Do You Ever Buy At Public Trustee Auctions?
What are public trustee options? Do you ever buy these properties and what are some of the pitfalls?
Public trustee auctions are a way to purchase property off the government and the great thing about buying at public trustee auctions is that the property has to sell on the day.
When the property goes to the public trustee it is usually because it’s a mortgagee repossession, it’s a deceased estate with no known family members in the country or no family members that want to be involved in seeing the property sell for a premium price point.
You may also have properties at public trustee options that have been through fires and are extremely difficult to sell. You could also have properties with major termite or pest infestations or damage or other issues along those lines.
When purchasing from a public trustee they often won’t give you any indication of price. They will just take the highest price from the day, but even still this is often much lower than the general market value of the property.
It’s a good idea to get a building and pest inspection done (at your own cost) prior to the auction. Because when you’re buying at auction you don’t get to set those exit clauses in the contract. Because it’s a public trustee auction they will not provide those reports to you, so you need to source them yourself.
You should alway be very thorough in your due diligence before considering buying a property from a public trustee auction. But having said that sometimes the properties can be incredible buying opportunities.
You should also be careful and make sure you have your finances in order before the day so that you can confidently close on auction terms.
Ensure you’ve completed all your important searches such a flood, bush fire searches, easements on the property as well as checking where all the connection points are, sewer lines and those sorts of things.
You want to be very thorough before you even consider buying something from a public trustee auction. They can be epic buying opportunities but doing your due diligence and having all your eggs lined up before auction day is really important.
How Do You Find Out About Public Trustee Auctions?
In order to find about about public trustee auctions their are websites that you can subscribe to and (for a fee) they’ll send you the details of public trustee auctions that come up.
Each state in Australia also has public trustee websites and they list properties that they have coming up so you can see what is available.
Then it comes down to doing your research at a suburb level. Often the public trustee or state government will identify one agent in the area to work with for a period of time.
They will often work with one agent for 12 months to 2 years and it’s about identifying who is selling those types of properties in that area and building a relationship with them so you can get access to the public trustee properties.
While those agents aren’t meant to give anyone an unfair advantage if you’ve got a good relationship with the selling agent then that can often help you to get the leg up and win the property on the day, or at least go into the auction more informed.
Are There Horror Stories For Public Trustee Auctions?
When you are purchasing a property at a public trustee auction you have to remember that these are auction terms.
This means if your finance falls over or you can’t complete the purchase for one reason or another chances are extremely high that you will lose your deposit.
This is why it’s so important to do your due diligence beforehand and have your finances in order before making an offer at the auction.
While I don’t know of any horror stories in particular I can certainly imagine that people have been burned by public trustee properties.
You are buying the property in its current condition and form. You don’t really have any legs to stand on liability-wise if you find out the property is in a worse condition than you thought after you’ve made the winning bid.
I can’t stress this enough. Make sure you’ve done ALL your due diligence prior to the auction. This includes (but isn’t limited to):
- Market cycle timings
- Suburb research and analysis
- Street research
- Property specific research
- Building and Pest inspections
- Flood check
- Bush fires check
- Easement check
- Sewer line check
- Town planning report
- Title searches
You need to be really thorough with this type of property purchase. They expect you to come ready to buy (or be prepared to walk away it if it’s for you or the price goes too high).
There are really good opportunities but no every property sold at a public trustee auction is going to be a bargain, not every property will be sold for under market value and not every property will be suitable to you and your investment strategy.
There are some really rubbish properties out there so make sure you do your due diligence so you don’t end up with a complete dud.
Focus On Getting The Right Investment, Not Just Buying Under Market Value
People are drawn to public trustee options for the obvious reasons that there’s a chance these properties will sell for under market value so you can make some money on the way in.
However, sometimes people spend so much time focussing and obsession on how to save some money that they lose sight of the big picture when choosing a property investment.
Sure you might be able to buy a property under market value but often you can be better off in the long run purchasing a property at market value in a high-quality suburb that is going to have good long term performance.
Sometimes buying under market value makes sense, and where you can do it great, buy sometimes buying a property at market value will give you good (and even better) results.
It all depends on the market, the area, the property and you as an investor.
If you want to learn more about finding suburbs that are set to grow check out my course on Secrets To Finding High Growth Suburbs by clicking here.
In that course I’ll walk you through exactly how to conduct suburb research to understand if an area is likely to grow or if it’s a dud.
This should be done for all properties, but it should especially be done for properties sold at public trustee auctions. You want to make sure you understand the market and suburb before you consider buying the property.
The moral or the story is:
Don’t get caught up trying to save $20,000 that it ends up costing your $600,000 in growth over the next 5-15 years.