What you don’t know about property auctions, and probably should
After scrolling through hundreds of property listings and finding that dream home, you feel slightly uneasy because it’s going to auction.
The auction process can be daunting – especially the first time – because it’s not enough just to know your budget and the ins and outs of the contract.
Buyers have to trudge through a minefield of jargon and rules, and battle psychological strategies from their competition.
Here are some common phrases that are worth a further look into:
1. Referring a bid to the vendor
When auctioneer Damien Cooley consulted Kim and Chris whether they were happy to sell their Block apartment, it appeared to be brief on TV.
But on site, buyers, journalists and producers waited patiently for about half an hour after the bidding reached a standstill at a price significantly lower than what the next-door apartment sold for just hours earlier.
It prompted some people to question the legality of such a long break; particularly given the property was technically on the market, and buyers’ advocate Nicole Jacobs found a new buyer for the apartment during the break.
That buyer eventually paid a price much closer what Julia and Sasha’s apartment achieved next door.
It turns out an auctioneer may withdraw the property from sale at any time.
In the real world, properties rarely get withdrawn after the price exceeds reserve.
But in the case of The Block, Mr Cooley wanted to do right by the vendor because the next door property – a comparable sale – sold after the reserve was set.
Sydney-based auctioneer Will Hampson, of My Auctioneer, says there is no time limit on negotiating with the vendor, or waiting for a prospective buyer to increase their bid. But the etiquette is to move the auction along swiftly and sell it to the highest bidder once the price is past reserve.
2. On the market
Photo: Dan Soderstorm
When an auctioneer announces a property is on the market, that price is not necessarily the reserve.
An auctioneer is not obliged to announce a property is “on the market” or “selling” if the bidding is flowing freely, Mr Hampson says, nor do they need to call it three times before selling the property.
“Most good auctioneers will always call it three times to give all buyers equal opportunity,” he says.
When the bidding comes thick and fast, auctioneers may tell buyers they are “playing for keeps” tens of thousand of dollars past the reserve price.
On the other side of the coin, even if the bid exceeds reserve, an auctioneer may still go inside to confirm with the vendor to ensure they are definitely happy to sell.
3. 10 per cent deposit
Photo: Sarah Keayes
No one knows for sure if they will buy on the day – or how much they will pay – so it can be difficult to pay a full 10 per cent deposit on the day.
Deposit arrangements can be negotiated before the auction, but they have to be approved by a vendor and their solicitor.
Melbourne-based Nelson Alexander sales director Arch Staver says if an altered settlement has been offered to one person, it must legally be offered to all participants.
If an auctioneer says the settlement is 60 days unless prior arrangements have been made, someone can legally ask: “What are those arrangements?”
4. Vendor bids
Photo: James Brickwood
Different states have varying rules about vendor bids; in Victoria auctioneers can make multiple vendor bids, while in NSW only one vendor bid can be made.
Vendor bids are generally used to move the auction along by lifting the price closer to the vendor’s expectations. Bidding higher than the vendor bid does not guarantee to buy the property, but it secures the first opportunity to negotiate exclusively with the vendor.
5. Cooling-off period
Photo: Glenn Hunt
In Victoria, there is no cooling-off period within three business days of an auction.
Gary Peer, of Gary Peer and Associates, says if a property passes in at auction on a Saturday and sells on the following Tuesday, or if a purchaser buys two days before and they think they can cool off – they can’t.