At an auction, everyone interested in the property bids against each other until only one bidder is left. If you buy at auction it’s unconditional (legally binding), so you need to arrange your finance and do all the legal and other checks beforehand.
How does the auction work?
- the auctioneer runs the auction and tells you what amounts they will accept. They’ll try to start high but towards the end they may accept bids of $1,000, or even $500 or less
- the seller usually sets a reserve price and tells the auctioneer what it is. If the final bid is over the reserve price, the home is sold and the buyer pays a deposit, usually 10%, to the auctioneer. Settlement (the day you get ownership) is usually set for 20 days later, but can often be negotiated
- if the reserve isn’t reached, the home is ‘passed in’, meaning it didn’t sell at auction. Often it sells by negotiation straight after the auction. If you're the highest bidder you have the first chance to negotiate and can add conditions to the contract at this stage if you need to.
Before you buy at auction
- go and watch a couple of auctions to get a feel for how they work
- register your interest with the agent
- get a copy of the auction contract
- do your due diligence with your lawyer (property titles), the council (LIM) and get other reports done (valuation, building inspection etc)
- arrange your finance with your lender and have your money ready to pay a deposit
- A conditional approval* is important here as it means you've been approved as a borrower providing nothing changes for you, and the home you choose meets the loan provider's lending conditions.
- decide on your top price
- the seller may consider offers before the auction. If an offer's deemed to be potentially acceptable by the seller, the real estate agent may contact all potential buyers who have registered their interest and invite them to also put forward their offers for consideration. Or the auction date may be brought forward, with the initial offer becoming the opening bid.
Presented to you by Westpac
*Conditional approval by Westpac requires a credit check and confirmation of the details provided in your application. Other conditions may also apply depending on the nature of your application.