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During a sale by auction, the amount the seller wants for the property is generally not revealed to potential buyers who are encouraged to attend the auction and to bid for the property against other potential buyers.

Auctions have become increasingly popular way to sell or buy residential property, but before you decide to go down that path, do your homework and familiarise yourself with the process and what it involves.

Who can conduct an auction?

Property and businesses can only be auctioned for a fee by:

  • An estate agent
  • An agent’s representative
  • An accredited auctioneer

Please note that an owner or part-owner can also auction their own property

Auctioneer’s responsibilities

Au auctioneer must:

  • Display information and make announcements before an auction starts
  • Make announcements and control the bidding during an auction

An auctioneer may:

  • Make bids on behalf of a seller to advance the bidding
  • Accept bids from co-owners or their representatives who are genuinely bidding.

It is an offence to:

  • Knowingly accept a bid by or for a seller, other than a co-owner
  • Make or accept fictitious (dummy) bids
  • Accept late bids after a property has been knocked down to the successful bidder

Auctioning process – step by step

Setting a reserve price

The reserve price is the lowest amount the seller is willing to accept for his/her property. Before bidding begins, the seller should advise the agent what they nominate as the reserve price. This is usually not told to prospective buyers.

Display of information

At least 30 minutes before the auction starts, at the auction site the auctioneer must display:

  • The rules that apply to the auction
  • The prescribed information statement
  • Any other conditions, such as those that may be in the Contract of Sale

Mandatory announcements

Before the bidding starts, an auctioneer must make certain announcements. Some are general and apply to all public auctions, others are specific to particular auctions.

General announcements include that:

  • The auction will be conducted according to the rules and any additional conditions displayed before the auction starts
  • Auction rules prohibit late bids
  • Bidders will be identified on request
  • Law prohibit and imposes fine for:
    • False bids
    • Major disruption by bidders
    • Bidders attempting to prevent others from bidding

Controlling the auction

At any time during the auction, an auctioneer can:

  • Set the amount for bidding
  • Refuse a bid
  • Refer a bid to the seller
  • Withdraw the property from sale
  • Re-submit the property for sale at the last undisputed bid or start the bidding again.

Bidding process

If the highest bid is below the reserve price, the property will be ‘passed in’. The seller will then either try and negotiate a price with interested bidders or put the property back on the market.

If the bidding continues beyond the reserve price, the property is sold at the fall of the auctioneer’s hammer.

Late bids

Au auctioneer must not accept a late bid, i.e. those made after a property has been knocked down to the successful bidder).

An estate agent or agent’s representative who hears a late bid must not refer the bid to the auctioneer, seller or anyone else.

If a contract is not entered into after an auction and the seller wishes to offer the property for private sale, late bids can be referred to the seller. An agent must pass on all offers, unless instructed not to do so by the seller.

If a property is passed in at auction below the reserve price, the auctioneer can decide whether to accept any late bids, subject to first negotiating with the highest bidder.

Successful bids

The successful bidder must sign the sale contract and pay the seller a deposit on the sport (usually 10%). There is no cooling-off period for anyone who buys a property at auction.

If the property is passed in at auction but contracts are exchanged on that same day, the cooling-off period still does not apply.

Call the experienced team at GMH Legal to assist you in your matter. A free consultation with GMH Legal is an opportunity to gain deep insights into your legal situation and all of your options.

Why Choose GMH Legal?

  • Over 60 years of combined legal experience
  • Outstanding track record with a winning approach
  • First appointment is always free
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