Hi Fellow Investors,
I'm based in VIC and recently found a property that I'm very interested in. There is a property going for auction in the following weeks and I would really like to bid however my broker has advised me not because of the risk of a low bank evaluation on the property because I am going with finance with the banks. He told me that if I were to bid and if the bid was too high I wouldn't get a loan big enough to cover for the property and that I need to fork out my own money to cover for the shortfall. But at the same time I really like this property in terms of rental yield and capital growth. I have tried speaking to the agent and trying to make a sale with short finance and settlement period before the auction happening in about a 1.5 weeks time.
What should I do, risk bidding but set a limit OR not bid at all and take no risk? I was thinking of waiting until after the auction and hope that it gets passed in and negotiate a price then. The property is probably worth around $350k but if the auction would come out lower, this would mean a steal. I have had a pre-approval done and I could buy a property up to $350k with 90% LVR.
-Help!
I'm no expert, just learning – but it does sound like there is some risk involved, only you can determine how great the risk is for the reward.
My understanding is that if you sucessfully bid at auction you will be required to pay a 10% deposit on the spot and sign documentation (do you have these funds)
Secondly as the contract will be non conditional you will be bound by the contract to settle within the terms, generally 30 days.
If you bid and sign on the night and are unable to gain the finance therefore unable to settle, you are responsible for the cost incurred by the seller in finding a new buyer plus you would likely loose your 10% deposit.
Perhaps you may wish to pay an independent valuer to inspect the property and see if you can gain a pre-approval from the bank. I dont believe this would be definative but would help you to better understand the risk!
I would say continue in your persuit for a pre auction sale, consider my above suggestion and well all else fails, hope it doesn't sell at auction and negotiate afterwards.
I would only bid if it sols under market value. Especially if you are borrowing 90%.
Banks sometimes won't lend 90% in some areas (for example if they are heavily invested in a certain area). This is the reason auctions aren't popular with many people. But that is also the reason you can get a bargain.
As mentioned you need 10% up front on the day.jsoohoo wrote:Hi Fellow Investors,He told me that if I were to bid and if the bid was too high
Ask your lender who they use as a valuer and then employ that valuer to provide you with a valuation before you go to auction.
That way you will know exactly what the property is worth before bidding on it and you can use the valuation for the bank loan.
However banks can go for the lower of both values being what you won the bid at and what the valuation was.Another method is to look at what similar properties in the area sold for this can be done in the sold (TAB) section of http://www.realestate.com.au then select the suburb and then pull up one of the properties listed.
Then at the bottom of the detailed screen you will see a link to recent sales.
This brings up a list of sales so you know what they sold for.It is very easy to get emotional carried away at an auction and by knowing the prices of property in the area you have an upper limit on bidding and must be prepared to walk away if the bidding is too high from what your researched price is.
The other problem is the price ranges given are not often followed in the bidding.
I prefer to buy without auction but unfortunately a lot of properties are sold by auction.
Also if it doesn't sell approach agent with an offer to buy at $xxx,xxxx amount.
You might need a pest and building inspection which then goes to waste if you are not successful in the auction.jsoohoo wrote:a pre-approval done and I could buy a property up to $350k with 90% LVR.So you have an upper limit so find out if similar properties recently sold for 350k in the area. As you can't go by what the price range is advertised at by the real estate agent.
However if yiu get two really motivated buyers who knows what the bidding will rise to.[/quote]
duckster wrote:jsoohoo wrote:Hi Fellow Investors,He told me that if I were to bid and if the bid was too high
Ask your lender who they use as a valuer and then employ that valuer to provide you with a valuation before you go to auction.
That way you will know exactly what the property is worth before bidding on it and you can use the valuation for the bank loan.
However banks can go for the lower of both values being what you won the bid at and what the valuation was.Another method is to look at what similar properties in the area sold for this can be done in the sold (TAB) section of http://www.realestate.com.au then select the suburb and then pull up one of the properties listed.
Then at the bottom of the detailed screen you will see a link to recent sales.
This brings up a list of sales so you know what they sold for.It is very easy to get emotional carried away at an auction and by knowing the prices of property in the area you have an upper limit on bidding and must be prepared to walk away if the bidding is too high from what your researched price is.
The other problem is the price ranges given are not often followed in the bidding.
I prefer to buy without auction but unfortunately a lot of properties are sold by auction.
Also if it doesn't sell approach agent with an offer to buy at $xxx,xxxx amount.
You might need a pest and building inspection which then goes to waste if you are not successful in the auction.jsoohoo wrote:a pre-approval done and I could buy a property up to $350k with 90% LVR.So you have an upper limit so find out if similar properties recently sold for 350k in the area. As you can't go by what the price range is advertised at by the real estate agent.
However if yiu get two really motivated buyers who knows what the bidding will rise to.[/quote]
Sorry, when you meant 'The other problem is the price ranges given are not often followed in the bidding', can you explain further?
Thank you,
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