Navigating the auction process
Buying a property at auction can be an exhilarating yet daunting experience, particularly for first-time bidders. In South Australia, property auctions are a popular way to buy real estate, offering a transparent process where the highest bidder secures the property (subject to meeting the reserve price).
How property auctions work
In South Australia, auctions are governed by strict regulations designed to ensure fairness and transparency. Here’s how the process typically unfolds:
Pre-auction preparation:
- Properties listed for auction will have a public inspection period.
- A vendor’s statement (Form 1) is provided to potential buyers, detailing essential legal and financial information about the property.
- Buyers should conduct due diligence, including building and pest inspections, before the auction, to have a clear understanding of the current condition of the home, as well as any maintenance tasks that will need to occur over the short, medium and longer-term.
Auction day:
- A licenced auctioneer conducts the event, starting with an opening statement outlining the terms of sale.
- Bidders must be registered before they can participate and ID is required.
- Bidding begins, and the highest offer that meets or exceeds the reserve price wins the auction.
- If bidding doesn’t reach the reserve price, the property may be “passed in”, and negotiations with the highest bidder may follow.
Winning the auction:
- If you are the highest bidder and the reserve price is met, you must immediately sign the contract and pay a deposit (usually 10% of the purchase price).
- There is no cooling-off period for properties bought at auction, so all due diligence must be completed beforehand.
Tips for bidding and winning at auction
To maximise your chances of success, consider these essential tips:
Set a clear budget: Auctions can be fast-paced, and it’s easy to get caught up in the heat of bidding. Determine your maximum budget in advance and stick to it. Factor in additional costs such as stamp duty, legal fees, and potential renovation expenses.
Get pre-approval for finance: Having your home loan pre-approved ensures you can confidently bid within your budget. It also demonstrates to the auctioneer and vendor that you are a serious buyer.
Attend other auctions: Familiarise yourself with the auction process by attending a few others before bidding. Observe the bidding strategies others use and gain a sense of how fast-paced auctions can be.
Develop a bidding strategy:
- Start strong: a confident opening bid can set the tone and deter other more hesitant bidders.
- Stay composed: avoid emotional bidding and don’t bid against yourself.
- Watch body language: observe competitors for signs of hesitation and know when to hold back or push forward.
- Stick to a plan: if bidding goes beyond your own budget figure, put your hands in your pockets and keep them there until the end!
- Get help: consider using a buyers’ agent to bid on your behalf.
Have a backup plan
If the property is passed in because it didn’t reach the reserve price, be ready to negotiate with the seller. Being the highest bidder gives you a strong position, but understanding market conditions and having comparable sales data can help you negotiate effectively.
In South Australia, if you negotiate to buy a property on the same day it has been passed in at auction, you do not have cooling-off rights. Under Section 5(5) of the Land and Business (Sale and Conveyancing) Act 1994 (SA), a buyer is not entitled to a cooling-off period if the contract is signed on the same day as the auction, regardless of whether the property was passed in or sold under the hammer. However, if you negotiate and sign the contract on a later day, you may be entitled to the standard two-business-day cooling-off period, unless another exemption applies (eg prior legal advice was obtained).
