Buying a property at auction
By Ali Hasani, Founder and Principal Mortgage Broker at Buyvest, MFAA accredited. Last updated July 2026. Auction rules described here are NSW specific.
This guide covers how NSW auction rules actually work, what pre-approval does and does not cover, and what happens after the hammer. How auctions compare with private treaty is covered in a separate guide.
The short version: Every NSW bidder registers and displays a number. The auctioneer may make one vendor bid only, announced as such. Dummy bidding is illegal. The winning bidder signs on the spot and pays 10% that day, with settlement around 42 days later. Pre-approval assesses the borrower, not the property, so the valuation lands after the contract is already binding.
How does a property auction work?
A property auction is a public sale where registered bidders compete openly and the highest bid above the reserve wins. In NSW every bidder must register and display a number, and no bid can be made after the fall of the hammer.
The auctioneer opens, bidding runs in the open, and the property sells to the highest bidder once the reserve is met. The reserve is the seller's minimum and must be given to the auctioneer in writing before the auction starts. Below it, nothing sells.
The rules are set by law rather than by the agent. Prescribed auction conditions under the Property and Stock Agents Regulation 2022 require every bidder to be registered in the Bidders Record and to display their allocated number when bidding. The conditions must be on display before the auction so buyers can read them. No bid can be made or accepted after the fall of the hammer, and the purchaser signs as soon as practicable afterwards.
Anyone bidding on someone else's behalf must give the auctioneer written authority before bidding. Where two or more people are buying together, only one of them needs to register.
What are the risks of buying at auction?
The defining risk at auction is that the contract is unconditional. There is no cooling off period and no finance or inspection clause, so a buyer who cannot settle faces losing the deposit and liability for any shortfall on resale.
Everything follows from the contract being unconditional. A buyer cannot attach a finance clause, a building and pest condition, or any other contingency, and there is no cooling off period to fall back on. Due diligence has to be finished before bidding, which means paying for a contract review and inspections on a property that may sell to someone else.
The consequences of not settling are real. The deposit is at risk, and a seller who resells for less can pursue the buyer for the shortfall and for costs. Against that, an auction is transparent, the sale is binding on the day, and a property with few registered bidders can sell for less than a competitive private treaty campaign would have achieved.
Does pre-approval cover you at auction?
Pre-approval covers the borrower, not the property. It assesses income, debts and credit history, while the bank valuation on the specific property happens after the hammer falls. At auction that gap sits entirely with the buyer, because the contract is already binding.
This is the gap most auction guidance skates over. Pre-approval is an assessment of the borrower: income, expenses, existing debts, credit history, and how much the lender is willing to advance. It says nothing about the specific property, because at the time it was issued there was no property.
The property side is the bank valuation, and in a normal purchase it happens before the contract becomes unconditional. At auction the order reverses. The hammer falls, the contract binds, and the valuation is ordered afterwards. If it lands below the price, the lender advances against the lower figure and the difference is cash the buyer finds before settlement.
An upfront valuation on the specific property, ordered before auction day, closes most of that gap. Several lenders provide them at no cost. The other half is the distinction between a fully assessed pre-approval and a system generated one, which matters far more when there is no finance clause behind it.
The sequence that catches people: pre-approval assesses you. The valuation assesses the property. At auction, the second one happens after you are already committed.
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What is a vendor bid?
A vendor bid is a bid the auctioneer makes on the seller's behalf. In NSW the auctioneer may make only one vendor bid at an auction of residential property, it must be announced as a vendor bid, and no other person may make one.
A vendor bid lets the seller lift the price toward the reserve without a genuine buyer behind it. It is legal and disclosed, and it is tightly limited. NSW Fair Trading confirms only one bid may be made on behalf of the vendor by the auctioneer.
Three conditions attach to it. The right to make a vendor bid must appear in the conditions of sale, which are displayed before the auction. The auctioneer must announce beforehand that one vendor bid is permitted. And at the moment of making it, the auctioneer must state that it is a vendor bid. Co-owners, executors and administrators are the narrow exception and may bid more than once, provided the auctioneer announces this and their registration number before bidding starts.
For a bidder, the practical effect is that one of the bids in the room may not be a competitor at all.
Is dummy bidding illegal?
Dummy bidding is illegal in NSW. A dummy bid is a bid that is not genuine, made to inflate the price without any intention to buy. It is an offence for an auctioneer to invent bids, and penalties apply to everyone involved.
A dummy bid is a bid placed with no intention of buying, made to push the price up. It is prohibited, and it is separate from a vendor bid, which is legal precisely because it is announced and limited to one.
NSW rules make it an offence for an auctioneer to invent bids. An auctioneer must not accept a bid from someone who is not registered in the Bidders Record, and taking one can attract disciplinary action and a fine of up to $11,000. Collusion between bidders to interfere with genuine competition is also prohibited.
The Bidders Record itself is confidential. It cannot be shown to the seller, and only an authorised NSW Fair Trading investigator can require access to it.
Can you buy before the auction?
A property can be bought before auction day where the seller agrees to consider offers. A pre-auction offer generally needs to sit at or above the expected auction result and be unconditional, since the seller is giving up the competition of the auction.
Sellers are not obliged to consider pre-auction offers and many will not, because an auction campaign is built to create competition on a set day. Where one is considered, the bar is high. The offer usually needs to be at or above what the campaign is expected to produce, unconditional, and open for a short window.
The trade-off runs both ways. A buyer avoids the auction room and the risk of being outbid, but gives up the chance that few bidders turn up. A pre-auction purchase is also an ordinary contract, so whether a cooling off period applies depends on the contract and the timing rather than on the fact an auction was scheduled.
What happens after the hammer falls?
The successful bidder signs the contract as soon as practicable after the fall of the hammer and pays a 10% deposit that day. Settlement follows around 42 days later in NSW. If the reserve is not met, the property is passed in.
The successful bidder signs the contract of sale as soon as practicable and pays the deposit, commonly 10%, that day by bank cheque or transfer. Contracts are exchanged on the spot. From there the loan moves to formal approval, the valuation is ordered, building insurance is arranged, and the conveyancer runs searches and adjustments ahead of settlement around 42 days later.
If the reserve is not met the property is passed in, and the highest bidder is generally given the first opportunity to negotiate with the seller. The reserve often becomes the starting point. An underbidder who misses out is sometimes contacted later if the sale does not proceed.
Frequently asked questions
Do you need to register to bid at an auction in NSW?
Yes. All bidders must be registered in the Bidders Record and display the number allocated to them when bidding. Registration requires proof of identity. Where two or more people are buying together, only one of them needs to register.
How much deposit do you pay at auction?
Usually 10% of the purchase price, paid on the day by bank cheque or electronic transfer. The deposit sits in the agent's trust account until settlement and forms part of the purchase price. The balance falls due at settlement, around 42 days later in NSW.
How many vendor bids can be made in NSW?
One. At an auction of residential property or rural land the auctioneer may make only one vendor bid, and no other person may make one. The auctioneer must announce before the auction that a vendor bid is permitted, and announce the bid itself as a vendor bid.
Is there a cooling off period at auction?
No. A property bought at auction sells unconditionally at the fall of the hammer, with no cooling off anywhere in Australia. The cooling off rules that apply to private treaty purchases in NSW are set out separately.
What happens if you cannot settle after winning at auction?
The contract is binding regardless of finance. A buyer who cannot complete risks forfeiting the deposit, liability for any shortfall if the seller resells for less, and legal action for the seller's costs. There is no finance clause to fall back on.
What is a reserve price?
The reserve is the minimum the seller will accept, given to the auctioneer in writing before the auction begins. It is usually not disclosed. Bidding below the reserve does not sell the property, and the highest bidder becomes the purchaser only once the reserve is met.
What happens if a property is passed in?
The property did not reach its reserve and did not sell under the hammer. The highest bidder is generally given the first opportunity to negotiate directly with the seller, and the reserve often becomes the starting point for that conversation.
Is dummy bidding illegal in NSW?
Yes. A dummy bid is a bid made without genuine intention to buy, placed to push the price up. It is an offence for an auctioneer to invent bids. Auctioneers also face penalties for taking a bid from someone not registered in the Bidders Record.
Take the next step
The work that makes an auction survivable happens weeks before it. Getting fully assessed rather than system generated is the first piece, knowing what happens when a valuation lands short is the second, and the Australian Government 5% Deposit Scheme applies at auction the same as anywhere else, subject to its price caps. Model the numbers with our property deposit calculator and mortgage repayment calculator.
Know your number before the hammer
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Related resources for first home buyers
Private treaty sales | Off the plan | Settlement guide | Bank valuations | Pre-approval | Loan to Value Ratio | First home buyers journey
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This article is general information only and does not take your personal circumstances into account. Auction conditions, bidder registration requirements and vendor bid rules described here are specific to New South Wales and are prescribed under the Property and Stock Agents Act 2002 (NSW) and the Property and Stock Agents Regulation 2022 (NSW). Rules differ in other states and change over time, and lender policies and valuation timeframes vary. Figures were verified in July 2026 against NSW Fair Trading auction guidance and the prescribed conditions of sale by auction. Confirm your position with a licensed conveyancer, solicitor, broker or lender before relying on it. Ali Hasani is an Authorised Credit Representative (CRN 567392) of Connective Credit Services Pty Ltd (Australian Credit Licence 389328).
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