How Auctions Work in Australia
Everything you need to know about buying at auction, including registration, bidding strategies, and what happens on the day.
What is a Property Auction?
A property auction is a public sale where potential buyers bid against each other to purchase a property. The highest bidder at or above the reserve price wins the property and is legally bound to complete the purchase. Auctions are popular in Australia, particularly in Sydney and Melbourne, accounting for a significant portion of property sales.
Before Auction Day
Preparation is crucial for auction success. Here's what you need to do:
- Get pre-approved for finance - this is essential as auction purchases are unconditional
- Research the property thoroughly - check comparable sales and the price guide
- Organise building and pest inspections before the auction
- Review the contract of sale with your solicitor or conveyancer
- Set your maximum bid and stick to it - emotional bidding can be costly
- Register to bid - you'll need ID and may need to pay a deposit or show proof of funds
Understanding Reserve Prices
The reserve price is the minimum amount the seller will accept. If bidding doesn't reach the reserve, the property is "passed in" and the highest bidder usually gets first right to negotiate with the vendor. The reserve is confidential and only disclosed if it's met or exceeded during the auction.
On Auction Day
Here's what to expect when the auction begins:
- Arrive early to register and receive your bidding number
- The auctioneer will read out the conditions of sale and any amendments
- Bidding typically starts with an opening bid from the crowd or a vendor bid
- Bids can be made in any increment, though auctioneers prefer round numbers
- The auctioneer may pause bidding to consult with the vendor about the reserve
- Once the reserve is met, the property is "on the market" and will be sold to the highest bidder
- The hammer falls to signal the sale - this is legally binding
Important: No Cooling-Off Period
When you buy at auction, there is NO cooling-off period. The fall of the hammer creates an immediate, legally binding contract. This is why it's critical to complete all due diligence before the auction. You'll typically need to pay a 10% deposit immediately and sign the contract on the day.
Bidding Strategies
Consider these proven auction strategies:
- Start strong with a confident opening bid to discourage competition
- Bid quickly to show you're serious and put pressure on other bidders
- Use odd numbers (e.g., $1,052,000) to throw off competitors
- Stay calm and don't show emotional attachment to the property
- Know when to stop - never exceed your pre-set maximum
- If passed in, negotiate immediately while you have leverage
After the Auction
If you're the successful bidder, you'll need to sign the contract and pay the deposit (usually 10%) immediately. Settlement typically occurs 30-90 days later as specified in the contract. If the property passes in and you're the highest bidder, you have the first opportunity to negotiate with the vendor.
Pro Tips
Attend several auctions as an observer before bidding on your target property. This helps you understand the process, the pace, and common tactics used by experienced bidders and auctioneers.
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