Participating in a real estate auction as a buyer is an exciting experience. But, before you show up and start bidding, there are some rules of the event you need to understand and stick to.
The bidding conditions
These rules, otherwise known as the bidding conditions, are displayed at auction. You will be given the opportunity to review these contracts before you bid on a property, and it is important for you to take the time to become familiar with the general terms of the sale before bidding.
Bidding conditions are drawn up by an estate agent. While these conditions vary slightly for each property, there are some standard bidding conditions attached to nearly every property at auction, including:
- Reserve prices on the property will dictate the minimum amount that must be bid in order for the property to transfer ownership. If you do not meet this reserve price during the bidding process, you will not own the property.
- The auctioneer starts the bidding process by calling out a price. You are not allowed to bid lower than this starting price.
- While you may not be bound to a final sale if the bidding does not meet the reserve price during an auction, it's important to understand that one of the conditions of an auction is that bids cannot be retracted.
- The person who holds the highest bid is determined to be the winning buyer once the bidding has closed.
- Contracts must be signed shortly after the close of the auction. The highest bidder is typically required to sign this contract within 10 minutes.
Avoiding dummy bidding
Bidding conditions are often closely related to auction laws. However, there are times when these conditions and the legal regulations related to auctions vary.
One such variance permits the seller to make dummy bids. Dummy bids are simply bids on the property that the seller makes. Anyone who bids on the property on behalf of the seller in an attempt to drive up the selling price is also making a dummy bid.
Sellers are allowed to make one bid on their property. Any additional dummy bids are considered to be illegal in some states, so it's important for sellers to research the applicable laws to avoid participating in illegal auction practices. It is also a requirement for all bids from the seller to be announced as vendor bids.
Bidding conditions can make property auctions tricky business for newcomers, but you shouldn't let these conditions repel you from an auction. Be sure to review the conditions of a contract before making a bid in order to avoid running into problems once the auction is over. You can protect yourself by getting to know more about property auction laws in your state.