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Top tips for auction success

So you've done all the legwork and located the perfect property purchase. The problem is, if the property is going to auction, finding the right place to purchase is only half the battle. The auction process can be a scary and emotional experience, for both buyers and sellers alike. But if the numbers of auctions conducted this spring are anything to go by, you can expect to be thrown in the deep end of the auction process if you're looking to make a property purchase. Here's a few important tips to help you succeed at auction.

1. Get a valuation

A lot of time and heartbreak can be saved by understanding the true market value of the property you want to purchase prior to auction day. Remember, the guide price advertised by the real estate agent is likely to be much less than the property actually sells for. Getting an independent valuation from a registered valuations expert or a lending institution will help you to get a realistic price and prevent you from wasting money, time and effort pursuing a property you can't afford.

2. Make inspections prior to the auction

Inspecting a property several times before purchase is always a good idea. But in the case of an auction, if you are really serious about purchasing the property you should consider having it thoroughly inspected by a building inspector as well as a pest inspector before deciding to attend the auction.

This is because an auction purchase is unconditional, and you will have no opportunity to complete these inspections afterwards. Going to auction without completing these inspections is risky and could result in you overpaying or having to pay extra to complete repairs after purchase.

3. Know the rules

The rules of auctions vary from state to state and auction to auction. If you are seriously interested in a property you should obtain the contract of sale and/or auction contract from the real estate agent or auctioneer and give it to your solicitor to review prior to the auction.

This will give you a clear understanding of the auction conditions, so you can prepare yourself for auction day. These documents will provide you with information such as the number of days to settlement, the amount of deposit required, exactly what is included in the auction price, the rules of your particular auction and so on.

By bidding at the auction, you agree to the terms of sale. However it is possible to vary the auction terms beforehand on the advice of your solicitor and with the agreement of the vendor. Reviewing the contract prior to the auction will give you the opportunity to ask for changes.

4. Get your financing in place

If you win at the auction, you will be required to pay a deposit on the spot so take along your chequebook. The deposit is usually 10% of the purchase price of the property, but may vary so you should remember to check the auction contract.

Additionally, the winning bid at an auction is a binding contract. That means you should have your financing in place before you bid at the auction, so talk to us as soon as you find a property that you're interested in buying. To be financially prepared, you will need a written loan approval in hand as well as your deposit.

5. Set a bidding limit before you go

With your property valuation and written loan approval at the ready, you should be well prepared to set your bidding limit before you go to the auction. Remember this is your walk-away price and you should stick to your limit even if the auction bid goes as little as $1,000 over. Setting a bidding limit is one thing, but sticking to it during the heat of the moment may prove to be a bit tricky!

Remember that going over your limit may involve over-extending yourself financially and may also be risky in terms of securing the additional finance later. If you're at the auction and the bidding goes over your limit then stop bidding immediately and consider leaving the auction to stop yourself putting your hand up again.

If you reach your maximum bid and the property is passed in, you may be offered the opportunity to negotiate with the vendor over price. If this is the case, remember your limit still applies.

6. Get familiar with the auction process

The capacity to bid with confidence is important when attempting to secure a property at auction. Attend as many auctions as you can prior to your auction day so you are fully familiar with the auction process. Some real estate agents recommend that you attend as many as 15 or 20 auctions, so you can eliminate the possibility of failing through inexperience on the day.

Make notes about the strategies implemented by the winning bidders. Take notice of the price a property is advertised for and the price it actually sells for. Talk to other bidders about their opinions of the auction and ask questions of the auctioneer so you understand how they identify bidders.

If you don't feel comfortable bidding, consider engaging a professional purchasing agent. It may also be possible to get a more experienced friend or family member to bid on your behalf.

With these handy tips, you'll know exactly what to do to be a success on auction day. Remember that bidding at an auction is not as difficult as it may first appear. And whilst the auction process may appear to favour the vendor, you can make it work in your favour if you have the know-how. The first step in succeeding at auction is having your financing in place, so talk to us today.

New Government, same rules...Hopefully

Superannuation Industry bodies have vowed to hold the new Coalition government to account over its promise of no detrimental change to the super sector, and continue to lobby for urgent review of key policy measures.

SMSF Professionals' Association of Australia's (SPAA's) chief executive Andrea Slattery said the association continues to lobby the government for bipartisan commitment to the superannuation system. "We welcome the promises made by both parties to stop changing super as a step in the right direction [to] bringing bipartisan support and a stable super system," Ms Slattery said.

"SPAA welcomed the Coalition's commitment to not introduce any negative changes to the system, and we will continue to advocate strongly those measures we believe will have a positive effect."

Can you justify your SMSF outgoings

A self-managed superannuation fund is an entity that you, as the trustee, are responsible for. On a day to day basis the trustees must ensure that the outgoings of the fund are solely for the running of the fund.

If your superannuation fund pays for flights and accommodation for you, the trustees, to visit an investment property, you had better keep immaculate records demonstrating that the trip was necessary and only in relation to the inspection of the investment. If the regulator scrutinises your records and shows you have received a personal benefit from the fund they will have grounds to impose penalties.

Do your expenses make sense in the context of the fund? For example, it would be difficult to justify the fund paying for a sophisticated share trading programme when the fund has only a small share portfolio.

Generations X and Y starting to take advantage of SMSFs

Recent surveys have shown an increasing popularity of SMSFs within a younger demographic. Advisors surveyed by Russell Research cite increased demand from 31-40 year olds looking for control and flexibility for their superannuation.

The increasing use and decreasing costs of superannuation fund borrowings, given the longer investment horizon of the Gen X and Gen Ys, is another driver behind the increasing numbers.

Many existing SMSF members nearing retirement are also advocating the use of SMSFs to their children and are able to provide practical guidance in their day to day running.

Remember, SMSFs are not for everyone, but if you are considering talking to your children about their use, feel free to contact our SMSF department.

Time to review salary sacrifice

Five months into the financial year 2014, now is as good a time as any to review your superannuation contribution arrangements.

Whilst everyone was limited to a contribution cap of $25,000 last year, in the current financial year, anyone who will be 60 or over will have that cap increased to $35,000. As arrangements such as salary sacrifice need to be prospective in nature, rearranging your contributions now can help ease any cash flow pressures that may arise by making changes later in the year.

Be careful when trying to maximise your contributions, consider all the contributions that are included in this cap including superannuation guarantee contributions. For example, if your base salary is $100,000, $9,250 will be contributed by your employer, your maximum salary sacrifice will be $15,750 or $25,750 if you will be over 60 during the year.

Matthew Moon

Australia's new comprehensive credit reporting regulations

How will they affect you? In March 2014, Australia will be subjected to new rules and regulations with regard to our credit reporting system. These rules and regulations will affect how banks and lending organisations go about approving loans and credit facilities for every day consumers like you and me.

The new regulations are designed to give lenders access to more information about your credit history so they can more accurately assess your credit worthiness and reduce the risk of you defaulting on a loan or credit card.

What's new?

As of March next year, lenders will be able to review your repayment history as far back as December 2012. They will be able to make a more detailed assessment of your financial situation and use the information to calculate their risk.

In the past, lenders were only able to access a limited amount of information such as major credit infringements and view any credit application enquiries. They were not able to find out whether your credit application was approved or declined, or find out if you made your repayments on time.

In the future, as well as serious credit infringements, lenders will be able to see the last 24 months of your credit repayment history on all open credit accounts in your name. That means they will be able to see your payment history on your rent, telecommunications accounts including your mobile phone, your energy and water bills, credit card payments, personal loan and mortgage repayments and so on.

The information they can access about you will include the amount of credit accounts you have open, the date the accounts were opened/closed and your repayment performance on each account. They will be able to use this evidence to decide whether or not you have too much debt and can afford to take on more.

Why the changes?

These changes are being made so that lenders can get a better idea of your financial situation and therefore make a more informed decision about your capacity to repay your loan. The changes are designed to reduce the number of people defaulting on loans and therefore lower the costs of credit for everyone. In terms of benefits to the consumer, this should help to reduce interest rates on lending facilities like credit cards in the long term.

What does it mean for you?

If you are not very conscientious about keeping up to date with your bills, you may give a lender the impression you are a bad credit risk when you are not. A payment that is as little as five days late could show up on your credit history report as a credit infringement.

So it is now more important than ever to keep your finances in order. If you pay your bills on time, this reform will be of benefit to you because lenders and credit providers will be able to see you as a model borrower, helping your chances of obtaining a loan or credit facilities.

Protect your credit rating.

In light of the new comprehensive credit reporting rules, a few simple precautions will help to ensure you maintain a good credit rating. First of all, always pay your bills on time. Organising to pay your bills using your bank's automatic payment system is a very good idea. You can also get applications for your mobile phone that remind you to pay your bills on time.

Be aware, educated and informed when helping others to obtain credit in case they default. If you are a renter, make sure you pay all of your utility bills when you change residence and if you are living in share accommodation, ensure your name is removed from any bill commitments when you leave.

Last but not least, regularly check your credit report. We can help you with this, and doing so will help you keep track of the information lenders can access about you. You can also take action if any mistakes are recorded by accident.

If you would like more information in relation to how these changes may impact you, please call the office.

Antony Blanch