Tips to buying an apartment at an auction
Buying an apartment vs buying a house at auction is very different.
The reason being that with a house you can look at around it, under it, you have a much better idea of the condition that it is in. When buying an apartment, you can only see the apartment you are buying, the common areas and what it looks like from outside. You can’t see what is happening on each floor, in each corner and so on. This means, as often mentioned in many other podcasts that your due diligence and sourcing the right people to do so is so important prior to auction.
This includes getting a lawyer to analyse the last two years of Body Corporate minutes, attempt to ask to speak to the chairman of the building committee. This gives you an insight into what needs to be done in the building too.
Ensure your bank is happy to finance you with that building you intend to purchase in. Banks will not lend to all buildings in the city. This will avoid disappointment and trouble in the future.
Lastly, getting a registered valuer to gage what the apartment is worth – then you will be able to ensure you are not overpaying at the auction.
Buying an apartment is very different from buying a house at auctions. The reason why? You can walk through the house, so you can have a look around and you can pretty the condition that house is in. It is normally one, maybe two levels. You can have a look around and you can have a look underneath the house, it is pretty much visible. But when you look at an apartment it could be anywhere between two, three, four, 40, 45, or even 50 floors high. How are you supposed to know what is happening on the fourth floor, in the right corner? How are you supposed to know what is happening in a unit title is between nine. Is it nine apartments or more?
That is what determines an apartment, it can be anywhere between nine apartments and over 500 being the largest apartment complex in New Zealand. How are you supposed to know what is happening on the 41st apartment? What is really important is your due diligence. You have got to make sure your due diligence is done all prior to purchasing at auction. Now, you can get some really, really good prices at auction and it does happen.
But the thing is that what you have got to realise is that when there are issues, very often in my opinion, they come out in the market at the end of the auction. I have seen this done before and I have seen real estate agents who specialise in apartments get caught out by this, because not all the documentation is there. When you think about it, you are relying on AGMs which are annual meetings. It has a body corporate minutes, which you are going through.
How do you know what has happened since then? And how do you know what is in the process? What I am going to do is give you an extra seven very solid tips to enable you to have a safe bidding and hopefully a very good purchase at auction. I think if you follow these seven steps, you will be absolutely and your risk will be mitigated and you are going to be in a good place to make a really good purchase. If you look at step number one, obviously start off by getting your lawyer to approve the last two years of body corporate minutes.
That is a basic one, you do that even if you are purchasing just a normal unit. Now, the big one is - ask to speak to the Chairman. Not many people ask about this, but if you are going to auction you want to be able to ask if you are having to do any due diligence up front. It is being rushed to a point, so ask to speak to the Chairman and verify if there is anything that is going on in the building.
Any water type maintenance or issues or anything you need to be concerned about. That will get you straight to the source and I know since I am a Chairman myself. If I got that call I would happily tell them what is happening in the building. Another one is, getting your lawyer to guide you over the long term maintenance plan and cross-check that with the budget to make sure the money's there. It is looking like it will be there when there are major ticket items, maybe if a roof needs to be replaced or something like that in a couple of years.
Nmber four, clear the property with your bank because if your bank is over exposed in that building, then they may not lend. They might be having to do finance prior to you need to do it prior to bidding in the auction. The other one is get a LIM reports. I notice with most auctions a lot of agents do not provide LIM reports. This is really important for making sure the consents are all done, the Warrant of Fitness is all upstanding. Anything you need to know about that property. And so I would a advise getting a LIM report prior to auction.
Another one is to get a building inspection. Often, when you are selling apartments in the normal purchase of your condition order building inspections. Why not do it before you go to auction? You think about it. You are spending hundreds of thousands of dollars, It is important to make sure your purchase is a safe one. Then get a registered valuation, because this market is very hard to predict. It is very hard to know the values. When I first started and I obviously know them inside out now.
As an agent, it took me six months to nine months to have an idea what the values were. So, if you are a buyer, how are you supposed to know? Get a registered valuation and that will help you with the hardest one. Deciding how much you are going to go up to and that is nail biting stuff. I think if you follow those steps, you will be in a good position to be bidding and hopefully you get a very good purchase at auction.
I hope that helps and thanks again. Andrew Murray, Apartment Specialists.