Buying a home at auction has become a popular way to purchase a property and yes purchasers of property in Victoria do have rights, we have compiled information from consumer affairs below
Paying the deposit after auction
When you make a written offer you will be asked to pay a deposit:
- in full, or
- a partial amount, with the remainder to be paid by a date set out in the contract of sale.
If an agent is managing the sale on behalf of the seller, you pay the deposit to that agent who must hold it in a trust account until settlement, or transfer it to the seller’s legal practitioner or conveyancer’s trust account.
If an agent is not managing the sale, you will pay the deposit:
- to the seller, who must:
- give the deposit to their legal practitioner or conveyancer, or
- deposit it into a special purpose account in an authorized deposit-taking institution in Victoria. The account must be in both the seller’s and your name, or
- to the seller’s legal practitioner or conveyancer, who will hold it in trust until settlement.
If you agree, the deposit can be released to the seller before settlement. For this to happen:
- the contract must be unconditional
- you must be satisfied with the proof of debts information provided by the seller.
You cannot release the deposit until 28 days after the date the contract was signed.
Your deposit will be returned to you if the seller does not accept your offer.
When is the property ‘sold’?
The property is sold when both you and the seller have signed the contract of sale.
All parties who sign the contract must be given a copy of the signed contract.
The sale is finalized at settlement when all checks have been made, the title and transfer documents exchanged, and the balance of the purchase price is paid.
Property sales and GST
The goods and services tax (GST) applies to the purchase of new homes. It does not apply to established homes unless the seller is registered for GST. You can check a seller’s GST status on the Australian Business Register website.
The contract must clearly specify whether the price is inclusive or exclusive of GST and, if included, the amount of the GST.
Do not sign the contract without checking whether GST applies. If uncertain, seek professional advice.
Cooling off on a property sale
A cooling-off period of three clear business days applies to private sales of residential and small rural property sales.
The cooling-off period gives you time to consider the offer. It begins from the date you sign the contract, not from the date the seller signs it.
If you decide you no longer want to buy the property, you can cool-off by giving written notice to the seller or the seller’s agent. You will be entitled to a full refund of any money paid, less $100 or 0.2 percent of the purchase price, whichever is greater.
The cooling-off period does not apply if:
- the property was purchased at a public auction or within three clear business days before or after a public auction
- the property is used mainly for industrial or commercial purposes
- the property is more than 20 hectares and used mainly for farming
- you previously signed a contract for the same property with the same terms
- the buyer is an estate agent or corporate body.
WHEN BUYING A PROPERTY AT AUCTION
Properties that are put up for auction will have a number of open for inspections before the auction date and although these are a good way to see the property you are limited to a time which can make it difficult to see all off the property especially with other people in attendance.
When buying a property at auction, it’s important for bidders to know the sale is final and can’t be negotiated for a pre-purchase building inspection. In Victoria, the Contract of Sale gives the buyer 3 days to organize an inspection before signing, but this must be checked before bidding.
Will any vendor acknowledge that the property has structural defects and that’s why he’s selling?? No way will he disclose any information, nor will the agent.
If you’re keen to purchase a property listed for auction, you could approach the agent and make an offer before the auction. The vendor may be keen to sell before auction day and can work for you but do all your homework first.
IF AN OFFER IS ACCEPTED
If your offer for sale is accepted, it’s important for the offer to be conditional upon a building and pest inspection. This allows time for a professional inspector to visit the property and write a comprehensive report so you know exactly what you’re buying.
Did you now that in Victoria if your building inspector has provided a report stating that the building has a structural building defect and you reject the property if your inspector is not registered with the victorian building authority then you cannot get out of the contract as he must be registered, very important to ensure that your pre-purchase building inspector is registered.
It’s important to consider what risks you’re willing to accept if you purchase a property at auction, as against buying a property through the normal pre-sale process.
For peace of mind, it may pay to organize your own building pest inspection prior to placing your bid.
A pre-purchase building inspection in Melbourne will provide clarity with how to proceed
Contact us for any help.