If you are selling a property by auction
You will need a sole agency agreement with an agent, have an agreed marketing plan and establish a reserve price in advance of the auction.
The reserve price
Is the lowest price the seller is willing to accept for the property and is confidential to the seller.
It is becoming common for a pre-auction offer to become the starting price for an auction and for the auction to be brought forward when a pre-auction offer is received. If the seller accepts a pre-auction offer it does not necessarily mean the auction will be cancelled. Often, when the seller accepts a pre-auction offer, the auction will be held sooner than the advertised date and the pre-auction offer becomes the first bid at the auction.
It’s important to check the auction terms and conditions and carefully read any pre-auction offer documentation you are given. Potential buyers can register their interest with the agent and ask to be informed if an offer is made.
Auction sales and purchases are unconditional
A buyer cannot attach conditions to an auction purchase. Once the bid is accepted and the auctioneer’s hammer has fallen the sale will be unconditional and must go ahead.
What a buyer needs to do before bidding for a property at auction
You will need to do all your research on the property before the auction. You should commission a building inspection, a title search and a Land Information Memorandum before the auction.
You will need to arrange any mortgage and finance and also consult your lawyer in advance.
If you haven’t attended a property auction before
You will need to register to take part in the auction and know what to expect on the day. Auctions are fast-moving events. Ask the agent marketing the property to explain the auction process to you.
Sometimes during an auction, the auctioneer or some other person working on behalf of the seller (such as the real estate agent), may make a bid on behalf of the seller. This is called vendor bidding.
Vendor bidding is sometimes used by the auctioneer as a way of starting off the bidding or trying to move bidding towards the reserve price.
Vendor bidding is only allowed if all three of the following conditions are met:
- the property being auctioned has a reserve price
- the reserve price has not been met
- the auctioneer makes it clear that the bid being made is a vendor bid.
Vendor bids must be clearly identified by the auctioneer and they will say something like “This is a vendor bid”. They will not be able to use auctioneering jargon such as ‘The bid is with me’.
For more information, see our Auction Information Sheet (.pdf 207KB).