Buying at Auction in Victoria? What to Check Before You Bid

Crownmark Lawyers | Property & Conveyancing

Buying a property at auction can move quickly.

You may spend weeks attending inspections, reviewing comparable sales and arranging finance, only for the final decision to come down to a few minutes of bidding on auction day.

But once the bidding starts, it is usually too late to begin thinking about the legal terms of the purchase.

In Victoria, buying at auction is different from buying through a standard private sale. The contract is generally unconditional, there is no cooling-off period, and the successful bidder is expected to proceed on the terms already contained in the contract.

That makes the work completed before the auction particularly important.

Have the Contract Reviewed Before Auction Day

The Contract of Sale should be reviewed before you bid.

It sets out the legal terms on which the property is being offered, including the settlement period, deposit requirements, inclusions and any special conditions affecting the transaction.

Those conditions may deal with matters that are easy to overlook when most of the attention is on the property itself.

A contract review can help identify provisions that may affect your position and give you an opportunity to raise questions or request amendments before the auction.

If you become the successful bidder first, your ability to negotiate different terms may be considerably more limited.

Review the Section 32 Statement

For Victorian property purchases, the vendor will generally provide a Section 32 statement containing information about the property.

This may include details relating to the title, registered interests, planning information, services, outgoings and other matters affecting the land.

The Section 32 should not simply be treated as paperwork accompanying the contract.

It can reveal information that may influence whether you want to purchase the property at all, or whether further enquiries should be made before you bid.

Consumer Affairs Victoria recommends having the Section 32 statement reviewed by your own legal practitioner or conveyancer before purchasing.

Understand What Is on the Title

The home you inspect is only part of what you are buying.

The title and supporting documents may reveal easements, covenants, restrictions or other registered interests affecting how the property can be used.

This can become particularly important if you intend to renovate, extend, redevelop or otherwise change the property after settlement.

For apartments and other properties affected by an owners corporation, there may also be additional matters to consider, including fees, rules and the financial position of the owners corporation.

Finding these issues before auction day gives you time to consider them properly rather than trying to make that assessment after you have already bought the property.

Make Sure Your Finance Is Ready

One of the most important differences between an auction and many private sales is that an auction purchase will not ordinarily be subject to finance.

A buyer who wins the auction cannot simply add a finance condition afterwards.

This means finance should be considered carefully before bidding.

Loan pre-approval can be useful, but buyers should also understand any conditions attached to their approval and whether their lender has everything required to proceed with the particular property.

If finance does not ultimately become available, the fact that the purchaser expected to obtain a loan does not necessarily release them from an unconditional contract.

Consumer Affairs Victoria specifically notes that an auction contract cannot ordinarily be made subject to obtaining finance after the successful bid.

Know the Deposit Requirements

The successful bidder will usually be required to sign the contract and pay the agreed deposit after the auction.

A deposit of 10 per cent is common, although Victorian law does not prescribe a fixed deposit percentage.

The contract should be checked before the auction so that you understand how much is required and when it needs to be paid.

If you need a different deposit arrangement, such as paying part of the deposit initially and the balance later, this should ideally be discussed and agreed before bidding rather than assumed after the auction.

There Is No Cooling-Off Period

A common assumption among property buyers is that they will have a few days after signing to reconsider the purchase.

That protection does not apply to a property purchased at auction.

Victoria's usual cooling-off rights also have important limitations for sales entered into within three clear business days before or after a publicly advertised auction.

For an auction buyer, this makes the decision to bid significantly more consequential.

Once the contract has been signed by the buyer and vendor, the transaction is binding and the buyer should be prepared to proceed to settlement.

Check the Settlement Period

Settlement timing can have practical consequences.

You may need time to finalise finance, sell another property, arrange funds or coordinate your move.

The settlement period contained in the contract should therefore be checked before you bid.

If you require a different settlement date, that is something to raise before the auction.

The safest approach is not to assume the vendor will agree to change the settlement terms once you have become the successful bidder.

Speak With Crownmark Lawyers

Crownmark Lawyers assists purchasers with residential and commercial property transactions, including contract reviews, Section 32 statements, auction purchases and conveyancing through to settlement.

If you are considering bidding on a property, having the contract reviewed before auction day can help you understand the terms, identify potential issues and approach the purchase with greater clarity.

Contact Crownmark Lawyers to discuss your next steps.

Harjit Mahindroo

Managing Partner

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Phone: 1800 884 751

From Overseas: +61 3 8595 4338

Email: info@crownmarklaw.com.au

This article contains general information only and does not constitute legal advice. The appropriate course of action will depend on the circumstances of each matter.