Read Time: 5-7 minutes
PROBLEM:
How can first home buyers navigate the intense, unconditional auction process without making costly errors?
Buying at auction is final. Once the hammer falls, there’s no way out. Many first home buyers jump into auctions without enough preparation. This can cause financial strain, property surprises, and potential legal complications.
RISK:
What pitfalls could you face if you don’t complete proper checks before auction day?
- Deposit Loss
You risk forfeiting your 10% deposit if your finance fails post-auction. Our newsletter on using your KiwiSaver at auction is here. - Property Issues
Undiscovered problems can surface after you’ve already committed. - Legal Disputes
Unclear obligations can lead to disputes and extra costs.
With the right steps, you can avoid these challenges and pursue your dream home safely.
CONTEXT:
Why do first home buyers often feel unprepared at auctions?
Most first timers go in with little more than hope. It’s like walking into a poker game with no strategy. They:
- Overlook a proper legal review of sale terms and property records.
- Neglect to confirm finance or KiwiSaver withdrawal deadlines.
- Rely on the seller’s builder’s report (if provided).
Auctions are like playing poker and going “all in”. Once your bid is successful and the reserve is met, you must pay the 10% deposit immediately. No second chances exist after the gavel drops. No conditional offers can be made at an auction. *
*Unless the auction "passes in" and the property does not sell.
SOLUTION:
How can first home buyers fully prepare for auction day and reduce stress?
- Clarify Auction Rules
a. Understand how deposits, unconditional contracts, and settlement dates work. - Complete Due Diligence
a. Review the Record of Title, LIM, and Particulars of Sale.
b. Arrange an independent builder’s report. - Secure Finance Early
a. Confirm your mortgage approval is unconditional.
b. Organise KiwiSaver withdrawals well in advance. - Plan Your Bidding
a. Decide your maximum bid and commit to it.
b. Avoid emotional bidding that stretches your budget. - Mitigate Potential Risks
a. Identify risks like unforeseen property issues or finance shortfalls.
b. Explore flexible settlement terms if necessary. - Prioritise Building Report Timing
a. Obtain a building report in the first week.
b. Consult your lawyer last. If the report is unfavourable, you’ll save on extra legal fees. At HouseMe Legal, we do not start the legal clock or send out a fixed fee until you receive a satisfactory building report or you tell us to do our review at the same time as the building report (if you are short on time).
TL;DR Summary
Looking for a quick overview?
1. Buying at auction is unconditional, so be 100% prepared.
2. Conduct thorough checks on the property and confirm finance in advance.
3. Set a firm bidding limit and stick to it.
4. Consult professionals (legal, financial, building) to avoid nasty surprises.
5. Have a plan for your KiwiSaver and initial deposit (normally 10%) - click here for our newsletter on how to do this.
