Buying a property at auction
Are you planning to buy your first home at auction? The auction process can be both exciting and overwhelming, especially for first-time buyers. This guide takes you through every step, from preparing for the auction to what happens after, so you can approach the process confidently and increase your chances of success in this competitive market. At Buyvest, we’re here to help you navigate every part of the auction journey to make informed decisions and achieve your homeownership goals.
Understanding property auctions
Before diving into strategies, it’s important to understand how property auctions work and how they differ from other methods of buying property.
What is a property auction?
A property auction is a public event where potential buyers compete by placing bids against each other. Here’s what you need to know about auctions:
Definition: Auctions are competitive bidding events where properties are sold to the highest bidder.
Transparency: All bids are made publicly, giving everyone a clear view of competing offers.
Timeframe: Auctions typically last between 15 and 30 minutes on a set date.
Finality: When the auctioneer's hammer falls, the highest bid wins, and the buyer is legally committed to the purchase.
No cooling-off period: Auctions do not offer a cooling-off period or conditional terms.
Immediate commitment: The winning bidder must pay a deposit and sign a contract immediately after the auction.
Reserve price: This is the minimum amount the seller will accept, but it’s often kept confidential until the auction.
This fast-paced, transparent process requires quick decision-making and certainty, making it different from traditional purchasing methods. At Buyvest, we offer expert advice to help you prepare and feel confident in this high-pressure environment.
Auctions vs private treaty
It’s crucial to understand how property auctions compare to private treaty sales, as it will help you decide which approach best suits your needs.
Time pressure: Auctions require quick decisions, while private treaty sales allow more time for consideration.
Price knowledge: Auctions typically have a price guide range; private treaty usually has a set asking price.
Negotiation: Auctions involve public bidding, whereas private treaty allows for private negotiation.
Offers: Auctions only accept unconditional bids, while private treaty sales can include conditional offers.
Deposit requirements: At auction, you need to pay a 10% deposit immediately; private treaty often allows for staged payments.
Cooling-off rights: Auctions do not provide a cooling-off period, whereas private treaty sales offer statutory cooling-off rights.
Settlement terms: Both auction and private treaty settlements generally last 42 days, but private treaty gives you more flexibility.
For first home buyers, the auction process presents different opportunities and challenges compared to the more straightforward private treaty method. Buyvest is here to guide you through the best approach based on your goals and financial situation.
The pros and cons of buying at auction
Buying a property at auction has several advantages, but it also comes with some risks. Here’s what to consider:
Advantages:
Transparency: You can see all the bids in real-time, which provides clarity on the competition.
Quick outcome: Auctions offer a fast resolution, often resulting in a sale on the day.
Motivated sellers: Sellers at auction are often committed to selling, which can work in your favour.
Fair opportunity: All buyers have an equal chance, as bids are made openly.
No gazumping: Once the hammer falls, the sale is secure, preventing other buyers from making offers after the auction.
Potential bargains: There’s a chance to purchase below market value if there’s limited competition.
Disadvantages:
Pressure: The competitive atmosphere can lead to impulsive, emotional decisions.
Unconditional sale: You can’t back out once you’ve bid, and no cooling-off period is available.
Upfront costs: You may spend money on property inspections and legal reviews with no guarantee of success.
Limited negotiation: Terms are set in stone before the auction, so there’s little room for negotiation.
Immediate deposit: You’ll need immediate access to the deposit, often 10% of the purchase price.
Competitive bidding: Prices can rise above the expected market value in a heated auction environment.
Reserve price uncertainty: The reserve price is often kept secret until the auction, so you may not know the minimum amount the seller will accept.
For first home buyers, it’s important to weigh the pros and cons carefully to see if the auction process aligns with your goals and comfort level. If you're feeling unsure about navigating this process, Buyvest can assist with pre-auction guidance, helping you make confident, well-informed decisions.
Pre-auction preparation
Success at auction doesn’t happen by chance, it’s all about preparation. The more thoroughly you prepare before auction day, the more confident and in control you'll feel when it’s time to bid. Buyvest is here to guide you through the process and ensure you’re fully ready for the auction experience.
Financial readiness
Being financially prepared for auction day goes far beyond simply securing pre-approval. It’s about ensuring all aspects of your finances are in order:
Unconditional approval: Make sure you have formal loan approval, not just pre-approval.
Valuation considerations: Arrange a bank valuation before auction day to understand the property’s worth.
Deposit accessibility: Ensure you have the 10% deposit available and ready to transfer immediately after winning.
Payment method: Be prepared with either a bank check or electronic transfer option to facilitate quick payment.
Budget ceiling: Set your absolute maximum bid, allowing some buffer for competition.
Bidding strategy: Plan your bidding increments in advance to stay within your budget.
Settlement capability: Confirm you can meet the settlement requirements within the specified timeframe.
Additional costs: Budget for stamp duty, legal fees, and other potential moving costs.
At Buyvest, we help you navigate these critical steps by providing financial guidance and expert advice, ensuring that all your financial aspects are auction-ready.
Legal due diligence
Before bidding at auction, a professional legal review is essential. Here’s what needs to be done:
Contract examination: A solicitor or conveyancer should thoroughly review the contract of sale for potential issues.
Special conditions: Be on the lookout for any unusual or concerning terms in the contract.
Title searches: Ensure the property’s title is clear and verify ownership and any encumbrances.
Strata reports: For apartments or townhouses, examine strata records for financial and maintenance concerns.
Zoning verification: Confirm the property’s zoning and check for any development restrictions.
Easements and covenants: Understand any limitations on how you can use the property.
Tenancy agreements: If the property is occupied, ensure you fully understand existing tenant arrangements.
Settlement period: Confirm that the required settlement period works for your circumstances.
By working with a trusted legal professional and following these steps, you’ll enter the auction process with confidence. At Buyvest, we connect you with trusted partners to ensure the contract is rock solid before you make any bids.
Property inspections
With auctions being unconditional, it’s vital to inspect the property thoroughly before bidding:
Multiple viewings: Attend open homes at different times to get a feel for the property.
Building inspection: Hire a qualified inspector to assess the structural integrity of the property.
Pest inspection: Make sure to arrange a pest inspection, especially for termites.
Electrical and plumbing checks: Have the essential systems inspected to avoid unexpected repair costs.
Renovation potential: Assess the potential for future improvements or renovations if you’re considering them.
Council approvals: Verify that any previous renovations are properly approved by the council.
Neighborhood research: Research the local area, amenities, and any future developments that could impact your investment.
Comparable sales: Look into the recent sales of similar properties to understand fair value.
These inspections help you avoid costly surprises after the purchase. At Buyvest, we can recommend trusted inspectors and guide you through the process to ensure you know exactly what you're bidding on.
Market research
To avoid overbidding at auction, it’s crucial to establish a fair value for the property. Here’s how to approach your market research:
Comparable sales: Research sales of similar properties in the area to gauge fair market value.
Market trends: Understand whether the local property market is rising, stable, or declining.
Days on market: Check how quickly similar properties are selling in the area.
Price guide accuracy: Auction price guides are often conservative, so keep that in mind when setting your budget.
Clearance rates: Review the local auction clearance rates to gauge how competitive the environment might be.
Agent feedback: Speak to agents about the level of interest in the property and what kind of bidding to expect.
Multiple opinions: Consider getting valuation estimates from several real estate agents for a broader perspective.
Future potential: Assess the potential for growth based on the property’s location and features.
By thoroughly researching the market, you can confidently set a realistic budget and avoid being swept up in the excitement of the auction. Buyvest is here to help you gather this vital information and ensure you make informed, strategic decisions.
Auction strategy development
A well-thought-out strategy is the key to maintaining control during the fast-paced auction environment. Developing a clear plan ahead of time will help you stay focused and avoid impulsive decisions when the heat is on. Buyvest is here to guide you every step of the way, ensuring your strategy is aligned with your goals.
Key Elements of an Effective Auction Strategy
When preparing for auction day, consider the following elements to craft a solid strategy:
Starting position: Decide whether you’ll initiate the bidding or wait for others to make the first move.
Bidding increments: Plan your bidding increments for various stages of the auction to avoid emotional overspending.
Maximum limit: Set an absolute ceiling for your bids - this is your non-negotiable maximum amount, no matter how intense the bidding becomes.
Psychological tactics: Develop methods to project confidence and deter competitors by appearing calm and in control.
Proxy consideration: Decide whether to bid on your own or enlist the help of a buyer’s agent or a trusted friend.
Communication system: If bidding with a partner, establish clear signals or codes to communicate effectively without confusion.
Plan B: Prepare for the possibility of being outbid or if the property passes in, and decide your next steps.
Post-auction negotiation: Understand how to approach negotiations if the property doesn’t sell on the day, as you may still have a chance to secure it afterward.
By preparing these elements in advance, you can enter the auction with confidence and clarity. With Buyvest’s expert advice and experience, you can develop a strategy that ensures you're always in control, no matter what happens at the auction.
Auction day
When the big day arrives, you’ll need more than just a strategy - you’ll need knowledge of the auction process to make sure you’re ready for anything. Here's how to navigate the auction process smoothly and increase your chances of success.
Registration Process
Before you can place a bid, you'll need to complete the registration process. Here’s what to expect:
Identification requirements: Make sure to bring a photo ID (e.g., driver’s license or passport).
Registration timing: Arrive early to fill out all necessary paperwork before the auction begins.
Bidder number: Upon registration, you’ll be given a bidder number or paddle.
Verification process: The auctioneer will verify all registered bidders before the auction starts.
Multiple bidders: If bidding as a couple or group, discuss how you’ll manage the process together.
Authority requirements: If bidding on behalf of someone else, ensure you have the required documents.
Privacy considerations: Understand how your registration details will be used and stored.
Deregistration process: If you decide not to bid, you can deregister before the auction begins.
Registration is mandatory in all Australian states and territories, though specific requirements may vary by location. At Buyvest, we can help guide you through the registration process to make sure everything is sorted before the auction begins.
Reading the auction environment
Assessing the auction environment can provide valuable insights into your competition:
Crowd size: Gauge the level of competition by observing the number of attendees.
Serious bidders: Identify who is serious about bidding and who may just be watching.
Agent activity: Pay attention to how real estate agents interact with attendees, they may provide clues about the bidding competition.
Bidder behavior: Take note of who looks prepared and confident, as these are the bidders likely to drive the price up.
Vendor presence: Observe whether the seller is present and gauge their motivation to sell.
Auctioneer style: The auctioneer’s approach can influence the pace of bidding, understanding their style can help you anticipate moves.
Market sentiment: Gauge the mood of the crowd, this can give you insights into the auction’s potential pace.
Last-minute inspections: Watch for any last-minute inspections, as this may indicate competition is still evaluating the property.
These observations help refine your strategy and adapt to the competition. At Buyvest, we can assist you in reading the auction environment and adjusting your approach accordingly to ensure you're ready for any surprises.
Effective bidding techniques
Bidding effectively is more than just placing offers, it's about strategy, timing, and confidence. Here’s how to maximise your chances of success:
Opening bid strategy: Decide whether to open the bidding or let others start.
Confidence projection: Bid decisively with clear, firm signals to demonstrate you’re serious.
Increment management: Choose when to bid in small increments or larger ones depending on the competition.
Timing considerations: Don’t rush, strategic pauses can throw competitors off balance.
Counter-bidding: Respond quickly to other bids to maintain momentum and show you’re a serious contender.
Body language: Maintain a confident, serious demeanour throughout the auction.
Position selection: Choose a spot where you can see and hear everything clearly, and where you’ll feel comfortable.
Focus maintenance: Stay sharp and attentive to every part of the auction process, from the auctioneer's cues to the competition's moves.
Effective bidding isn’t just about money; it’s about psychology and showing your confidence. With Buyvest’s guidance, you’ll feel prepared to execute your bidding strategy with precision.
Understanding Auctioneer Tactics: Recognizing Common Techniques
Auctioneers employ various strategies to drive up the sale price. Understanding these tactics will help you stay in control of your bidding and avoid being manipulated into going beyond your limit.
Key auctioneer techniques to be aware of
Here are some common techniques used by auctioneers:
Vendor bids: Auctioneers may place bids on behalf of the seller to encourage bidding or move the price closer to the reserve.
"Going once, going twice": The auctioneer uses this chant to create a sense of urgency and encourage bids.
Bid solicitation: Auctioneers will often target specific attendees to make bids, directing attention toward them.
Price suggestions: They may suggest certain increments to keep the bidding moving and build momentum.
Momentum building: Auctioneers use various strategies to maintain the energy of the bidding process.
Break requests: Pauses to consult with the seller are used to gauge interest or strategise.
Reserve announcements: Auctioneers will inform the crowd when the reserve price is reached.
Passed-in procedure: If the reserve price isn’t met, the auction may be paused or passed in, allowing for post-auction negotiation.
Understanding these tactics allows you to maintain perspective and stick to your predetermined budget. With Buyvest's expert advice, we can help you prepare for these auctioneer techniques, giving you a clear advantage when the bidding starts.
When the hammer falls
If you’re the successful bidder, the work doesn’t stop there. Several immediate actions must be taken to ensure the purchase process goes smoothly.
What Happens Right After You Win the Auction
Upon winning the auction, here are the key steps you must follow:
Deposit payment: A 10% deposit is required, usually paid by bank check or transfer.
Contract signing: You’ll sign the contract of sale immediately after the auction.
Buyer details confirmation: Ensure that the buyer’s names are correctly listed on the contract.
Agent communication: Exchange contact details with the selling agent for further communication.
Settlement date confirmation: Confirm the agreed-upon settlement period with the seller.
Property access arrangements: Discuss access to the property before the settlement takes place.
Insurance requirements: Arrange for building insurance on the property as soon as possible.
Legal notification: Inform your solicitor or conveyancer that you've successfully won the auction.
These steps usually happen quickly after the hammer falls, often in a separate room at the auction venue. At Buyvest, we’ll help ensure you're well-prepared for this stage, making sure all legal and financial steps are managed efficiently.
Post-auction scenarios
Not all auctions end with a successful bid. Understanding the different scenarios that may arise after the auction is crucial to making the best decisions for your next steps.
Successful bid
If you win the auction, here’s what happens next:
Formal notification: You’ll receive confirmation of your successful bid.
Deposit processing: Your deposit will be processed and held in trust until settlement.
Mortgage finalization: Work with your lender to finalise your mortgage paperwork.
Settlement preparation: Collaborate with your conveyancer to prepare for the settlement.
Building insurance: Secure building insurance to protect your investment.
Pre-settlement inspection: Arrange for a final inspection of the property before settlement.
Settlement attendance: Know what to expect during the settlement and your role in the process.
Key handover: You’ll arrange to receive the keys to your new home.
Your conveyancer or solicitor will guide you through these next steps, ensuring everything is legally sorted out before settlement. With Buyvest by your side, you’ll have professional support to manage this process smoothly.
Passed In
If the property doesn’t meet the reserve and is “passed in,” you still have opportunities to secure it:
First right of negotiation: As the highest bidder, you typically get the first chance to negotiate with the seller.
Reserve disclosure: The seller may share their reserve price, allowing you to adjust your offer.
Negotiation strategy: Understand the best approach to negotiate post-auction.
Cooling-off period: Whether a cooling-off period applies will depend on the specific auction and sale conditions.
Contract amendments: You may be able to negotiate more favourable contract terms.
Deposit and competition: Learn how deposit arrangements and the competition from other interested parties affect negotiations.
Post-auction negotiations often result in successful purchases, sometimes at prices lower than what would have been paid during active bidding. With Buyvest, we can advise you on the best approach to secure a property after it’s passed in.
Underbidder position
Being the second-highest bidder isn’t the end of the road, there are still opportunities to secure the property:
Seller contact: The agent may approach you if the successful bid falls through.
Waiting period: You’ll typically wait to see if the highest bidder completes the purchase.
Alternative properties: While waiting, continue your search for other potential properties.
Emotional recovery: Stay positive and open to new opportunities, learning from the experience.
Reassessing your offer: If given a second chance, decide if you’re willing to increase your offer.
Agent relationship: Keep in touch with the agent for future opportunities.
Market monitoring: Keep an eye on the property’s status in case the deal falls through.
Many buyers have successfully secured properties after being the underbidder, so it’s worth staying alert and ready. Buyvest is here to help guide you through these scenarios and support your decision-making.
Property withdrawal
Sometimes, a property may be withdrawn from sale or sold before the auction. In these cases, there are different strategies to consider:
Pre-auction offer: Consider making an offer before the auction starts.
Competitive advantages: Understand how to make your offer more appealing to the seller.
Withdrawal reasons: Learn why a property might be withdrawn from sale and how that affects you.
Continued interest: Stay in touch with the agent if you’re still interested in the property.
Price negotiation: You may have more flexibility in price negotiations before auction day.
Cooling-off periods: Be aware of whether a cooling-off period applies to pre-auction purchases.
Pre-auction purchases can be a great way to secure a property without the stress of competitive bidding. Buyvest can help you assess the best approach if you're considering making an offer before auction day.
Frequently asked questions about property auctions
How much deposit do I need on auction day?
The deposit for an auction is typically 10% of the purchase price, and it must be paid immediately after the auction concludes. Here’s what you need to know:
Standard deposit: 10% of the purchase price
Payment timing: Required immediately after the auction
Acceptable methods: Bank check, personal cheque (with prior approval), or electronic transfer
Deposit holder: Held in the agent’s trust account until settlement
Negotiability: Typically non-negotiable, though flexible with prior arrangement
Forfeiture risk: You risk losing the deposit if unable to complete the purchase
Balance payment: Remaining 90% due at settlement, usually within 42 days
Having the deposit funds ready is critical, as failing to provide the deposit can result in the property being reoffered. Let Buyvest guide you through securing the right financing before auction day to ensure you're fully prepared.
What happens if I can’t get finance after winning an auction?
Winning an auction is legally binding, and failing to secure finance can have serious consequences:
Legal obligation: You must still complete the purchase, regardless of financing issues.
Deposit forfeiture: You may lose your 10% deposit if unable to complete.
Additional liability: You may be responsible for any shortfall if the property is resold at a lower price.
Legal consequences: Potential action from the seller for specific performance or damages.
Credit impact: Potential damage to your credit rating.
Emergency financing: Options like bridging loans or private lenders may be available.
Negotiation: There is limited opportunity to negotiate an extension or change terms with the seller.
It’s essential to secure unconditional finance approval before auction day. Buyvest can help ensure your financing is in place, so you’re ready when the hammer falls.
Can I make my auction bid subject to conditions?
Auction bids must be unconditional, meaning they cannot be made subject to any conditions:
Unconditional bids: All bids at auction must be unconditional.
No finance clauses: You cannot include finance contingencies in your bid.
No inspections: Building or pest inspections cannot be made a condition.
No cooling-off period: The statutory cooling-off period does not apply to auctions.
Settlement timeframe: The settlement period is fixed and non-negotiable.
Pre-auction offers: You can make conditional offers before the auction if needed.
This is a key aspect of auctions, and understanding this condition will help you manage your expectations. With Buyvest, you’ll be prepared to handle the process without surprises.
What is a vendor bid and how does it work?
A vendor bid is a bid made by the auctioneer on behalf of the seller:
Definition: A bid made by the auctioneer for the seller to encourage bidding.
Purpose: To start or keep bidding moving toward the reserve price.
Disclosure: It must be announced clearly as a "vendor bid."
Limitation: Vendor bids can only go up to the reserve price, not above.
Frequency: Generally limited to one or two throughout the auction.
Legal status: Permitted in most Australian states with proper disclosure.
Strategic role: Often used when bidding is slow or hasn't started.
Understanding vendor bids can help you strategise your approach. Buyvest is here to help you interpret these bids and plan your next move effectively.
What is a reserve price and how does it affect the auction?
The reserve price is the minimum price the seller is willing to accept:
Definition: The lowest price at which the seller will sell.
Disclosure: Usually not revealed before or during the auction.
Setting the reserve: The reserve is typically set by the seller and agent before auction.
Flexibility: The reserve may be adjusted if bidding is strong but below the reserve.
Passed-in consequence: If bidding doesn’t meet the reserve, the property is passed in.
Negotiation: After a passed-in auction, the reserve becomes the starting point for negotiations.
Understanding the reserve price can give you a strategic edge. Buyvest can help you navigate this and optimise your bidding approach.
Should I bid first or wait for others to start?
Your approach to the opening bid depends on various factors:
Psychological impact: The first bid sets the tone for the auction.
Price strategy: Whether to start low or bid strongly depends on the competition.
Auction conditions: Consider the number of bidders and market conditions.
Property desirability: Tailor your approach based on how competitive the auction is.
While there’s no one-size-fits-all answer, Buyvest can help you develop a strategy that works for your auction goals, helping you maintain control and confidence.
How do I stay calm and avoid emotional bidding?
Staying calm is crucial to successful bidding:
Preparation: A well-prepared strategy reduces the likelihood of emotional bidding.
Set your limit: Commit to your maximum price before bidding.
Support: Bring a friend or a professional to keep you grounded.
Buyer’s agent: Consider having a representative bid on your behalf.
Physical techniques: Breathing exercises can help manage stress.
Focus: Stick to your strategy, rather than reacting emotionally.
Emotional bidding can often lead to overpaying. Buyvest can help you stay focused and confident during the auction process.
What happens if the property is passed in?
If the bidding doesn’t reach the reserve, the property may be passed in:
Priority for negotiations: The highest bidder gets the first chance to negotiate.
Negotiation: You can discuss price and contract terms with the seller post-auction.
Reserve disclosure: The seller may reveal the reserve price during negotiations.
Cooling-off: Cooling-off periods don’t apply in most cases for passed-in properties.
Many buyers successfully purchase properties through post-auction negotiations. Buyvest can guide you through this process and help you secure a property at a price that works for you.
Can I attend an auction just to observe before I’m ready to buy?
Attending auctions as an observer is a great way to learn:
Learning: Understand auction dynamics and bidding behaviour.
Etiquette: Be aware of proper conduct when observing.
Registration: You may need to register, even if you’re not bidding.
Confidence building: Observation helps reduce auction anxiety when you're ready to participate.
Strategic insights: Watch for auctioneer tactics and bidder strategies.
Attending auctions before bidding is a valuable way to build confidence. Buyvest can help you prepare to participate once you’re ready to jump in.
Next Steps in Your Auction Journey
When you’re ready to participate in an auction, make sure you’re fully prepared:
Secure unconditional finance approval before considering an auction.
Engage a conveyancer or solicitor to review contracts for properties of interest.
Arrange inspections for properties you’re seriously considering.
Research comparable sales to establish your bidding limit.
Attend auctions as an observer to get comfortable with the process.
Prepare your deposit funds well in advance.
Develop your bidding strategy and be prepared to stick to it.
With the right preparation and professional support from Buyvest, you can approach auctions with confidence. Contact us today to ensure your next property purchase goes smoothly.
Ready to Bid with Confidence?
Participating in an auction can be a rewarding way to secure your next property, but preparation is key. With Buyvest by your side, you’ll have the expertise and support you need to navigate the auction process with ease.
Whether it's securing the right finance, understanding the reserve price, or developing a winning bidding strategy, we’re here to help you every step of the way.
Get in touch with Buyvest today to start your auction journey with confidence and make your property goals a reality.
Table of Contents
A new beginning after a successful auction.
Turning a house into a home, one family at a time.
Important stuff:
Please note that the views and opinions expressed in this post are general information only, and this is not financial advice.
Any advice and information is provided by Buyvest Pty Ltd ABN 91 684 841 496, Australia Credit Licence No. 567392 and is general in nature, for educational purposes only and is not intended to constitute specialist or personal advice. This website has been prepared without considering your objectives, financial situation or needs. Therefore, consider the appropriateness of the advice for your situation and needs before taking any action. It should not be relied upon to enter into any legal or financial commitments. Specific investment advice should be obtained from a suitably qualified professional before adopting any investment strategy. If any financial product has been mentioned, you should obtain and read a copy of the relevant Product Disclosure Statement and consider the information contained within that Statement concerning your circumstances before deciding whether to acquire the product. You can obtain a copy of the PDS by emailing hello@buyvest.com.au. If you want to change your financial circumstances, such as applying for a loan, all loan applications are subject to credit approval.
All information on this website is subject to change without notice.
