While the Perth property market is showing signs of a recovery, local agents and buyers advocates are predicting auctions will rise as a sales method compared to the traditional offer and acceptance.
The latest Domain Group auction data revealed there were 180 auction listings in Perth in November, with a clearance rate of 30 per cent — in comparison to Sydney data for the same month of 4,187 listings with a clearance rate of 55 per cent — there were signs more homes will be sold under the hammer in Perth in 2018.
As we know auctions are ingrained in the Sydney and Melbourne vendor market, and as the Perth property market begins to recover, auction conditions are predicted to improve.
According to JLL buyers advocate Lachlan Delahunty, “the vicious market created by pent up demand and savage competition, has seen auctions on the East Coast dominate as the primary method of sale.” The main reason for this is a faster sale. “However, no one wants a still auction, no bidders certainly equates to no sale, so the market has to be ready for it”.
Mr Delahunty predicted if the WA market continued to improve during the first few months of this year, properties in coastal and blue chip suburbs would start to see the benefits of a bidding frenzy.
I attended an auction with my family (spectator only) in “Doubleview South” at the weekend to see what this bidding frenzy was all about. The starting bid price for a 771 sqm block including a 3 bedroom Fibro home was $710,000. Bidding reached $750,000 and offers were written but this was lower than the seller’s reserved price even though RP Data’s valuation of the property was $740,000. This is a good example of even in a soft market bids had exceeded the actual value of the property by using an auction as the sales method.
Pre-approval finance is required prior to auction because if you’re the successful bidder you’ll usually have to sign an unconditional contract which means you must complete the sale or pay substantial penalties, such as forfeiting your deposit. Getting pre-approval will give you a bidding limit and help you to be reasonably sure that everything will go smoothly with the transaction.
It is important to note that even with pre-approval, a lender can still decline a loan application if they do not like the property you are looking to purchase. If they feel it is over-priced or something is wrong with the property, they will not approve your final loan application. However, getting pre-approval significantly reduces the risk of this occurring.