In the Market for a House? Don’t go to House Auctions!
At least this article is not about the housing market in Auckland this time!
Auctions suck when you don’t have a 20% deposit.
The bank won’t sign off on the property, and short of paying for a valuation before you bid, you have to either just bid or hope, or you have to pay for the valuation, and then might not get the home.
Short answer is – don’t go to auctions.
Seems simple and it may or may not be, depending in where you live, but there are lots of houses for sale, and not all are on auction.
Valuations are risky if the property ends up worth less than you pay, as you may have to scramble for more deposit, because the bank will lend against the value or price, whichever is lower. So, for example if you have a $30K deposit and want to buy a $300K property, that’s a 90% loan. But, if the property is only worth $290K, the bank will lend you 90% of $290K (or $271K) so you need to find the missing $9K. Not good.
That’s bad, but missing a building report could cost you tens of thousands. Don’t do it. Always get one, even if you are paying for something that may be worthless if you miss out on the house.
If the vendor provides one, it’s okay, but it won’t have been extended to you (and they probably should not be giving it to you anyway), so you have no protection if something is missed.
It’s still not worth as much as the one you pay for, for your use.
There are other traps as well, about insurance and the age of the house, when it was built and moisture tests, etc.
Get advice! A good adviser (like the DUX team) knows all these traps and will help you with the property you are looking at buying.
It’s better to walk away from a house that looks like a dream, than buy it without due diligence and risk it turning into a nightmare.