While a lot of our properties are sold by Private Treaty, we often sell properties by auction as well. The auction process often raises questions, for both sellers and buyers, especially if this is the first property that you’re thinking of selling or buying at Auction.
As a buyer, don’t be concerned if you feel some reservations about bidding and buying a property at Auction as this is a perfectly natural reaction and potential buyers often feel this way when it comes to Auctions.
In this two part blog we will aim to answer the most frequently asked questions about Auctions and to give you an overview of what to do leading up to the Auction, during the auction and immediately following the auction, which we hope you will find helpful.
Firstly, here are some quick answers to the most frequently asked questions relating to auctions:
FREQUENTLY ASKED QUESTIONS relating to Auctions and their answers:
What is a Vendor Bid?
It is a bid made on behalf of a Vendor (Owner) not a Buyer.
Who can make a Vendor Bid?
Only the Auctioneer.
Does the Auctioneer have to declare a Vendor Bid when it is used?
How many bids can a Vendor make?
What is a Reserve Price?
The price below which a Vendor will not sell. This price may vary and is kept confidential. The Auctioneer will advise bidders during the Auction when the reserve has been met and the property is “on the market”. The highest bid after this point will win.
What does “passed in” mean?
The bidding has not reached the Vendor’s reserve price and the property is not sold.
If the property is “passed in” who gets the first opportunity to buy the property?
The highest bidder.
If the property is “passed in” on a Vendor Bid, what happens then?
The Vendor, via the Vendor’s Agent, is at liberty to negotiate with any genuine buyer.
Do I have to register prior to bidding at an Auction?
Yes. If you intend to bid you must be registered. The Auctioneer will not accept any bids from any unregistered bidders.
Do I need to pay a 10% deposit if I am the successful bidder?
Yes. Unless prior arrangements are made to pay a lesser amount.
Must I sign the contract on the day of the Auction if I am the successful bidder?
Yes. You must sign a contract and pay a deposit.
Can I “cool off” if I buy under Auction conditions?
No. The law does not allow you to cool off if you buy under Auction conditions.
RULES & REGULATIONS
The rules are very strict when it comes to the Auction process and we conduct all of our Auctions in accordance with legislative requirements as per the Property Stock and Business Agent’s Act (NSW) 2002 (Part 6, Section 77) and Regulations 2003.
The following are the Prescribed Conditions of Sale by Auction
The Principal’s reserve price must be given in writing to the auctioneer before the auction commences
A bid for the seller cannot be made unless the auctioneer has, before the commencement of the auction, announced clearly and precisely the number of bids that may be made by or on behalf of the seller.
The highest bidder is the purchaser, subject to any reserve price.
In the event of a disputed bid, the auctioneer is the sole arbitrator and the auctioneer’s decision is final.
The auctioneer may refuse to accept a bid that, in the auctioneer’s opinion, is not in the best interests of the seller.
A bidder is taken to be a principal unless, before bidding, the bidder has given to the auctioneer a copy of a written authority to bid for or on behalf of another person.
A bid cannot be made or accepted after the fall of the hammer.
As soon as practicable after the fall of the hammer the purchaser is to sign the agreement (if any) for sale.
PREPARING FOR THE AUCTION
What to do before the Auction
Once you have inspected the property and have received a copy of the Contract for Sale, we recommend the following:
See your Solicitor and provide them with a copy of the Contract for Sale so they can peruse it to ensure it’s all in order before Auction day. If you wish to negotiate any of the terms or conditions of the Contract, such as a lesser deposit, extended settlement date or the like, you should discuss this with your solicitor who will then liaise with the Vendor’s Solicitor to seek agreement to the changes and ensure that you have the necessary Special Conditions prepared before the Auction so they can be included if you are the successful bidder.
Secure written, unconditional finance approval from your finance provider as once you sign the Contract you are bound to that contract and must pay the deposit at the time of signing the Contract and then have your balance of funds available for settlement. There is no “Cooling Off” period at Auction so bear this in mind.
Conduct any due diligence recommended by your Solicitor, such as arranging for a Pest and Building Inspection and Report, as soon as possible before the day of the Auction.
So, that covers the preparation for Auction Day. In Part 2, we will look at what happens come Auction day. How to register to bid, the bidding process and how to pay the deposit and sign the contract when you are the successful bidder.