Thanks to television shows including Channel 9’s The Block and Channel 7’s Under the Hammer, property auctions have become increasingly popular in Australia.
It seems everyone loves an auction, and why not? Auctions have everything – drama, intrigue and excitement.
But while auctions are very exciting (especially if you are a potential buyer), it is important to know that there are some rules of the event everyone must understand and adhere 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 conditions 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:
1. Reserve Price
Reserve prices on the property will dictate the minimum amount that must be bid in order for the property to be on the market and thus the potential to transfer ownership.
2. Starting Price
The auctioneer will often start the bidding process by calling out a price. He will normally not accept a 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.
4. Highest Bid
The person who holds the highest bid is determined to be the winning buyer once the bidding has closed. If the property is not sold at auction the highest bidder is given the first right to negotiate with the vendor.
Contracts must be signed shortly after the close of the auction. The highest bidder is typically required to sign this contract within 10 minutes.
Don’t be put off
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.
Any changes to the contract for the property (including but not limited to the settlement period and the deposit accepted) must be negotiated and accepted by the vendor prior to the auction starting. Typically this is done via the Vendor’s solicitor and/or through the Vendor’s agent.
Attend a few auctions as a spectator so you will feel comfortable when it’s your turn to become a bidder. Auctions can be a great way to buy your property as the ‘market place’ determines the price.
Alternatively, speak to us at Mortgage Choice at Newtown. We can help you navigate every step of the home buying journey, from organising finance to bidding at auction and beyond.
Contact either Owun, Suzanne or Costa on 02 9517 1818 or firstname.lastname@example.org to discuss your options. Or, if you feel like dropping in at our office, we are located at Suite 106, Flourmill Studios, 3 Gladstone Street, Newtown 2042. Be sure to share our blog on Facebook and Twitter and let others join the conversation!