Why do I need a Land Information Memorandum (LIM)?
A LIM is a comprehensive report containing everything the local council knows about a property or section, (usually) including potential erosion and slippage, permitted land use and any zoning restrictions, consents and orders affecting the land or buildings.
A LIM also usually records any unpaid rates (which you, as the new owner, may be liable for). As you can see, it’s a document you would be wise to read before you purchase! If you want any other background reports in addition to a LIM, such as a registered valuation, title or trade report, these are your responsibility.
How do I know what the property is worth?
You should research similar properties for sale, or recently sold, in the area where you intend to buy. You can pay for a registered valuation if you wish. However, if others think the property is worth more, then you may be outbid at auction.
What are the ‘Particulars and Conditions of Sale’?
This document is available prior to auction and includes the terms and conditions of sale, including a list of all the chattels included in the sale, and expected settlement date.
You should have a solicitor review it. In particular, your solicitor should check the title. All bidders on auction day are deemed to have accepted the title. Note any special conditions mentioned. Although these conditions will be read aloud by the auctioneer at the beginning of the auction, you should familiarise yourself with them beforehand.
What is a reserve price?
This is the price below which the owner will not usually sell the property. The reserve price is usually known only by the auctioneer and the owner, and will not be made public. Once the reserve price is met, the auctioneer will announce that the property is ‘on the market’ and it will be sold to the highest bidder.
If I want a longer settlement is this possible?
You can ask the agent for a variation of terms before the auction; for example you could ask for settlement in 90 days rather than the standard 30 days. If the owner agrees to this variation, it will need to be put in writing before the auction.
I can’t raise the full 10% deposit, does this mean I am unable to bid?
Not necessarily. Prior to auction you can apply for a variation of the terms to set a lower deposit. This variation applies only to you. Once you have this writing, you can bid with confidence.
If I win the auction, do I need to pay any money immediately?
Yes, you will be expected to pay the deposit, which is usually 10% of the purchase price. You will also need to sign the special auction sale and purchase agreement. The balance of the money is due on settlement day which is usually 30 days after the auction.
Unless specifically asked for, a bank cheque is not required; a personal cheque is fine. If it bounces or is cancelled then the purchaser is in default and special clauses contained in the agreement will be triggered.
What does ‘unless sold prior’ mean?
The seller can choose to withdraw a property for sale before the auction. They may also choose to accept an offer before auction day. Let your agent know before the auction that, if a pre-auction offer is made, you would like to make your own offer. The vendor will consider all offers together. Alternatively, the auction date may be brought forward, with the opening bid being the original offer.
It is becoming increasingly rare for owners to sell before auction. Owners have invested in a marketing campaign to establish what the market thinks their property is worth. They are therefore only likely to sell prior to auction if your offer was very attractive.
I want to buy, but haven’t arranged finance?
You cannot bid unless your finance is pre-approved. When you buy at auction, the purchase is unconditional. You therefore have two choices: You can see your bank or mortgage broker and arrange bridging finance. This puts you in a cash position on auction day. You have both your existing and the new property to offer as security to the bank.
You can take a calculated risk on your existing property selling quickly, say within 90 days, and ask for a variation of terms before the auction; i.e. ask for settlement in 90 days. This variation needs to be in writing before the auction. Make sure you have a backup plan in case your existing property takes longer to sell.
I can’t attend the auction but can I still bid?
You can nominate another person to bid on your behalf. This may be a trusted friend or your lawyer. Extreme care is required however. You should draft a written authority between yourself and your representative which clearly states what amount they can bid up to.
You can also bid by telephone providing you have made prior arrangements to do so (a signed authority is required). The auctioneer will normally announce that there is a telephone bidder, and your bids will be relayed by an appointed agent.
What is a 'vendor bid'?
If the conditions of sale allow, the seller may either bid themselves or instruct the auctioneer to bid on their behalf. Not all real estate companies will make vendor bid’s but, if they do, it is considered good conduct to advise all those present that a vendor bid has been made.
How does the auction run and how do I bid?
First relax; you won’t buy the property accidentally by coughing at the wrong time!
The auctioneer will open the bidding by asking for an opening bid. For example, an opening bid of $200,000 may be placed. The auctioneer will then ask for further bids increasing by a specified amount (e.g. $10,000). In this case, the next person to bid will be offering $210,000.
To place a bid, you simply need to attract the auctioneer’s attention by raising your hand and/or calling out your bid. Once the auctioneer knows you are bidding they will look for signals from you for further bids, whereupon a nod of the head will be sufficient. Once bidding reaches the reserve price, the property is ‘on the market’ and will sell to the highest bidder.
The auctioneer is taking bids in $10,000 increments. Can I offer less?
Yes, you can do this by calling out an amount less that the auctioneer is asking for. For example; “I bid five thousand”. However the auctioneer can refuse your bid if they believe it will slow the bidding down.
What if the house doesn’t sell at the auction?
If the reserve is not reached the property is ‘passed in’ to the highest bidder, who then has the first right to purchase at the reserve price. If that bidder is unable to reach agreement with the owner, the owner’s agents will then negotiate with other buyers. If these negotiations are unsuccessful, the path is now open for conditional buyers to make an offer.
What does ‘private treaty’ mean?
Private treaty essentially means ‘confidential agreement’. It is the sale of a property by negotiation between parties and is not being sold by an auction or tender.