Eighteen per cent of Australian bidders have failed to get pre-approved finance prior to attending an auction, a new study has revealed.
According to a recent YouGov Galaxy poll, nearly one in five adults in Australia failed to secure finance before buying at auction.
RE/MAX Auction Services director Dene Tucker said that any percentage of non-pre-approved buyers is a concern, despite acknowledging that his experience has shown that most buyers have their pre-approval in order.
“The fact I struggle to recall a situation where this (failure to have pre-approval) has occurred may be more attributed to the agents and financial specialists preparing buyers for auction,” Mr Tucker said.
He suggested that real estate agents and finance specialists should be helping their clients prepare for an auction “at the earliest opportunity”, which involves pre-approval and the lender’s acceptance of the property to be offered up as security.
“Given that the time it takes to seek and be granted pre-approval can be both unpredictable and vary significantly — anything from days to weeks — we would bring finance into our client relationship at the earliest opportunity in the sales process,” Mr Tucker said.
Matthew Andrews, GM at Pivotal Financial, said that applying for finance after an auction is very risky.
“Unfortunately, it happens more often than it should,” Mr Andrews said.
The Pivotal GM outlined a number of benefits of obtaining pre-approval ahead of an auction, including that it helps buyers determine how much they can borrow, provides certainty that they are being realistic with their expectations and allows them to estimate repayments and complete budgeting exercises.
“Pre-approval is an indication from a lender that they feel comfortable lending a set amount of money to the buyer. It puts the buyer ahead of the game and strengthens their position when negotiating with an offer,” Mr Andrews said.
The obvious benefit for the seller is a hassle-free sale, according to Mr Tucker.
“A potential buyer fronting up on auction day without pre-approved finance is risky scenario,” the director said, “and we would be doing both the buyer and seller a disservice if we allow this to happen because the buyer is uninformed.”