The barriers to entering the property market in NZ are high, particularly so in Auckland, where it is becoming increasingly difficult for people to attain the Kiwi dream of owning their own homes. Agents are complaining about a shortage of stock and property prices are on the rise. The number of properties being sold at auction is reaching record highs and buyers are finding that many vendors are not open to accepting offers and would rather take their property straight to auction. Auctions favour the vendors and the whole experience can be quite overwhelming for purchasers especially if they are new to the property market.
We have a few tips to help you though the auction process, however, we strongly recommend you meet with a lawyer before bidding at auction so please get in touch with our legal team to set up a time to meet. Auckland – 09 638 6969 Pukekohe – 09 237 1008 Botany – 09 274 8003
Go and watch an auction
Before bidding on a property you are interested in, go to another auction to familiarize yourself with the process. Auctions can be quite nerve wracking so it is good to know what to expect. If you don’t feel comfortable bidding yourself you can always appoint someone else to do this for you.
Set a maximum price and stick to it
This sounds obvious but I have seen far too many clients who get carried away in the heat of the moment and land up paying far more than they planned or sometimes could afford for a property. Buying a house is an emotional decision but is also a business decision – after all, this is the biggest investment you will probably make in your life time. It should therefore be entered into carefully with a level head.
Do your homework before the auction
When purchasing a property at an auction in New Zealand, you need to understand that your purchase is unconditional and that on the fall of the hammer you accept the property as is. It is therefore essential to do your homework and consult your lawyer prior to the auction.
There are 4 checks that should always be done:
- Finance – Preapproval is not sufficient. It just means you are eligible for a loan but the bank still needs to approve the specific property so you will need to submit all the details to them before the auction.
- Builders Report – You should always get the property checked out by a building inspector, this will set you back around $500, but if you consider the amount you will be investing in a property, it is well worth getting it checked for defects by a professional.
- LIM Report – This is usually supplied by the agent and made available to prospective purchasers, however, many buyers prefer to order their own to ensure it is current and complete.
- Title, Auction Agreement and Conditions of Sale – These will be made available to you prior to the auction by the agent, go through them carefully with your lawyer to ensure you understand everything. If you are buying at mortgagee auction it is absolutely imperative you get legal advice and fully understand the risks of buying at mortgagee sale.
Organise a Deposit
If you are the successful bidder at an auction you will be required to pay a 10% deposit on the day of the auction. This needs to be cash you have available in your bank account. Funds from KiwiSaver & Housing NZ Deposit Subsidy could be available to use as a deposit but needs to be approved and arranged well in advance.
What if you don’t have 10% deposit
If you don’t have the full 10% deposit you can still purchase at auction, there are 2 main options open to you:
- Arrange with your bank for a temporary loan or overdraft facility. Banks usually accept KiwiSaver funds as your deposit or contribution towards the purchase and are aware that this is not available to you to pay as a deposit to the agents. You may therefore be able to apply for a temporary facility. This all needs to be arranged prior to the auction.
- Explain your situation to the agent prior to the auction and ask them to draw up a variation of agreement saying for example that if you were the successful bidder then you would pay a deposit of $25,000 rather than the required 10%. The Vendors of the property would then have to agree to this and sign the variation.