Properties can be purchased by way of private sale or through a public auction. Due to the recent rise in real estate prices and the competitive property market, auctions have become a more popular means of selling properties. There are various legal factors that need to be taken into consideration when purchasing at an auction. Accordingly, it is essential to consider the process involved.
At an auction, various prospective buyers will bid against one another to purchase a property. If you are the highest bidder, you will be required to sign a contract and will be immediately bound by the terms of the contract. Consequently, you must settle the contract regardless of whether you change your mind, you can’t afford the property or the property doesn’t pass inspections.
Cooling Off Period
A 5-day cooling-off period normally applies to a contract of sale of residential property in Queensland, however, when purchasing a property at auction, the contract of sale is exempt from the cooling-off period. This means that, as the purchaser, you do not have the opportunity to terminate the contract on a cooling-off basis.
Terms of Sale
Generally, due to the terms of sale, you are required to bid at an auction on an unconditional basis. In this circumstance, you cannot elect to enter a contract subject to conditions such as finance, building, and pest or have the contract subject to completion of a prior sale.
Finance Condition
It is essential that you secure funding to complete the purchase because, if you are the successful bidder, you will be required to fund and settle the purchase without the option to terminate pursuant to a finance condition. Prior to the auction, it is recommended that you seek the advice of a mortgage broker to determine your prospects and the process involved in obtaining funding for the purchase.
Building & Pest Condition
Generally, the seller will have engaged an independent building and pest inspector to inspect the property. Accordingly, the real estate agent will have a copy of the building and pest report to provide to prospective bidders and it is recommended that you obtain a copy of the report. Alternatively, you can arrange to engage your own independent inspector before the auction date.
Prior to the Auction
Due to the risk involved in bidding on an unconditional basis at auction, it is recommended that you address the following factors prior to bidding:
Inspect the property;
Arrange for building and pest inspections;
Conduct due diligence enquiries;
Determine the value of the property;
Arrange finance to fund the purchase;
Conduct searches on the property;
Obtain a copy of the proposed contract; and
Seek legal advice regarding the terms of sale.
It is essential to protect yourself as purchasing a property is generally one of the largest outlays in your life. You should be mindful and aware of the pitfalls so that you can comfortably attend and bid at an auction.
If you are considering bidding at an auction, CJM Lawyers’ experienced solicitors can provide you with advice at any stage throughout the auction process, including reviewing the proposed contract of sale. Our property lawyers can be contacted on 1300 245 299.