 10% or 20% etc

    But at the end of the day the vendor is not in control of how much the market offers them

    True but if the real estate agent has sold 3 similar properties in the last month they should have a good idea of what the market will pay. It won't be a surprise. Underquoting is deliberate.

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  caramel0 on 03/05/2021 - 13:27

  I bought my first home at auction recently.

  We found that pre-approval wasn't a guarantee, but it gave us a ballpark and we ended up buying somewhere for significantly less than the max pre-approval amount, so we didn't have worries there.

  With the banks taking longer to turn around a loan due to COVID, the 28 day settlement period was extended to 45 by the REA for the property we were successful at - this change in the contract was offered to all prospective bidders as standard. We were uneasy about this too (what happens if the 28/45 days lapse and loan not ready yet?), but our mortgage broker assured us the banks keep the settlement date deadlines in mind when prioritising their work. I reasoned that people wouldn't buy at auctions or you'd have lots of stories on a current affair/today tonight if the banks were too slow and people lost their home deposit through no fault of their own/settlement taking too long. Ours actually came through quicker than 4 weeks in the end.

  You need to (should) get a conveyancer to read through the contract of every place you intend to bid on before the auction, for us it was something like $60 per contract with the understanding that once successful they would be our conveyancer for the purchase. Ours was pretty quick at turning that around (1-2 days/property)

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  Keplaffintech on 03/05/2021 - 13:31

  Pre-approval is usually only conditional on valuation of the property you bought.

  If you're buying a standard house or even apartment (not off the plan), you're not going to have any issue with the valuation, particularly at an auction (means someone else was prepared to pay as well). The valuation will come in at the price you bought for.

  • 

    miwahni on 03/05/2021 - 23:06

    Not necessarily. I've seen some vals come in way lower ($60k = $80k) than purchase price over the last few months. When the market is running hot I would not count on the valuation coming in at purchase price in every instance. And just hope that the property itself is acceptable to the lender (no major repairs, not limited title, not within 50m of high voltage lines etc).

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  spal on 03/05/2021 - 13:52

  Usually, unless the vendor has an urgency they will work with you. They too want to sell their property. It would take them longer if they were to take your deposit and then the finance period expired. All parties to a contract must do everything to complete the contract. So, delays by banks are generally fixed by an email from the buyer's conveyancer. It is important to keep in touch with the Vendor and let them know early if there is likelihood of a delay due to finance.

  Maybe just steer clear of short settlement contracts, because the Vendor might have a reason to request very short settlement. Other vendors are generally flexible within reason.

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    tsunamisurfer on 03/05/2021 - 14:02

    This is a good point….in fact this agent forwarded us a modified REIWA standard offer and acceptance form to remove any comeback against the vendor in case any of the information provided Eg land dimensions, easements etc is wrong.

    We re-instated it which probably pushed us down the pile.

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  Traveller107 on 03/05/2021 - 17:13

  +1

  Most people who buy at auction apply for finance. So don't worry too much as you are in the same boat as most. Rather in a better position coz most don't have 30% deposit!
  A few points that might help-

  1. Get a pre approval. Most are useless but a very few lenders do a thorough one right from the start. Which means when you do go under contract it'll take a just few days to get finance approved. CBA does a full proper pre-approval and even in the last 6 months their turn around time have been excellent. Meanwhile plenty other lenders were starting their assessment after the client going under contract and taking forever because their preapproval done in the beginning were pointless and clients had to request extensions.

  2. Most sellers will accept a longer settlement if discussed prior respectfully. They'll usually agree to it only for registered bidders so make the request when you are registering.

  3. Also most sellers will agree to an extension in good faith.

  4. Usually bank valuations honor the winning auction bid as the market value so there is a very rare chance of valuation coming in short.

  5. In this market only an exceptionally clueless seller would consider a pre auction conditional offer. Don't fear auctions they are a very good, easy and transparent way to buy your property without being played for a fool by the agents.

  Cheers!