Protect your property interests with a contract of sale
While the movies would suggest that property auctions are an exciting whirlwind of spur-of-the-moment action, in reality the process is far more considered. With auctions falling under the ‘caveat emptor’ principle (or ‘let the buyer beware’, for those rusty on their Latin), smart potential buyers undertake plenty of preparation well ahead of auction day.
One of the key differences between a private sale and an auction is that the latter doesn’t have a cooling off period if you change your mind. This means that if you’re serious about bidding for the property – as opposed to just window shopping – then you’ll need to be 100 per cent ready to proceed with the purchase on the day, with a chequebook in your pocket ready for writing out that deposit cheque.
That said, it’s surprising how many would-be buyers fail to perform all of the necessary checks to protect their best interests.
How to manoeuvre a property sale in your favour
One of the crucial steps that’s often forgotten or overlooked is getting the contract of sale reviewed by a conveyancer. Once you’re at the auction and have made a successful bid, it’s too late to make any changes to the contract – which means a missed opportunity to manoeuvre the property sale in your favour.
There are several key things to look for in the contract of sale that may make a material difference to your purchase. The settlement period, which is the time between the exchange of contracts and the exchange of ownership upon settlement, can be made shorter or longer, depending on what works best for all parties.
The property settlement period is usually 30 to 90 days, but if you’re waiting on your current property to be sold – and the funds that accrue from that sale – you could ask for a longer settlement period. Conversely, if you’re required to vacate your current premises by a particular day, it may be in your best interests to make the settlement day sooner.
The contract for sale also specifies the deposit that buyers are required to hand over upon successfully bidding at auction. This is typically set at 10 per cent of the value of the property, but there’s nothing to prevent a buyer from requesting this percentage be adjusted to suit their current financial situation. Remember – this deposit is required to be given to the seller on the day of auction, so if you won’t have that much money available then, you’ll need to amend the contract of sale prior to the auction accordingly.
The costs for doing due diligence ahead of a property auction can add up
All of the inclusions that form part of the sale are specified in the contract, and this includes permanent fixtures such as built-in wardrobes, dishwashers, air conditioners and cabinetry. However, the line between what constitutes a permanent fixture can sometimes be blurry, so it’s worth reviewing this itemised list while you inspect the property.
While appliances typically aren’t counted as permanent fixtures, things like wall-mounted TVs and professionally-installed sound systems are often difficult to remove, and borrowers would be wise to get these factored into the sale. You may also see non-permanent items in the home that you wish to have included, in which case you could make an offer that incorporates those items into the contract.
The costs for doing due diligence ahead of a property auction can add up, but as tempting as it may be to cut corners, skimping on getting the contract of sale reviewed should not be one of them. The lack of cooling-off period for property auctions means you’re legally bound by the contract of sale, so it pays to make sure that your interests are protected as much as possible.
At the end of the day, getting the contract reviewed by a conveyancer or lawyer will only cost you a few hundred dollars, while potentially saving you thousands in the process