Buying at Auction V Private Sale

Spring is upon us which means a busy time of year for the property market.  Spring is a time that we usually see more properties going on the market and more properties being sold by Auction. So, what is the difference between buying at Auction versus buying by Private Sale arrangements.  From a legal perspective there are many differences, and you should be aware of all of those before entering the market and bidding at Auction. Here are some of the key differences:-

COOLING OFF PERIODS

Private Sale

Purchasing under a Private Sale arrangement provides a purchaser with the right to a 3 day cooling off period.  The Cooling off period is 3 business days and begins from the date that YOU (the purchaser) sign the Contract of Sale.  It’s important to note that the Cooling off period does not start from the date that the Vendor countersigns.  Accordingly, do not wait until the Vendor signs to complete any further due diligence you may wish to complete within the 3 day cooling off period.

Auction
Purchasing under Auction Conditions means that legally you waive the right to any Cooling off period.  Auction conditions apply to any publicly marketed Auction and the 3 business days prior to the marketed Auction date and 3 business days after the marketed Auction date.  By way of example, if you purchased a property on Wednesday, 11 September 2024 and the advertised Auction date is Saturday, 14 September 2024 you will waive your right to any cooling off period as this is within the 3 business day period of the marketed auction.

CONTRACT OF SALE CONDITIONS

Private Sale

Purchasing under Private Sale arrangements means that you have the right to negotiate certain conditions that are acceptable to the Vendor.  These may include a finance condition, building and pest condition or any other additional conditions that may be required.  Recently we have been reviewing more Contracts of Sale that are subject to the sale of the purchaser’s existing property.  Special conditions like those do need to be carefully drafted by your Property Lawyer or Conveyancer to ensure that you can rescind the Contract of Sale if the condition(s) are not met.

Auction
Purchasing at Auction means that you, as the purchaser, waive the right to include any further conditions.  As such you need to ensure your finance, if required is in order, and inspections have been completed well before Auction.  A property purchased at Auction is commonly known as an unconditional Contract of Sale which means that the Contract is unconditional at the time of the Vendor and Purchaser signing the Contract of Sale. 

Have your Contract of Sale and Section 32, Vendors Statement reviewed

Before you sign a Contract of Sale and Section 32, Vendors Statement you should ensure you have had the documents reviewed by a Property Lawyer or Conveyancer.  The review is designed to provide you with the necessary advice and details of any further due diligence that you may wish to carry out to ensure the property is the right fit for you.  A Contract review often provides a purchaser with further insight and power to negotiate. Furthermore, if you are purchasing at Auction you have no right to cool off so it’s important that the Contract of Sale and Section 32 are reviewed beforehand to ensure you know exactly what you are signing on the day of auction.  You don’t want to find out post Auction that there is an easement or covenant disclosed that is going to prevent you from completing those additional works to the property that you had dreamed of.

Be Ready

Speak to the Real Estate Agent well before Auction day and ask all the relevant questions including what deposit is required and how this is payable on the day, the preferred settlement period, any inclusions or exclusions that will be set out in the Contract of Sale. Ensure all those final questions have been answered following the Contract review and any further due diligence has been done.  This may include items such as contacting Council or the Water Authority to ensure that an easement located on title will not restrict any works you have planned or if they do impact any prospective works or renovations, what are the implications.  Have you building and pest inspections completed, and the report prepared by the inspector well before Auction.  This will provide you with time to review the report and have any discussions that may be required with the inspector.

Having these discussions and completing the due diligence, will allow you to feel confident and prepared to bid at Auction.