Navigating Auction House Finance: A Guide for Australian Homebuyers

Understanding Auction Finance

When purchasing a property at auction, securing finance is a pivotal part of the process. Unlike a private treaty sale, an auction involves an unconditional contract, meaning you need to have your finances in order before bidding. This is because, if successful, you’ll be required to pay a deposit immediately, often around 10% of the purchase price, and there is no cooling-off period.

Pre-Approval: Your Essential First Step

Before stepping into the auction room, obtaining pre-approval from a lender is crucial. Pre-approval gives you a clear idea of how much you can borrow and instills confidence in your ability to bid. However, remember that pre-approval is not a guarantee of final loan approval, as it is subject to property valuation and other checks.

Practical Tips for Pre-Approval

• Consult a Mortgage Broker: A broker can guide you through different lenders' criteria and help find the best rates and terms.

• Check Your Credit Score: Ensure your credit history is in good shape, as this influences the lender's decision.

• Understand the Costs: Factor in stamp duty, legal fees, and inspection costs into your budget.

Navigating the Auction Day

On auction day, it’s essential to be well-prepared and composed. Here are some strategies to ensure you’re ready:

• Set a Firm Budget: Determine your maximum bid limit based on your pre-approval and stick to it to avoid overextending.

• Inspect the Property: Conduct thorough checks and inspections prior to the auction to ensure the property meets your expectations.

• Legal Review: Have a solicitor or conveyancer review the contract of sale before the auction to understand any special conditions.

Finalising Your Loan Post-Auction

Once you’ve successfully bid on a property, the next step is finalising your mortgage. This will involve a property valuation by the lender to ensure the property is worth the loan amount. Be prepared for this process and have all necessary documentation ready.

Common Mistakes to Avoid

1. Not Securing Pre-Approval: Bidding without pre-approval can lead to financial complications. 2. Overlooking Property Valuation: If the valuation doesn’t meet the purchase price, you may need to cover the shortfall yourself.

3. Ignoring Additional Costs: Forgetting to budget for additional costs like moving expenses and renovations can strain finances.

How Esteb and Co Can Help

At Esteb and Co, we specialise in guiding buyers through the intricate process of auction finance. Our team of experienced brokers will assist you in securing pre-approval, reviewing contracts, and navigating the complexities of finalising your loan. We provide personalised advice tailored to your financial situation, ensuring you’re well-prepared before, during, and after the auction.