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13<br />
Buying a property at auction<br />
If you’re keen on a property that’s going<br />
to auction, preparation is everything. A<br />
successful bid means you are immediately<br />
committed to buy the property; you cannot<br />
seek legal advice, arrange finance or even<br />
get the property valued or inspected when<br />
the auction is over.<br />
That means you need to do all your due<br />
diligence in advance of auction day. Before<br />
the auction (usually after you’ve viewed the<br />
property), the real estate agent working for<br />
the seller should provide you with a copy<br />
of the terms and Contract of Sale, which<br />
sets out what chattels will be included with<br />
the property. This document will also tell<br />
you the amount of the deposit to be paid<br />
by the successful bidder, and when the<br />
balance of the payment must be made.<br />
These documents should be checked by<br />
your lawyer.<br />
You should consider having the property<br />
checked (preferably by a qualified inspector<br />
who has professional indemnity insurance<br />
and carries out their work in accordance<br />
with the New Zealand Property Inspection<br />
Standards and obtain an up-to-date Land<br />
Information Memorandum (LIM) from<br />
the local council. It’s a good idea to get a<br />
valuation of the property, especially as<br />
you are likely to require one if you need a<br />
loan. Some websites provide free estimated<br />
market values that may be useful.<br />
There’s a lot to take in at an auction and<br />
it’s easy to feel overwhelmed. If you can,<br />
go along to one as an observer to see how<br />
the process works before you actually want<br />
to buy. Remember that the auctioneer is<br />
working for the seller and they want to get<br />
the highest price possible for the property.<br />
At an auction, the auctioneer will read the terms and<br />
conditions of the sale aloud and announce if a reserve<br />
price has been set. They must also state whether the seller<br />
has reserved the right to bid during the auction. This is<br />
called ‘vendor bidding’ and it is only allowed under strict<br />
circumstances, such as when the property being auctioned<br />
has a reserve price; when the reserve price has not yet been<br />
met; and the auctioneer has made it clear that the bid being<br />
made is a vendor bid. They must do this by saying, ‘this is a<br />
vendor bid’ rather than using any jargon.<br />
Auctioneers sometimes use vendor bids as a way to<br />
start off the bidding, or to move the bidding towards the<br />
reserve price. Vendor bids can be made by the auctioneer,<br />
or another person working on behalf of<br />
the seller, such as a real estate agent. An<br />
auctioneer can also use a pre-auction offer<br />
to start the bidding.<br />
The auction continues until there is only<br />
one bidder left. At that stage, if the reserve<br />
price is reached or beaten, the highest<br />
bidder will be the successful buyer. If the<br />
reserve price isn’t reached, the seller can tell<br />
the auctioneer to stop the auction without<br />
selling the property.<br />
If the auction is stopped without a sale, the<br />
highest bidder may have the opportunity to<br />
negotiate with the seller (via their agent)<br />
after the auction. If this happens, the terms<br />
and conditions of the auction no longer<br />
apply and you can negotiate new ones.<br />
For independent advice on buying<br />
property, check out www.buyingahome.<br />
reaa.govt.nz.<br />
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