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Buying at Auction

Before Auction

Before bidding at auction you must understand the process and satisfy yourself about all details relating to the property. If you’re the highest bidder and your bid is accepted, you’re obliged to purchase the property. If buying at auction you should have:

  • Decided on a definitive upper limit you’re prepared to pay
  • Conducted inspections
  • Had legal documents checked by your solicitor/conveyancer
  • Organised a bank cheque for the deposit
  • Had finance pre-approved

Conditions of sale by auction may differ between states and territories. Your agent can explain the conditions applicable in your area.

Bidding At Auction

In some states prospective purchasers wishing to bid at auction for residential and rural property must register by giving their particulars to the selling agent before they’re permitted to bid. Bidders are issued with a bidder’s number which is displayed when making a bid.

The vendor, or the auctioneer on the vendor’s behalf, may make one bid which must be announced during the auction. This is called a vendor bid.

If the property fails to reach the reserve price it’s passed in. As a courtesy, the highest bidder is usually given first opportunity after the auction to negotiate further with the vendor through the selling agent. If the highest bidder does not purchase at the reserve price the property will be placed back in the market for sale by private treaty.

Bidding On Behalf Of A Purchaser

If someone else is bidding on your behalf, they must give the auctioneer a written authority from you, before the auction starts. The letter must include your name, address and details of proof of identity, such as your driver’s licence or passport.

Telephone Bidding

Bidding by telephone is allowed subject to compliance with certain procedures. A written authority must be given to the auctioneer prior to auction, containing an acknowledgement that the person on whose behalf bids are made, has been given a copy of the conditions applicable in respect of the sale, and the bidder is satisfied the person has been given a copy of those conditions. A copy of the contract must be provided to all successful telephone bidders after the auctioneer has signed it on their behalf.

Dummy Bidding

It is illegal to make ‘dummy’ bids at an auction. If you make ‘dummy’ bids for the seller, you may be prosecuted and incur a substantial fine.

Bidding Tips

  • Attend similar auctions in the weeks leading up to your auction, to better understand the system
  • Get a feel for the bidding process before you start
  • Establish a limit of how much you’re willing to spend for the property
  • Be aware of what’s happening around you and don’t hide, otherwise the auctioneer may miss your bid
  • Bid with confidence and show people that you’re serious about buying
  • The auctioneer sets the bidding increments, depending on the price bracket of the property; bid in these increments if you can and don’t raise the price unnecessarily
  • When bidding slows or stops at a figure acceptable to the vendor, the auctioneer may announce that the property is to be sold and will repeat the price several times before the hammer comes down and the property is sold

Reserve Price

Before the auction the seller will nominate a reserve price to their agent which is the lowest price they’re willing to accept. The reserve price is not revealed to buyers.

Passed In

If a property fails to reach the reserve price the property can be ‘passed in’ or withdrawn from auction. The agent will then negotiate with the highest bidder on behalf of the vendor. This may result in a sale.

Purchase At Auction

If you are the successful bidder, you must sign the sale contract and pay the deposit immediately (usually 10%). A cooling-off period does not apply if you buy at auction, so it is imperative you arrange finance prior to the auction. Conditions of sale by auction may differ from state to state. Your agent can explain the sale by auction conditions in your area.

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