A real estate auction is a public sale of property conducted by a licensed auctioneer (real estate agent).

Ask any questions about the property before the auction commences. For example if a timber pest or building inspection has been done on the property.

During an auction, buyers bid against each other. The property is sold to the highest bidder if the bid exceeds the minimum sale price or ‘reserve price’. If the reserve price is not met, the property is ‘passed in’ and does not sell.

Before the auction

• Research: Investigate the property and its market value. Attend open houses and review property details.
• Finance: Ensure you have pre-approved financing. Auction purchases cannot be conditional on financing approval.
• Find a settlement agent: If you make the successful bid, you will need to immediately nominate someone to handle the settlement. Arrange this before the auction day. For more information, see Choosing a settlement agent.
• Legal advice: Review the contract of sale and any relevant documents with a solicitor or settlement agent
• Reserve price: is the minimum the seller will accept. It is not disclosed to bidders.

During the auction 

1. Opening announcement: The auctioneer will describe the property. They will also highlight any important details such as restrictions on the title and deposit required.
2. Bidding: The auctioneer will call for an opening bid. Bids will increase progressively.
3. Reaching the reserve price: the auctioneer will announce when the bids reach the reserve price and confirm the property will sell.
4. Final bid: The highest bidder wins. They must immediately sign the contract of sale. The auctioneer signs the contract on behalf of the seller.

After the auction

• Deposit: At the close of the auction, a deposit is required, about 10% of the purchase price.
• Settlement: The remaining balance is due at settlement, usually 30 days after the auction. The settlement date is included in the conditions of sale. It is added to the sales contract and must be initialled by buyer and seller (or acting agent).

When a property is passed in 

If the property is passed in because it failed to reach the reserve price, the auctioneer or agent can negotiate privately with bidders.

The auction sales contract

The Auction Particulars and Conditions of Sale of Freehold Property form shows:

• details of the auction date
• certificate of title
• location of the property
• chattels
• any encumbrances or restrictions on the land
• zoning and use
• any tenancy agreements
• arrangements for payment
• if the seller is going to make vendor bids and how many.

This form is read out by the auctioneer before commencing the auction. You may ask for a copy from the auctioneer before the auction.

If the property sells at the auction, this form becomes the sales contract. Generally, the Joint Form of General Conditions for the Sale of Land is also attached and forms part of the contract.

Read the forms carefully before the auction. Once signed, the sales contract is legally binding. Seek legal advice before attending the auction if you:

• want to make changes to the conditions of sale or
• need help understanding the contracts.

Advice for buyers 

In an auction, you cannot make your offer subject to any conditions and pre-finance approval.

Buyers must have prepared:

• pre-approved finance. Do not bid over your finance limit.
• the deposit amount
• a settlement agent or lawyer for settlement
• a good understanding about the property
  • how much is it worth
  • any future developments
  • any restrictions on the property
  • any strata rules and ongoing costs

Vendor (seller) bidding

The seller or their agent can make bids up to the reserve price. The intended number of bids must be shown in the conditions of sale. They are usually declared at the start of the auction by the auctioneer.

Advice for sellers 

Auction may be the best way to get the highest price for your property when the property:

• is in a sought-after suburb
• is of a unique character
• requires exposure to find potential buyers.

Auctions can cost more than selling by private treaty, the include the price of:

• holding an auction
• advertising and promotion costs
• coordination of the auction
• auctioneer’s fees
• hiring chairs and a marquee if needed.

There is no guarantee the property will sell at an auction.

Choosing an agent

Follow these tips to pick an agent to auction your home:

• Check your agent is a licensed auctioneer.
• Compare fees and services of several agents.
• Ask about possible marketing plans for your property and sample advertisements;
• Ask for details of other auctions that the agent has organised;
• Ask about the auctioneer’s skills and experience;
• Attend an auction the agent is conducting
• Speak to people who have used an auctioneer for recommendations

Agent contracts 

Licensed agents must have written details about the services they will provide and their fees and charges. This legally binding contract is known as an Authority to Auction.

It allows the agent/auctioneer to sign the sales contract on your behalf, provided the highest bid is equal to or above the reserve price.

You can make changes to the Authority to Auction. Both you and your agent will need to agree to these changes by signing and dating them.

Make sure you get independent legal advice if you are unsure of anything before agreeing to changes or signing the contract.