Purchasing at auction: The dangers when emotion gets in the way of logic

Purchasing at auction can create a huge amount of risk for a purchaser, if you do not approach it correctly. If you are the successful bidder, you are bound by the contract, even if you cannot obtain finance, or have not done your due diligence.

As I discovered, it’s easy to get into an uncomfortable position quickly when you come across the emotions and opportunities auctions present to buyers.

I have seen these issues first hand, as I myself was victim to it. About a year ago I attended an auction for a property in Freshwater. I had not reviewed the contract, nor had I obtained finance or a strata report. All of the things that I advise clients that you just cannot do. My justification was that the property would probably be well outside my budget.

I signed up for the auction about 2 minutes before it began and sat in the corner watching on. As they were about to call ‘Sold’ to the highest bidder, I piped in and upped the bid, and ended up being the successful purchaser. That’s when the panic set in.

I obtained a Strata report post auction and was lucky that there was nothing wrong with it. Finance approval was the biggest issue, with my broker informing me that it ‘just couldn’t be done’.

I was close to giving up, and accepting the fact that I would have to forfeit my 10% deposit…

That’s when my mortgage broker managed to pull through and find a bank that would lend me what I needed. It took a lot of work on his end, and I could not have been more grateful. With his help I was able to secure the property and fulfill my obligations under the contract.

Having come so close to losing my deposit and not being able to settle the property, I cannot stress enough the importance of obtaining legal advice and securing finance before the auction.

These four steps could save you:

1. Have the contract reviewed so that you are made aware of any inherent issues;

2. Know what you are buying and carry out the necessary due diligence including strata reports and pest and building inspections;

3. If finance is required, obtain it before attending the auction; and

4. If you intend to develop the property, discuss this with your lawyer and Council to ensure the property is suitable for your purpose.

Don’t get caught out. There is just too much at stake.

If you require professional help with purchasing a property give us a call on (02) 9982 1655 or visit our Northern Beaches office located on Fisher Rd, Dee Why.

Recent Post

Dear Friends,

We are a COVID19 conscious workplace. We encourage clients to wear masks and sanitise before a conference

Yours Sincerely,

The Team,
O’Brien Connors & Kennett Solicitors