The two most common methods of selling property in Australia are through private treaty sale and through property auctions. Unlike other countries that rarely sell their houses through property auctions, Australia accepts this form of sale and most city auctions are the most popular way for homeowners to sell their homes.
Sydney and Melbourne are two of Australia's largest cities and also the cities that conduct the highest number of property auctions. In 2017, Sydney averaged around 1,000 properties per week at auction, while Melbourne averaged over 1,200. The auction clearance rate in 2017 was 80% in Sydney and around 75% in Melbourne, meaning that property in these two cities is predominantly put up at auction. It's important that buyers understand exactly what property auction is.
1. What is a property auction?
A real estate auction is a gathering of potential buyers publicly bidding on a property. The auction is usually conducted by a real estate agent as well as an auctioneer and is subject to strict rules. The entire bidding process is open and if the hammer falls and you are the highest bidder, you must sign a local contract at that time. This means you must be sure that the property you are bidding on is the one you can afford to buy.
2. How long is a property auction listed on the market?
Properties are usually listed on the market for 3 to 4 weeks prior to the auction date.
3. Can I buy a property before the property auction date?
Yes, in most cases, the owner is happy to sell the property before the auction date if an early offer is acceptable.
4. Where is the property auction held?
This usually takes place at the house after the inspection or after the open house, in the auction house room or hotel conference room. When the property is ready to be auctioned, the place, date and time of the auction will be stated. In Australia, it is most common to sell properties at auction during the day, on a Saturday.
5. What is the role of the reservation price?
Prior to auction the property, the seller will specify a reserve price, which is the minimum price at which the property will be sold, and if the bids are consistently higher than the minimum price, the moment the hammer falls is the moment the property is sold.
If you are the successful bidder, you must sign the contract of sale and make a deposit on the spot (approximately 10% of the purchase price).
6. What happens if the bids never reach the reserved price level?
If the bids do not ultimately reach the reserved price level, the property will be treated as an aborted auction and negotiations and discussions with potential buyers participating in the auction will begin.
As a bystander, you can familiarise yourself with the auction process by attending some auctions. You need to be able to walk away if the price is jacked up too high. This can be one of the biggest decisions you will ever have to make, so it is necessary to make the right decision and be as well prepared and fully informed about the property as possible.
The Columns of James Pratt, America's and Australia's Top Auctioneer
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This is an exclusive article by Juwai.com. q
This article is contributed by Juwai Columnist, James Pratt.