Step 1: Work out the costs
Working out how much you can afford to repay on a home loan plus all the associated costs of buying a property—like stamp duty―is the first step.
Of course, buying at auction means the final purchase price remains unknown until the hammer falls. But a defined financial limit means you’ll know when to stop bidding.
Step 2: Arrange finance
Make sure you’re ready to bid. That means knowing exactly how much you can borrow comfortably because your lender has assessed your situation and approved a specific amount.
Visit your lender before you start looking for a property and arrange pre-approval so you’re set to go. With an approved home loan from AMP Bank you can benefit from competitive interest rates and terms, plus the convenience of pre-approval.
Step 3: Do your research
It can take time to find the right house. Researching the area will give you an idea of prices for similar properties.
Attend auctions in the area so you understand the strategies agents use and what to expect.
Before buying at auction, make sure the property is solid—arrange building and pest inspections. And read the contract, certificate of title and section statement so you understand what you’d be buying. If possible, ask a solicitor to look over the paperwork with you.
Step 4: Ready, set… auction!
Before the auction, decide who’ll bid for the property―speak with the real estate agent. You can ask someone to bid on your behalf; they may need to sign a proxy form.
If the reserve price―the minimum the seller will accept―is reached and you’re the winning bidder you’ll have to sign a contract of sale and pay 10% deposit immediately after auction. Ask the agent how you’ll need to provide the deposit. Will you need a personal cheque book?
If the reserve price isn’t reached but you are the highest bidder, the agent may negotiate with you and the seller afterwards.
Only some savings accounts offer a cheque book option so consider an AMP Cash Manager account for ready access to your money, competitive interest and the option of a cheque book.
Step 5: Be prepared to walk away
If your heart’s set on a particular property, it can be difficult watching someone outbid you. But it’s better to walk away without a property than with a debt larger than you can repay.
Remember your financial limits and stick to them. You’ll avoid paying more than you can afford―or than a property may be worth―and stay out of the emotional charge an auction can create.
Print your auction checklist so you can be ready come auction day.
Making the decision to buy or not to buy can be complex, so it’s important to talk to your financial adviser before you take the plunge.
If you don’t have a financial adviser, call AMP on 131 267 Monday to Friday from 8am to 8pm and Saturday and Sunday between 9am and 5pm AEST and we’ll put you in touch with someone who can help.
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