An alarming suggestion out of a recent YouGov Galaxy poll was that 18 per cent of the adult population in Australia failed to get pre-approved finance before trying to buy at auction.
While RE/MAX Auction Services’ Dene Tucker says his experience of more than 5000 auction suggests that the majority of buyers have their pre-approval in order, he agrees that any percentage of non-pre-approved buyers is a concern.
“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,” said Mr Tucker.
“Real estate agents and finance specialists should be working together with clients at the earliest opportunity to prepare them for auction. This involves pre-approval and the lender’s acceptance of the property likely to be offered up as security.”
Pivotal Financial’s Australian General Manager, Matthew Andrews, says while anyone can bid at auction then apply for finance afterwards in Australia, it is a very risky approach.
“Unfortunately it happens more often than it should,” he said.
“We believe buyers deserve to be better informed so Pivotal Financial brokers and RE/MAX agents are on the same team, providing professional assistance to buyers and better preparing them for the auction.”
Mr Andrews said seeking pre-approval from the outset helped buyers determine just how much they can borrow; provided certainty that they were being realistic with their expectations and looking in the right market; and allowed them to determine likely repayments and therefore complete some 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 Tucker said the obvious benefit for the seller was a completed and trouble-free sale.
“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,” he said.
In order to bid at auction in New Zealand, the buyer needs the certainty of funding, and they also need the property accepted as a security by the lender.
“I wouldn’t risk trying to buy anything at an auction in New Zealand unless I had the security of a written approval from the lender”, said Pivotal Financial’s New Zealand General Manager, Geoff Bawden, “and you don’t get that in a morning.”
“In New Zealand, there is now a huge variance between what one lender can do over another. If the buyer is not talking to a finance specialist, they have not considered all of the options and they will have no idea about whether they are even looking in the right market.”
“For RE/MAX and Pivotal Financial, it is a matter of gathering and properly managing information that is invaluable in helping a client to make the right buying decision,” Mr Tucker said.
“A potential buyer fronting up on auction day without pre-approved finance is risky scenario; and we would be doing both the buyer and seller a disservice if we allow this happen because the buyer is uninformed,” he said.
Lyn Cox, Public Relations – M. +61 418 793 096
Dene Tucker, RE/MAX Auction Services – M. +61 405 102 210
Matthew Andrews, Pivotal Financial AU – M. +61 411 439 611
Geoff Bawden, Pivotal Financial, NZ – M. +64 21 837 003
About RE/MAX: RE/MAX is the No.1 real estate agency business in the world based on volume of sales and many other criteria. It is in more than 100 countries and territories and has more than 115,000 agents worldwide.