5 Mistakes When Buying Auction Property
Getting the right auction property at the most favorable price requires a good strategy.
If you want to get a definite result, here are some common auction mistakes to avoid so you can come out a winner during the auction day.
Getting carried away
Accept the fact that the auction process can be an overwhelming and emotional experience. Bidding on an auction property is like going into battle. Don’t let your emotions rule over you. Remember that you are going to invest a huge amount of money and you don’t want to over-extend your pockets. So, don’t get carried away, no matter how tempting it is to do so.
Remember that when the auction market is strong, doing an auction is a very effective method of selling property. The sellers are confident that they can fetch a good price for their property so you really have to fight your way up to the top. So, if you want to successfully bid at auction make up your mind that you want to get a definite result.
Prepare for unconditional contracts that will be exchanged at auction. Once signed, they are binding on you and the seller. So, make sure that you read through the contracts before signing them and don’t forget to ask for clarifications, no matter how excited you are to obtain the property. You may also have to check with the real estate organizations in your area if you need to register in order to have the authority to bid.
Not doing your research
How much is the true market value of the property you intend to buy? If you are applying for a mortgage at NSW Mortgage Corp, you can ask their mortgage experts with regards to their opinion of the property’s value. You can also monitor the prices of similar properties recently sold in the area to have a rough idea of its reserve price or the minimum price the seller is willing to accept.
Ignoring the opportunity to conduct a property inspection
Property inspection is an important component in the buying process. Visit the property several times to know what you’re getting into. There may be some serious problems like plumbing, electricity and foundation issue that you may not know about until you finally bought it.
It is also important to get to know the property owners or their agent to gain an insight about the neighborhood, the public and private facilities. Try to know how much other people are willing to spend for the property depending on their perception of how much it is really worth. You can also ask the agent or the owner about the number of bidders to expect.
Some bidders also hire building inspectors and other professionals to check the property thoroughly before going to the place of auction.
Not sticking to your limit.
As a bidder, you must know when to stop even if you are tempted to keep going. Once you reached your limit, walk out of the room—because it is not practical to overextend yourself. There are many other properties on the market that would fit your financial capacity. It is not in your best interests to sign a sale contract and to pay the deposit of a property which is beyond your ability to pay.
Going to an auction financially unprepared
Are you financially prepared to win bid at an auction? If your finances are not in order before the day of auction, think again.
The moment you win the bid for an auction property and sign the papers, it becomes a binding contract between you and the owner. Make sure that your financing has been approved by your lending institution before you decide to start searching for a property. Otherwise, you will not be able to set your limit for the auction. Remember that your bid must not exceed your borrowing power.
Get your loan approved before the auction day. Don’t forget to prepare the deposit, which can be 10 percent (or higher) of the property’s purchase price.
If your credit score is good, you may not have troubles in applying for a loan. But a lower credit score means you’ll have a harder time finding a lender that will offer reasonable rates. But, it is always a good idea to check the lender’s interest rates and other costs before you file a loan application.
Many lenders are willing to give you a quote upon pulling your credit report. But, if you don’t want to put your credit file on the line—because frequent credit checks can lower your credit score—look for lenders that conduct no-credit check inquiry.