The competition, the uncertainty, the tension - bidding at auction can certainly be nerve-racking. While it may feel like there are many factors our of your control, there is something you can take charge of and that’s avoiding rookie mistakes. Here are five of the most common blunders made by people buying a house at auction.

1. Not confirming your finances

If you didn’t already know, an New Zealand property auction is an unconditional sale. You’ll need to have all your financing confirmed with your bank and ready to go before the auction itself. In most cases, you’ll need to have specific financing options in place—a generic ‘pre-approval’ may not be good enough.

Remember, you’re also required to put down your deposit as soon as an auction is completed. If you don’t have these funds ready to transfer as soon as you win, you’ll lose out. The deposit is usually 10 percent of the total purchase price.

2. Not getting a builder’s report

Never, ever ignore the importance of a builder’s report in your pre-purchase process for a real estate auction. This is going to be your biggest asset, remember. The last thing you want to do is endure unexpected expenses (think leaky home, or compromised foundations) because you didn’t seek out this critical information. You can often arrange for a builder to inspect a property outside of the open home times.

We'd always suggest using a Registered Master Builder; a builder who is experienced enough to see through any cosmetic improvements that the previous owners may have made in order to cover up faults. 

3. Failing to properly consider your price range (and limits)

Time and time again, participants inevitably overspend when buying a house at auction because they didn’t plan ahead. The last thing you want to do is spend more than a property is worth in the market or exceed your actual budget.

Take some time to complete your research on a prospective property well before you even head to the auction floor. In order to get an idea of the market value of the property, you should look up recent selling prices for similar properties in your area. It can be helpful to commission a report by a professional valuer on the property. Set a range you are willing to pay, with clear thresholds you can understand, for example:

• $600K - $650k: Securing a home at this price is fair and a good price
• $650k - $675k: Securing this home means stretching the budget a bit more, but we can do it. 
• Over $675k: Stretching this far is not a good financial decision. It is time to walk away. 

4. Failing to read and understand the documentation

It’s your responsibility to understand all the provisions of the sale (also known as the Particulars and Conditions of Sale of Real Estate by Auction) prior to the auction. Take the time to make sure you’re familiar with everything so there will be no surprises during the bidding process.

5. Not registering your interest

Registering your interest prior to a sale helps to prevent another buyer from snatching the property from under you prior to the property auction. If you’re registered, you will be notified when another buyer makes an offer—and you'll be given the opportunity to make your own best offer.

As you can see, almost every one of these blunders can be avoided by preparing yourself ahead of time. Take the time you need to complete your due diligence. This type of preparation will allow you to be ready for any auction that comes your way. And it will help to prevent any costly mistakes.

All the ins-and-outs of financing a home can be an overwhelming, time-consuming and often quite stressful process. Download our guide now to help you understand everything you need to know about property finance.