A property auction is a public sale:
- usually conducted by an agent acting as an auctioneer, and governed by strict rules
- advertised for a specific place, time and date. Prospective buyers bid and the property is offered to the highest bidder.
There is an advertising campaign with open house inspections for several weeks leading up to the auction date.
On the day of the auction the property may be open for inspection, for at least half an hour before the bidding starts.
Buyers can make an offer through an agent before an auction if you agree to consider pre-auction offers. This will usually be in the form of a signed contract and the process of negotiation is the same as buying property by private sale.
If the offer is accepted less than three clear business days before the auction date, the buyer does not get a cooling-off period.
There are strict rules about how an auctioneer runs an auction, and how people attending one must behave. Substantial penalties may apply to anyone who breaks these rules.
The auction rules and an information sheet that explains auction laws in Victoria must be displayed for at least 30 minutes before the auction starts. The rules and information sheet are set out in the Schedules to the Sale of Land Regulations 2005, which also set out the announcements an auctioneer must make.
Before bidding starts, the auctioneer must tell bidders:
- the auction will be conducted according to the auction rules
- the rules prohibit bids being accepted after the fall of the hammer
- bidders will be identified on request
- it is against the law to make a false bid, hinder another bidder, or in any way intentionally disrupt an auction
- substantial penalties apply to anyone who engages in illegal auction conduct
- whether or not there will be vendor or co-owner bids
- any additional conditions that apply to the auction.
During the auction, anyone can ask the auctioneer a reasonable number of questions about the property, the contract, or the auction.
The auctioneer may:
- refuse a bid at any time during the auction, including when the auction hammer is falling
- if there is a dispute over a bid, resume the auction at the last undisputed bid or start the bidding again
- refer a bid to you at any time before the conclusion of the auction
- withdraw the property from sale at any time.
Vendor and co-owner bids
Bids by co-owners or on behalf of the seller (vendor bids) are allowed at auctions in certain circumstances.
The auctioneer can bid on your behalf if you are not satisfied with the amount of the last bid. This type of bid:
- can only be made by the auctioneer
- must be announced by the auctioneer when the bid is made.
When a property is jointly owned, one or more of the owners who genuinely wants to buy the property may bid from the crowd.
Co-owners may bid themselves or through a representative in the crowd, but not through the auctioneer.
The arrangements for vendor and co-owner bids must be:
- set out in the rules displayed before the auction starts
- announced by the auctioneer at the start of the auction.
It is illegal for you to bid from the crowd, or to ask another person to bid on your behalf, to increase the price for your property.
A dummy bid is either:
- a false bid made up by the auctioneer
- a bid accepted by the auctioneer from a non-genuine bidder from the crowd.
Dummy bids are illegal.
Auction language: ‘On the market’ and ‘passed in’
On the market
The auctioneer may halt proceedings and say they are ‘going inside’ or ‘seeking advice or instructions’. The auctioneer will speak to you privately about the progress of the bidding.
If the bidding is close to or has reached your reserve price (the lowest price at which you will sell), the auctioneer will ask if you will sell at the last bid or any higher bid that is made.
Should you agree, the auctioneer will tell the crowd that the property is ‘on the market’. This means the property will be offered for sale to the highest bidder.
If bidding has not met your reserve, the auctioneer will seek more bids. If bids still do not meet the reserve, the property may be ‘passed in’ or ‘withdrawn from auction’.
If bids do not meet your reserve or other price at which you are willing to sell, the property will be ‘passed in’.
The highest bidder then has first right to negotiate with you.
When is the property sold?
There is no legally binding contract until you and the successful bidder at auction have signed the contract of sale.
Signing the contract of sale
Immediately after the auction, the successful bidder is invited to sign the contract to formalise their offer. You can accept the offer by also signing the contract. You and the buyer will each receive a copy of the signed contract.
As this is an auction, the buyer must pay a deposit upon signing the contract and cannot make the contract subject to conditions.
Some buyers may not have a full deposit on the day of the auction. You may agree to change the contract to allow for a part deposit, with the remaining amount due on a specified date
The buyer has no cooling-off period for a property purchased at auction.
The sale is finalised at settlement when:
- all checks have been made, such as the condition of the property and measurements of the land
- the title and transfer documents have been exchanged
- the balance of the purchase price has been paid.