Should you buy at auction or private sale?
Buying a home is a big enough step, and then there is the decision about how to buy: at Auction or a private sale?
We’ve weighed up some of the key considerations for each, to help you prepare:
Buying at auction:
Have all of your ducks in a row
Buying at auction is unconditional, and there is no cooling off period, which means any inspections, building checks and finance pre-approval must be completed prior to auction. Note that you may be able to negotiate special terms that will come into play if you are the successful bidder (e.g. a longer settlement) but these need to be agreed upon by all parties prior to auction.
Do your homework
Read the Contract of Sale and Vendor’s statement (Section 32) prior to auction. You should have a conveyancer or solicitor review these documents too, to help identify any potential issues. Follow up any concerns or queries prior to auction.
Know your limits
Decide your maximum budget, stick to it and have a bidding strategy in place. Pro tip: Spend a weekend watching a few auctions where you are not bidding, get a feel for the process to help you feel more at ease on the day.
Get familiar with Auction Jargon
In Victoria, the auctioneer can place a ‘vendor bid’ during the auction. This is a bid on behalf of the seller to show that they are not yet satisfied with the price reached.
If the bidding reaches the price the seller is happy to sell at (the ‘reserve’), the auctioneer will declare that the property is ‘on the market’ and will be sold to the highest bidder. If the reserve price is not reached at auction, the highest bidder will normally have the first chance to negotiate the price with the seller in private to see if an agreement on price can be reached.
Have your deposit ready
If you’re successful at auction, you’ll be required to pay a deposit (usually 10% of the purchase price) on the day.
Buying at private sale:
Also known as a private treaty sale, this is when a property is purchased through direct negotiations with an estate agent and the owner. A sale price must be agreed upon by both parties.
Flexibility to negotiate
Unlike purchasing at auction, you can make the sale subject to conditions such as obtaining finance or building inspections – make sure you organise these before finalising the sale.
Do your research
Before you make an offer, research sales in the area on similar properties. This will help you understand the expected market price and help with negotiations. You and your conveyancer or solicitor should also read the Contract of Sale and Vendor’s Statement (Section 32) and follow up any concerns or questions you may have.
A three business day cooling-off period applies from the date you sign the contract, unless the sale is within three days of a public auction. Find out more about cooling off periods and their drawbacks.