Buying at Auction

I have purchased 5 houses in the past but never at auction. I have pre approval for 585,000 from CBA and I have over 300,000 of my own. I want to purchase a property that I expect to go in the high 700's. I would borrow the full 585,000 and use my own money for the rest.

My conversations with the bank have been challenging because they are saying that i shouldn't buy without a subject to finance in the contract. That obviously does not happen at auction. They are almost making out that I can't do it. When I insist that I am adamant to be a part of the auction they say it is at my own risk and try and warn me off it.

Also, I am keen to put in an offer before auction but the agent insists they won't look at it unless I am able to not have the subject to finance as a part of the offer. This seems like an option for me because I have the 300,000 as a back up in case the valuation is an issue.

Does anyone have some helpful advice in this matter?


The property is in Qld.

 

Hi Daniel. Forget your bank, go and talk to a mortgate broker asap . whens the auction ?

 

Andrew Timms 0488 029 908

 

Make sure your 'pre-approval' has been fully assessed. Sometimes banks will say you're pre-approved, when in reality they have just run your details through their servicing calc without actually assessing the deal. You want to be sure that the only condition outstanding is the valuation of the property you're purchasing.

 

We have a lot of good brokers here
Check @Steven Ryan

 

Here is a bunch of things they are saying they need to search for (more than just valuation)

Property is crown land/perpetual leasehold

Purple title

Moiety title

Water licences not attached to the land

Folio identifier ending an a letter

Encumbrances

Caveats

 

Assuming this property isn't in Mexico, and it's freehold title ?

 

Not Mexico and it is a freehold title

 

Hey, nothing wrong with buying in Victoria`

I have pre-approval from my bank which was done for an auction. They have no issues with me not using a finance condition as long as I am aware I need to make up any shortfall between the pre-approved amount and the total cost of the property (purchase, legals, duties etc).

 

The auction is September 3rd. Thanks for your advice.

 

I'd have a chat to a broker (lots of good ones here) to confirm you're good for finance for the deal, and to work out the best lender given your future plans. The fact that CBA are saying you shouldn't buy without a finance condition may hint that perhaps they haven't fully assessed the deal – or they're just being super cautious. Either way, it's worth gaining some clarity.

You don't know what you don't know.

 

I bought twice in auction last 4 months in VIC. I am not sure how it is like in QLD but in VIC properties which are prime areas, upcoming areas and even 40kms away from the CBD etc are all for auction. from the likes of st albans to frankston to the brightons and hawthorns. The only ones that aren't for auction are apartments or really expensive mansions (2-3 mil) or there is something really wrong with it like having multiple electrical pole transformers behind the block. Even rundown properties in Brunswick and exhousing comm houses are all for auction. But if the property is in a prime area and there are ppl who want it, It will be in auction in melbourne.

 

Latest Agent's deal in my area is "Board Room Auction" House that was for auction on 3 Sept was privately "Board Room" Auctioned at the weekend, as Agent received so many pre-offers. Anyone thinking they could wait for the actual auction would have missed out.

 

The bank staff is correct. There is a risk and they are covering their arses by telling you this. It is up to yourself to decide how great a risk this is and if it is worth taking.

 

Plus more

Suitable security is a big one

 

I would always tell my clients the that it's at their own risk in bidding at auction. Even if the application has been signed off by the head of credit before the auction.
You can definitely mitigate the risk through having the application fully assessed (very easy with CBA), looking at comparable sales and if/when see fit getting a B&P inspection prior

IMO buying without finance clause should only be used when
- attending auction
- price offered is at a discount, as you're now taking on the risk without finance clause
- market demand is strong and unconditional offer will see your offer looked at favourably
(obviously with all of these finance would need to be property assessed to the best ability prior)

@Daniel Jurin I would be far more concerned if somoene provided you a pre-approval for you to attend auction without discussing any potential risk.

I've never had a finance clause on any of my purchases and my first purchase was at auction

 

Be extra careful in Queensland - the vendor does not have to agree to defer the settlement date, they can just keep your deposit. So you need to be extra prepared !

 

which is what majority of melbourne and sydney markets are atm. i would have thought brisbane you could still score deals outside of the auction arena

 

The preapproval just means you can fund the property but if you buy the property at 600k and the bank values it at 500k and you were looking at 80LVR the bank will only lend you 400k.

It is then up to you to come up with the 200k (100k for 80% of the 500k + 100k to bring it to 600k total).

This is why the bank is saying you need STF as things can go pear shape if the valuation doesn't stack up correctly.

However in 99% of the time the valuation will come back in at what was paid at auction (as typically there is another buyer that was willing to pay 1k less) however if it doesn't you need to quickly find another bank that will value the property at 600k (in this example) or you are up a certain creek without a paddle.

 

Ive had a few client loans where the security was not acceptable to the bank.

1. Structurally unsound.

2. Former boarding house

3. Kitchen had been ripped out