What to expect at an auction in NSW or ACT

Each week, hundreds of properties are sold under the hammer. It is important for buyers to be prepared for the auction, so they can bid confidently.

Auctions can take place on-site at the property being sold, or in another location such as the real estate agent’s office.

Be prepared – there is no cooling off period

When a property is sold at auction, there is no cooling off period. The sale is final and the buyer cannot change their mind.

That’s why it is important to be prepared before you bid at the auction. Some of the things you should consider include:

• Have you arranged finance?
• Do you have enough money to pay the deposit on the day of the auction? It is common for a buyer to pay a deposit equal to 10% of the purchase price. The deposit is due immediately after the auction.
• Have you obtained a building and pest inspection report?
• Are there any other necessary enquiries you should make, to ensure you are satisfied with the condition of the property?
• Have you registered to bid at the auction? (We discuss bidder registration further below)

Pre-auction offer

Sometimes, prior to the auction, the seller may consider an offer from a buyer. However, you should be aware that any offer accepted by the seller is likely to be under auction conditions. You will be required to immediately sign an unconditional contract without a cooling off period. You will also need to immediately pay the deposit to the agent.

Register as a bidder

You must register if you intend to bid at the auction. This involves providing your details to the real estate agent, so they can record you as a registered bidder. The real estate agent will require you to provide identification when you are registering as a bidder. This might include a driver’s licence which contains your full name and residential address.

If you pre-register as a bidder prior to the day of the auction, you will still need to show the agent your proof of identity on the auction day.

Once you are registered as a bidder, you will be allocated a bidder’s number. This will need to be clearly displayed to the auctioneer when you make a bid.

If you are bidding for another person, or on behalf of a company, you need to show the agent a letter of authority from them, which gives you permission to bid on their behalf. The letter must include the person’s name, address and details of their proof of identity (eg a copy of their driver’s licence). If someone is bidding on your behalf, they must also show a letter of authority from you.

Auction conditions

Auctions are conducted under strict conditions that are set out in the law. This includes:

• The highest bidder is the purchaser, subject to any reserve price set by the seller.
• The auctioneer is entitled to make a bid on behalf of the seller.
• Any bid made on behalf of the seller must be announced by the auctioneer.
• A bid can be refused if the auctioneer considers it is not in the best interests of the seller. (We will talk more about this in our article below).
• Late bids cannot be accepted after the fall of the hammer.

Bidding process

Bidding at an auction can feel a little daunting. At the start of an auction, it is common for bidders to stay quiet when the auctioneer asks for the first bid! However once the first bid is placed, things tend to take off rather quickly.

Bids often rise in increments of $100,000 or $10,000 in the beginning. The auctioneer may refuse small bids until later in the auction. This is because they are trying to protect the flow and size of the bids, so the reserve price is met and the property is “on the market”.

Fall of the hammer

Property has met the reserve

If the property has reached the reserve price and you are the final bidder, then you are the successful buyer. You must sign the contract and pay the deposit immediately after the auction. There will be no cooling off period.

Property has not met the reserve

A property is not sold at auction unless it reaches the reserve price set by the seller.

If you are the highest bidder at the end of the auction, but your bid was less than the reserve price, you have the first right to negotiate the purchase of the property with the seller after the auction. If you agree on a price, you will be the successful purchaser and must immediately sign the contract and pay the deposit. The property will be sold under auction conditions, which means there will be no cooling off period.

Dummy bidding and collusion

It is illegal to make a dummy bid at an action. A dummy bid is a fake bid, either by the seller or someone acting on their behalf, to create the illusion of higher competition and to drive up the price of the property.

If you make a dummy bid on behalf of the seller, you may be prosecuted or subject to a heavy fine.

Questions?

We know that bidding at an auction can be a confusing or daunting process. Please feel free to contact our office if you have any questions about the auction process or your purchase.

For properties sold by auction in New South Wales, the Department of Fair Trading also has some useful information on their website. For buyers in the Australian Capital Territory, see the Access Canberra real estate guide for buyers and sellers in the ACT.