Buying property at auction
You need to prepare before buying a home at auction. Try to go to a few auctions first to see how they work.
There is no cooling-off period for buying at auction. If you are the successful bidder at the auction, you will have to settle the contract even if:
- the house doesn’t pass inspections
- you change your mind
- you can’t afford it.
The cooling-off period also does not apply to a private treaty contract:
- entered into within 2 business days of an unsuccessful auction of that property
- in which the buyer was a registered bidder at the auction.
The terms of sale usually require you to bid on an unconditional basis. This means you cannot have any conditions, such as:
- subject to finance
- subject to the completion of another sale.
Before the auction
Before the auction, make sure you:
- inspect the property
- arrange your finance
- get a property valuation
- do your own research of the market
- get a copy of the contract
- get legal advice about the terms and conditions in case you’re the successful bidder.
Make sure you ask the agent about:
- how much deposit they will ask for (as a percentage of the winning bid)
- how you’ll need to pay it (a personal cheque, bank cheque or deposit bond is usually okay).
It’s illegal for a seller or their agent to give you a price guide for an auction property. This is because they cannot know how high the bidding will go.
A property may appear on a listing website when you search by price. This is only for the purposes of the web search, and is not designed as a price guide. The website should give you a statement that explains this.
Sometimes, an auctioneer may offer you a comparative market analysis (CMA). This is a document that offers you information about what similar properties have sold for in the same area. They can only give you this document with the seller’s approval.
Remember to do all the necessary checks, such as a:
- a title search
- a building inspection
- a pest inspection
- a land tax clearance search
- a swimming pool inspection (if relevant).
At the auction
Set a budget before the auction and stick to it.
If you are the successful bidder, you will have to settle the contract, even if you can’t afford it.
If you want to bid:
- ask if there have been late changes to the contract
- ask any questions you have about the property
- check the required deposit
- check your inspection details
- any other relevant details.
Only registered bidders can bid.
The reserve price is the minimum sale price that the seller will accept. The seller sets the reserve price but doesn’t have to set a reserve price, but most will choose to have one.
Once the reserve price is reached during bidding (or no reserve price is set), the property will be ‘on the market’. Once a property is on the market, it means the auction must result in a sale. The winning bidder must purchase the property, and the seller must sell.
If the property doesn’t reach the reserve price, you can negotiate with the seller after the auction. If this leads to a sale within 2 days of the auction, you will not get a cooling-off period.
If you reach an agreement more than 2 days after the auction, you will have access to a cooling-off period.
The successful bidder
If you are the successful bidder, you must sign a contract immediately.
There are very serious legal consequences if you cannot settle the sale on time. You may be forced to pay:
- the amount of your winning bid, regardless of whether you had access to the money
- the cost of re-auctioning the property
- any shortfall between your offer and the winning bid at the next auction.
A dummy bid is an attempt to raise the bidding, after the reserve price has been reached, by:
- the seller
- their family or friends
- the auctioneer
- any other ‘planted’ individual.
Dummy bids are illegal.