Dec 13, 20244 min read

Your Ultimate Guide to Property Auctions: What Every First-Time Buyer Needs to Know

Updated: 4 days ago

Property auctions are a common way to buy and sell real estate. For first-time buyers, the process may seem complex and intimidating. As an experienced real estate agent, I’m here to help you navigate your first auction with ease. In this blog, I’ll explain key auction terms, the auction process, and the rights and responsibilities of both buyers and auctioneers。

Key Terms You Should Know Before Attending a Property Auction

1. Auctioneer: A licensed professional who conducts the auction, accepts bids, and declares the property sold to the highest bidder.

2. Reserve Price: The minimum price the seller is willing to accept. This is confidential and set before the auction begins.

3. Vendor Bid: A bid made by the auctioneer on behalf of the seller to encourage bidding. These bids must be clearly announced.

4. On the Market: A term used when the bidding has reached the reserve price, meaning the property will be sold to the highest bidder.

5. Passed In: If bidding does not meet the reserve price, the property is “passed in,” and the highest bidder is usually given the first opportunity to negotiate with the seller.

6. Fall of the Hammer: The moment the auctioneer strikes the gavel, officially declaring the property sold.

7. Bidder’s Card: A numbered card given to registered bidders to signal their bids during the auction.

8. As-Is Sale: The property is sold in its current condition, with no guarantees or warranties from the seller.

How Property Auctions Work in Victoria

1. Property Inspections

Before the auction, attend open-for-inspection days to thoroughly evaluate the property. In Victoria, auction properties are sold “as is,” so any issues will become your responsibility after purchase.

2. Registration

On auction day, you must register to bid. Bring valid identification to receive a bidder’s card, which you will use to signal your bids.

3. Auction Commencement

The auctioneer will begin by outlining the auction rules, providing a brief overview of the property, and confirming any legal details relevant to the sale.

4. Bidding Process

• Bidding starts with an opening bid from the floor or a vendor bid.

• The auctioneer will call for incremental bids, acknowledging each offer and encouraging competitive bidding.

5. Reserve Price and “On the Market” Announcement

Once the highest bid meets or exceeds the reserve price, the auctioneer announces that the property is “on the market.” From this point, the property will be sold to the highest bidder.

6. Fall of the Hammer

When bidding concludes, the auctioneer announces “sold,” and the highest bidder immediately signs the contract of sale and pays a deposit (typically 10%).

7. Passed-In Properties

If the bidding doesn’t reach the reserve price, the highest bidder is usually invited to negotiate directly with the seller after the auction.

Your Rights and Responsibilities as a Buyer

Rights

1. Access to Information: You have the right to request the property’s contract of sale and auction rules before the auction.

2. Fair Bidding Process: The auction must be conducted transparently, with vendor bids clearly identified.

3. First Negotiation Opportunity: If a property is passed in, the highest bidder gets the first chance to negotiate with the seller.

Responsibilities

1. Registration: You must register before the auction to participate in the bidding.

2. Financial Readiness: Ensure you have pre-approved financing and the required deposit available immediately after the auction.

3. Understanding “As-Is” Purchases: Familiarize yourself with the property’s condition and any legal obligations before bidding.

Tips for First-Time Auction Buyers in Victoria

Before the Auction

1. Inspect Thoroughly: Attend open houses and arrange professional inspections if needed.

2. Review the Contract: Consult a solicitor or conveyancer to review the contract of sale and identify any red flags.

3. Set a Budget: Determine your maximum bid and stick to it to avoid overextending financially.

4. Get Pre-Approval: Secure a loan pre-approval so you know your borrowing capacity.

During the Auction

1. Start Strong: Consider making an early bid to set the pace and demonstrate confidence.

2. Stay Calm: Avoid showing emotions that might signal desperation or hesitation to other bidders.

3. Bid Strategically: Be aware of bidding increments and time your bids thoughtfully.

After the Auction

1. Be Prepared to Act: If you’re the winning bidder, be ready to sign the contract and pay the deposit on the spot.

2. Negotiate if Passed In: If the property is passed in, use your position as the highest bidder to negotiate with the seller.

Common Mistakes to Avoid

1. Failing to Register: Without registration, you cannot bid at the auction.

2. Overbidding: Stick to your budget, even in the heat of the moment.

3. Skipping Legal Review: Always review the contract of sale with a legal expert before the auction.

4. Underestimating Costs: Account for additional expenses like stamp duty, legal fees, and potential renovations.

Property auctions in Victoria are a dynamic and exciting way to buy real estate, but preparation is key. By understanding the terms, process, and your rights and responsibilities, you can confidently navigate your first auction and increase your chances of success.

If you’re considering attending an auction or have questions about the process, feel free to contact me. I’m here to provide guidance and help you secure the property of your dreams.

Disclaimer: This blog is for informational purposes only and does not constitute financial or legal advice. Always consult a qualified professional for guidance specific to your circumstances.