HOME > BLOG > Buying and Selling > What to know before bidding at auction

Property auctions can be a completely different experience for home buyers and can generate a range of emotions in a very short time period.

Property auctions can be a completely different experience for home buyers and can generate a range of emotions in a very short time period.

Many buyers end up either missing out or paying too much for a property because they don’t understand how the process works. Having an understanding of the lingo and the process may help you keep your head straight on the day.

Terms you will need to know:

Vendor bid: A vendor bid is made on behalf of the seller by the auctioneer. This occurs when they are not happy with the price bidders have reached.

Reserve price: This is the price that the seller is willing to sell the property. The reserve price can often change leading up to the auction and then set on the day.

Rises or bidding advances: An auctioneer may set a certain amount to increase the bids. As a bidder, you do not have to match their bid, however, if you bid less, they are able to either accept or reject it.

Passed in: If the bidders don’t reach the vendor’s reserve price, the property may be passed in. This means the highest bidder is able to negotiate with the vendor.

Before auction day

Property auctions can start end quickly, which is why you need to have a clear idea of what your limits are. If you employ the help of an agent, you will need to make sure you have a clear strategy that you both agree on.

Also, decisions about whether you will submit a vendor bid through your agent will need to be made before the day as it has certain legal implications.

Auction day

There are certain rules and laws that auctioneers must abide by, but within the rules, auctioneers can run the auction their own way.

An auctioneer will then as buyers to bid an opening amount and will then set an amount that the bids must increase by (e.g. $5000 increments).  If the reserve price is reached, then the property will be sold to the highest bidder. However, if the reserve price is not met, the auctioneer will discuss with the vendor whether the property can be sold at a lower price. If the property is successfully sold at auction, the buyer is required to provide a deposit immediately (usually 10%).

There are two important differences between buying at auction and buying privately that buyers need to be aware of. When buying at auction, you do not have a cooling-off period if you decide to change your mind and you cannot make changes to the contract. If you do wish to have any conditions included in the contract or want to organise a building and pest inspection, this will need to be done before auction day.

This is also why it is so important to organise your finances before auction day. Many buyers get caught out when they do not organise their finances first as they purchase a property at auction only to find out they cannot get a home loan for the purchase amount. Organising a home loan pre-approval is quick and simple and can give you the ability to confidently bid at auction knowing you are financially prepared.