Property is often purchased and sold in New Zealand, particularly in a seller’s market, via auctions. However, buyers frequently under-prepare for an auction and can be caught out when the hammer falls. When purchasing at auction, you are making an offer unconditionally. In essence, this means that the highest bidder over the reserve is making a binding cash offer and entering a binding agreement with the seller.
Talk to the agent
Before attending and bidding at an auction, you should obtain as much information as possible about the property. You should also register your interest with the agent. If a third party makes a pre-auction offer, the auction must be brought forward. As such, you will need to be prepared to bid at the early auction, including having funds available to pay the deposit which must be paid on the auction day.
Review the auction terms and conditions
The agent should provide potential buyers with a copy of the auction terms and conditions of sale. You should review these terms carefully, to ensure that the proposed chattels list is correct and that the settlement date is practically and financially achievable. The terms should be reviewed by a lawyer for certainty.
Get legal advice on the title
It is extremely important that you seek advice on the title before attending an auction; prudent buyers will also have taken advice on the auction terms and conditions of sale. If, in obtaining advice, you discover an issue with the property, agreement or the title, you may raise such an issue as part of pre-auction negotiations.
Obtaining a Land Information Memorandum (LIM), which is a report prepared by the relevant council providing historical and current information relating to the property, land and any buildings, is strongly advised.
Builder’s report and contamination testing
A comprehensive builder’s report can be expected to include advice on fences, paths, retaining walls, foundations, insulation, ventilation, plumbing, drainage, structures and roofing materials. Contamination tests, which measure toxicity within a building, are also becoming more common.
It is essential that any necessary finance is arranged prior to bidding at auction and that you are in a position to draw down the funds on the designated settlement date.
Complete all of your due diligence investigations, ask all of your key questions and seek legal advice before the auction, so you can bid from a position of power.