Auctions unearth a range of emotions – anxiety, excitement, joy if you’re the successful bidder, or disappointment if you’re among those missing out. Understanding the auction process and the lingo that is used can help to keep your emotions in check on the day. How does an auction work?
There are rules about how an auction must be run; but within those rules, auctioneers have different ways of conducting auctions. The auctioneers aim to encourage as many bidders as possible to compete, to achieve the highest possible price for the vendor. The auctioneer can set the amount by which bids increase, called rises or bidding advances. You don’t have to bid at the amount stated by the auctioneer but if you bid less, they can choose to accept or reject your offer.
Tips to make a winning bid
The auctioneer may halt proceedings if the bidding dries up and say they are ‘going inside’ or ‘seeking advice or instructions’ from the seller. They use this time to discuss the progress of the bidding with the seller.
What is a vendor bid? During the auction, the auctioneer may place a vendor bid. A vendor bid must be declared by the auctioneer. It gives an indication that the vendor is not satisfied with the price reached at that point of the auction. If the bidding has reached or is close to the reserve price – the figure at which the vendor has previously agreed they will sell – the auctioneer will confirm with the seller that they will sell at the highest bid. If they agree, the auctioneer will say the property is on the market. Bidding will continue and the property will be sold to the highest bidder.
Don’t pass out if it passes in. The auctioneer will seek bids until they meet the seller’s reserve. If they don’t, the property is likely to be passed in. The highest bidder then gets first right to negotiate with the seller in an effort to achieve a sale. There are important differences between buying a house at auction and by private sale.
If you buy at auction, you don’t get a cooling-off period if you change your mind – and you can’t make the contract subject to any conditions. This means that if you are planning to have a building or pest inspection – which we recommend you do – this needs to happen before the auction.
If you buy a property by private sale you are able to make the contract subject to conditions. In a private sale, a cooling-off period of three business days applies from the date you sign the contract, unless this is within three days before or after a public auction.