An auction is the method of selling a property through the process of public negotiation. Purchasing property through an auction allows you to publicly negotiate the price, which helps ensure you are paying the true market value for the property at that time. You will need to register to take part in the auction. Auctions are fast-moving events. Ask the agent marketing the property to explain the auction process to you.
You will need to do all your research on the property before the auction. You should get a building inspection, title search and a LIM report. You will need to arrange any mortgage and finance and also consult your lawyer in advance. The reason for these is that a buyer cannot attach conditions to an auction purchase. Once the bid is accepted and the auctioneer’s hammer has fallen the sale will be unconditional and must go ahead. This is something that makes auctions less than ideal for first home buyers, as getting an offer unconditional can cost a lot, especially if banks require things like market valuations.
The auctioneer will start by asking for an opening bid and will then nominate the increments by which the bidding can be raised. For example, an opening bid is placed of $300,000. The auctioneer then nominates for the bid to be raised in increments of $10,000. The next person bidding will offer $310,000, and so on.
To place a bid, you simply attract the attention of the auctioneer by raising your hand, calling out your bid or nodding your head when you catch the auctioneer's eye. Once bidding reaches the reserve price (which is set prior to the auction by the sellers), the property is "on the market" and will sell to the highest bidder.
Auctions are one of the most transparent methods of buying a home. There are no hidden surprises, you know the terms and the settlement date in advance, you know that you’re bidding unconditionally, you know who your competition is and you know exactly what other buyers are willing to offer. Unlike other methods of buying a home, auctions give you the assurance that you've paid the right price. The other bonus is that all offers are on an even playing field with everyone bidding unconditionally. And, when the house meets the reserve, you also know the price that the owners are willing to sell at.
It is becoming common for a pre-auction offer to become the starting price for an auction and for the auction to be brought forward when a pre-auction offer is received. If the seller accepts a pre-auction offer it does not necessarily mean the auction will be cancelled. Often, when the seller accepts a pre-auction offer, the auction will be held sooner than the advertised date and the pre-auction offer becomes the first bid at the auction. It’s important to check the auction terms and conditions and read any pre-auction offer documentation you are given. Potential buyers can register their interest with the agent and ask to be informed if an offer is made.
Vendor bids are a wierd mechanism where the owner or someone working on behalf of the seller, may make a bid on behalf of the seller.
Sometimes during an auction, the auctioneer or some other person working on behalf of the seller (such as the real estate agent), may make a bid on behalf of the seller. This can be used by the auctioneer as a way of starting off the bidding or trying to move bidding towards the reserve price.
So at least this means that vendor bids must be clearly identified by the auctioneer.
More information on Auctions can be found at: