Intending On Purchase At Auction –
It is essential to have the Contract for Sale for the property reviewed prior to auction day and, most importantly, well in advance so there is time to:
1. Carry out due diligence and organise any pre purchase inspections you may require;*
2. Have the terms of the Contract reviewed, negotiations commenced by your Conveyancer and amendments agreed to BEFORE auction day; **
3. Organise your finance and to have your Lender carry out a pre-auction valuation if required; ***
4. Organise your deposit and ensure that if this is less than 10% or if a deposit bond is intended that this is approved by the owner’s Conveyancer;^
5. Ensure you know exactly what you are buying. Are there easements or affectations on the land that you have not considered or do not understand?
- Considered whether you can access the property via the driveway with your vehicle? Are there any unusual ways of accessing the property?
- Made yourself familiar with the neighbourhood and its surrounds?
- Spoken to your local council about any developments that could be proposed or approved for properties surrounding the one that you are looking at purchasing?
- Checked that all the inclusions in the property are fully functional and is there anything excluded from the purchase? Caveat Emptor ?^^
How Things Can Go Wrong
An Example Of Proceeding Without Advice Before Auction
The auction was set down for a Saturday however, once our client arrived, they were the only attendee. The Agent cancelled the ‘auction’ and negotiations commenced directly with our client^^^ . The following transpired:
a. Our client came into our office on the Monday and advised that they had ‘purchased a property;’
b. After consultation with our client it was discovered that they as purchasers were given the following information from the Real Estate Agent:
i. That they had a 7 business day cooling off period (this is not standard);
ii. Then they were advised due to ‘administration errors’ and documents missing from the contract that the cooling off period had reverted to 5 business days;
iii. The reference in (ii) above was also verbally confirmed via telephone to our office;
iv. The Owners Solicitor also claimed (despite the above representations) that the property had been sold under ‘auction terms’ and there was NO COOLING OFF PERIOD .
c. Upon closer inspection of the received executed, dated and exchanged Contract we found the following:
i. The standard Law Society provisions contained in most of the Contracts for the Sale and purchase of property within NSW namely pages 3-20 were NOT included in the Contract;
ii. Most importantly within these pages is the prescribed statutory cooling off notice which is required under s66X of the Conveyancing Act to be in all Contracts for Sale of residential property in NSW^* ;
iii. When the warning notice referred to above is not in contracts the Purchaser has a right of rescission (to withdraw) at any time prior to completion.
d. Some problems this caused for our purchaser client:
i. The Contract contained an easement for transmission lines 15 metres wide
ii. Upon viewing the easement, the purchaser realised that they could not use the property as they had first intended;
iii. A deep-seated feeling of disappointment in terms of being pressured and mislead
e. The conclusion for our client:
i. They did not wish to purchase the property despite having available funds cleared and ready to do so;
ii. Negotiations commenced coupled with evidence to support our client’s rights to withdraw from the contract were provided to Vendor’s Solicitor;
iii. The Vendor’s solicitor after some initial resistance agreed that the purchaser was entitled to rescind (withdraw) from the Contract; and
iv. They authorised for the full 10% deposit previously paid by our client to be refunded to them.
Don’t forget to call us for advice the next time you or someone you care about is looking at purchasing a residential property in NSW. We know the tricks and the law. Don’t let them trick you.
*Consider pest inspection, building inspection, electrical inspection, plumbing inspection, surveyor’s identification report in some instances.
**Should an auction actually commence and the property be passed in and offer and acceptance of a sale price is agreed on the same day as the auction then auction terms apply as there is NO COOLING OFF PERIOD for auction in this scenario, s66T of the Conveyancing Act 1919 does not apply.
***Ideally you should have formal written approval advice that your Lender will accept the property as adequate security for the purposes of securing your Mortgage.
^Have you considered the maximum purchase price that you will go to? If so then you will need to have access to 10% of this amount as cleared funds for the auction day. If you require a deposit bond, we recommend Deposit Assure and can organise this for you.
^^Caveat Emptor – the principle that the buyer alone is responsible for checking the quality and suitability of goods before a purchase is made.
^^^Normally the Real Estate can provide you with a copy of the auction Contract or it can be downloaded direct from the marketing page on their website for the property.
^*A purchaser for all residential properties in NSW is entitled to a cooling off period under s66U of the Conveyancing Act 1919 unless a certificate under S66Wof the Act is signed and provided by the purchaser’s Conveyancer or Solicitor waiving such rights.