Buying at Auction

Buying at Auction

With many sellers now choosing to sell their property by auction, it can be a daunting process. Here is some information to help take out the stress and ensure the transaction is as smooth as possible.

What is a Real Estate Auction?

Auction is a method of marketing property through an intensive advertising and marketing campaign designed to capture the maximum attention of buyers within a set time frame. The process is a means of purchasing real estate through a transparent negotiation to determine the true market value of the property.

Registering Your Interest

After an inspection you may be interested in purchasing the property. It is important to inform the agent as soon as possible. This will ensure you are notified, should the property look like selling prior to the auction date. We cannot disclose offers made by other buyers, but you will be given the opportunity to submit your pre-auction offer.

Preparing for Auction Day

Before you decide to bid on a property you should become familiar with the property and the sales contract. You may also like to have a solicitor advise you about the contract details. If you would like any general information on the property, please do not hesitate to contact the marketing agent prior to the auction.

Following the Real Estate Agents Act 2008 which came into effect on 17 November 2009, an area of particular concern across the industry has been compliance with the obligation to provide auction purchasers with the Real Estate Agents Authority’s (‘REAA’) Residential Property Sale and Purchase Agreement Guide (‘the Sale Guide’). Section 133 of the 2008 Act provides that the Sale Guide must be given to a prospective purchaser before they sign a ‘contractual document’.  This means before the purchaser makes a written offer for a property. In an auction context, however, by the time a purchaser actually signs an agreement for sale and purchase a binding contract has already been created on the fall of the hammer.

To comply, therefore, with the spirit and intention of section 133, we have determined the Sale Guide should be given to a prospective auction purchaser before they make a bid. Before calling the auction the auctioneer will remind attendees that anyone intending to bid should first have been given a copy of the Sale Guide.  We will ensure that copies of the sale guide are available at the auction and the auctioneer will indicate that this is the case.  Purchasers who request to be given a guide before the auction commences can be provided with one and shall sign an acknowledgment of receipt as required by the 2008 Act.  As a matter of prudence the sale and purchase agreement signed by the successful purchaser at auction shall also include an acknowledgment by that purchaser that they have been given a copy of the Sale Guide prior to bidding.

How do we bid at Auction?

Position yourself where the Auctioneer can see you. You may nominate the amount of your bid by calling out or bid by a show of your hand or by nodding to catch the Auctioneers eye.

It is important you finish as the highest bidder. You will either be successful in purchasing by the fall of the hammer, unless the property does not reach the reserve price. The highest bidder will be given the first option to negotiate with the vendor immediately after the auction.

Bidding with Confidence

The best policy is to offer your bids clearly and confidently, as this announces your intention to buy the property and ensures you are acknowledged as a buyer. Feel free to use verbal bids or clear signals such as a raised hand. If you are unfamiliar with bidding at auction, please speak to our marketing agents who will offer their assistance.

Bidding by Telephone

With many buyers unable to attend the auction itself, we offer you the opportunity to bid over the telephone. You must complete the appropriate form prior to the commencement of the auction. Please inform your marketing agent that this is your intention so that all the formalities are in place.

Authorised Bidding Representative

For many reasons you may prefer to have a representative attend the auction and bid on your behalf. If this is the case, a written authority must be completed prior to the commencement of the auction. Please allow sufficient time to have this form to be completed.

Setting your limit

Think carefully about the property and compare it with others recently sold in the area. You can then decide on the highest figure you are prepared to pay to own the property. To be sure of this figure ask yourself how you would feel if someone bought the property for just $1,000 more. This is the true value of the property. Remember, once a property is sold under the hammer you have missed your opportunity.

Frequently asked Questions:

I don’t believe I can buy at Auction because I have to get finance?

You can organise through your bank, financial institution or a broker, an ‘approval’ to bid up to a price that you are prepared to pay. The bank’s offer (for finance) could be subject to a registered valuation. This is simple to organise and only takes a couple of days.

I want to buy it, but I have a house to sell

There are two answers. If you are in a sound financial position you may organise a bridging loan, the other way is to buy on a longer settlement date, giving you time to sell and settle your house.

What contract do we sign and what are the standard conditions?

The contract is the standard contract on display at the Auction. The usual conditions of purchase at Auction are: 10% of the purchase price paid at deposit either by cash, bank cheques or personal cheque. Settlement date is generally 30-90 days from the signing of the contract as will be stated in the contract on display (Clause 3.1 – Possession and Completion).

Can I buy before Auction?

Yes, in most cases you can. You simply submit your offer to the agent and if the price is agreed to, the contract is then completed and the property is sold before Auction.

What’s the Reserve Price?

The reserve price is usually set on the day of the Auction by the vendor. Other than the vendor, the real estate salesperson and the auctioneer are the only people who know the reserve. The reserve is generally established by the intending purchasers’ feedback.

What if the house doesn’t sell?

If the reserve price is not reached, it is passed into the highest bidder. The highest bidder then has the first right to purchase the property immediately after the Auction at the reserve price, otherwise the property will be offered for sale to all other interested parties, including conditional buyers.