A property auction is a fast-paced public sale. The property is sold to the buyer with the highest bid after the seller’s reserve price is reached.
If you are selling a property by auction, it's best to have a sole agency agreement with an agent. You will need to set a reserve price before the auction — this is the lowest price you are willing to accept for the property and is confidential to you, your agent and the auctioneer.
Buyers will receive an auction pack if they register their interest with your agent, and this will include the terms and conditions of the auction, a copy of the sale and purchase agreement and information about the property.
Understanding the pre-auction offer process
A pre-auction offer is an offer that is made for the property before the day of the auction. The offer will be written on the auction sale and purchase agreement and will usually be unconditional, unless otherwise agreed by the seller. If you are willing to accept the offer, the auction may be brought forward from the advertised date, or it may be cancelled if a sale and purchase agreement is signed.
If you're interested in considering pre-auction offers, speak to your agent. They will likely include the wording 'unless sold prior' in the advertising for your property. This indicates to buyers that the property may be sold before the auction date. Interested buyers may still ask about making a pre-auction offer if the advertising does not state 'unless sold prior', and the agent should speak to you about whether you wish to consider the offer or wait until the auction.
If the auction is held earlier than advertised, the pre-auction offer becomes the first bid at auction although the bidder is allowed to withdraw this offer once the auction begins. The property can sell any time after that first bid.
Auction sales and purchases are unconditional
A buyer cannot attach conditions to an auction purchase, but they can approach you to vary the terms of the auction or change the settlement date. Once the bid is accepted and the auctioneer’s hammer has fallen, the sale will be unconditional and you as the buyer will be obliged to complete the transaction. If either party can't complete the sale, this becomes a legal matter and both parties should seek legal advice.
Auctioneers sometimes use vendor bidding to start the auction or to move bidding towards the reserve price. A vendor bid can be made by the auctioneer or a person working on behalf of the seller, such as the real estate agent.
Vendor bids are only allowed when:
- the property has a reserve price
- the reserve price hasn’t been reached
- the bid is clearly identified by the auctioneer as a vendor bid.
Vendor bids are not allowed when:
- bids are made by people who appear to be genuine bidders but are in fact bidding on behalf of the seller to persuade genuine bidders to raise their bid — these are called dummy or shill bids and are illegal
- sellers bid over their reserve price
- the seller, their agent or anyone else who is making a vendor bid doesn't identify themselves — they should state clearly "This is a vendor bid".