Buying your first home at auction can feel exciting—but if you’ve got less than a 20% deposit, it can also be a lot more complicated.
At My Mortgage, we often work with first home buyers who are keen to buy at auction but aren’t aware of the extra steps involved. Here’s what you need to know before you head to the auction room.
Auctions Are Unconditional – So Due Diligence Comes First
When you buy a property at auction, you're making an unconditional offer. That means all of your checks need to be completed before auction day, including:
Reviewing the LIM Report and property title
Getting legal advice
Ordering a building inspection
Getting a registered valuation
If you're buying with less than a 20% deposit, the bank will usually require that valuation up front—and that alone can cost around $1,000.
The tough part? You’ll need to pay for this work before you know whether you’ll win the auction. It’s a big risk, especially if you're stretching your budget already.
How Lending Works With Less Than 20%
When your deposit is under 20%, the bank’s rules get a little bit stricter.
Most banks will approve lending for an auction purchase but to be fully uncondtional, they will want to see the valuation and make sure everything is as expected, the values match up and there aren't any other issues with the valuation.
On top of that, banks lend based on the lower of the purchase price or the registered valuation. So if you win an auction by bidding $10,000 more than what the property is valued at by the registered valuation, it could create a funding shortfall. There are ways to work around this but it is something to be aware off when bidding at auction before having a valuation completed.
Why a Negotiation or Deadline Sale Might Be Easier
With a standard purchase (like a deadline sale or negotiation), you can include a finance condition in your offer—usually around 15 working days. That gives us time to:
Apply formally to the bank
Order and complete the registered valuation
Ensure everything lines up with your lending approval
This approach reduces the risk, gives you more flexibility, and helps avoid unexpected costs.
What Should You Do?
If you’re considering a property that’s going to auction and you have less than a 20% deposit, let’s chat first. We can talk through your situation, the property, and whether it’s the right fit—or if there’s a smarter way to go about buying your first home.