Buying a property at auction can be exciting, fast-paced and, at times, a little overwhelming. Unlike purchasing through a standard private sale, an auction usually gives you no opportunity to reconsider the decision once the hammer falls.
In NSW, the successful bidder is generally required to sign the contract and pay the deposit immediately. There is no cooling-off period when a property is purchased at auction. This makes it essential to complete your legal, financial and property checks before placing a bid.
Here are five important things every buyer should check before bidding at a property auction in NSW.
1. Have the Contract Reviewed Before the Auction
The contract for sale sets out the legal terms on which you are purchasing the property. It should be reviewed by a licensed conveyancer or solicitor before auction day—not after you have successfully bid.
A contract review can identify issues relating to:
- the settlement period
- the deposit amount and payment requirements
- inclusions and exclusions
- existing tenancies
- proposed developments or notices affecting the property
- land tax adjustments
- easements, covenants and restrictions on the land
- special conditions that favour the seller
- penalties if settlement is delayed.
The contract may also contain conditions that differ from the standard terms buyers expect. Your conveyancer can explain these conditions, identify potential risks and request amendments from the seller’s representative before the auction.
Once you become the successful bidder, it may be too late to renegotiate the contract.
2. Check Your Finance and Set a Firm Bidding Limit
A loan pre-approval is an important starting point, but buyers should understand that pre-approval is not always the same as unconditional approval for a particular property.
Before bidding, confirm with your lender or mortgage broker:
- how much you can safely borrow
- whether the lender is comfortable with the type of property
- how the property valuation may affect the loan
- how much deposit you will need
- whether lender’s mortgage insurance applies
- what additional purchasing costs you need to cover.
A successful bidder who cannot complete the contract may lose their deposit and could also be liable for losses suffered by the seller.
Your maximum bid should also allow for costs beyond the sale price, including:
- transfer duty
- conveyancing fees
- inspection costs
- loan fees
- moving expenses
- immediate repairs or renovations
- strata levies, council rates and insurance.
Some eligible first-home buyers may qualify for a transfer-duty exemption or concession, so this should be checked before setting your budget.
Decide on your absolute maximum price before the auction begins and avoid changing it in the heat of the bidding.
3. Arrange the Appropriate Property Inspections
A standard contract review does not tell you whether the building has structural problems, termites, water damage or costly maintenance issues.
For a house, buyers should generally consider obtaining independent building and pest inspection reports before the auction.
Depending on the property, the reports may identify:
- structural movement or cracking
- moisture and drainage problems
- termite activity or damage
- roofing issues
- unsafe electrical or building work
- timber deterioration
- poor ventilation
- repairs that may be needed shortly after settlement.
For apartments, townhouses and villas, a strata report is particularly important. It can provide information about the strata scheme’s financial position, insurance, meeting records, planned works, disputes, special levies and known building defects.
Do not rely entirely on the appearance of the property during an open inspection. Fresh paint and styling may improve presentation but will not necessarily reveal what is happening behind walls, beneath floors or within the strata scheme.
4. Investigate the Title and Restrictions Affecting the Property
The property’s title can reveal important legal interests and restrictions that may affect how the land can be accessed, developed or used.
These may include:
- easements for drainage, sewerage or access
- rights of way
- restrictions on the use of the land
- positive covenants
- mortgages
- leases
- caveats.
For example, an easement may allow a neighbour, utility provider or council to access or use part of the land. A restrictive covenant may limit the type of building work that can be carried out.
You should also consider whether the property is affected by:
- heritage controls
- bushfire or flood risks
- road-widening proposals
- zoning restrictions
- unapproved building work
- swimming pool compliance requirements
- outstanding council notices.
Not every issue means you should walk away from the property. However, you should understand how each matter may affect your intended use of the property and its future value before deciding how much to bid.
5. Understand the Auction and Deposit Requirements
To bid at a residential property auction in NSW, you will generally need to register with the selling agent, provide identification and receive a bidder’s number.
You should also confirm:
- the auction date, time and location
- whether the auction is in person or online
- which forms of deposit payment will be accepted
- the exact deposit required
- whose name or entity will be purchasing the property
- whether someone else will be bidding on your behalf.
If you are bidding for another person or a company, written authority and additional identification information may be required.
The successful bidder must generally sign the contract and pay the deposit immediately. The deposit is commonly 10% of the purchase price, although a different amount may sometimes be negotiated and documented before the auction.
Make sure the purchaser’s details are correct before auction day. Changing the purchaser after exchange—from an individual to a company, trust, spouse or another family member—can create legal, lending and transfer-duty complications.
Preparation Gives You the Confidence to Bid
The best time to uncover a problem is before you become legally committed to the purchase.
Before auction day, make sure you have:
- obtained legal advice on the contract
- confirmed your finance
- calculated the full cost of buying
- completed the necessary property inspections
- investigated the title and relevant restrictions
- set a firm maximum bid
- prepared the deposit payment.
Having the contract reviewed early also gives your conveyancer time to raise questions and negotiate changes with the seller’s representative.
Buying at Auction in NSW?
Before you bid, speak with Campbell Mills at Conveyancing Sydney.
Conveyancing Sydney can review the contract, explain any legal risks and help ensure you understand exactly what you are agreeing to before auction day.
Contact Campbell as early as possible so there is enough time to review the contract, investigate the property and raise any concerns before you bid.
This article provides general information only and does not constitute legal advice. Property contracts and individual circumstances vary. Obtain advice from a licensed conveyancer or solicitor before bidding or signing a contract.
