When you learn how to buy property at auction in Sydney, the regulations might not apply to real estate auction purchases throughout the rest of the country.
For instance, bidders are required to pre-register before the auction while Victoria imposes no such rule.
If you’re looking for auction houses for sale in Sydney, it’s important to understand the buying process. So, to help you along the way, we’re guiding you through all the auction rules in Sydney and getting some hands on tips on how to prepare yourself for auction day!
Recommended reading: Auction Rules in NSW
Auction rules throughout Australia
While some auction rules differ from state to state, here are those that apply to all of Australia.
- Unlike private sales, auctions are unconditional which means no conditions are attached to the sale. The contract is signed immediately after the auction sale and the buyer cannot terminate for whatever reason.
- There is no cooling-off period after the auction sale so you can’t change your mind after giving the winning bid.
- Dummy bids are illegal. These are fake bids to attempt raising the price.
- When a bid reaches the reserve price, the property is on the market.
- If the property does not reach the reserve price, the highest bidder has first right to negotiate the price with the vendor.
- Once the auction sale comes to an end, the deposit is made and the contract is signed immediately.
- The seller must be made aware of all bids.
Auction rules in Sydney and NSW
- When registering for an auction in Sydney and NSW, you need to provide a form of ID like your drivers licence. Additionally, the auctioneer will need to verify your identity upon arrival.
- If bidding on someone else’s behalf, you need to supply a letter of authority.
- From 2016, NSW clamped down on underquoting by requiring all agents to furnish evidence of the property valuation. Ambiguous price guides on listings (eg. offers above $500,000) can incur major fines for agents.
- In Sydney and NSW, only one vendor bid can be made per auction.
How do you buy a house at an auction in Sydney?
There are a few steps you should know about buying properties at auction in Sydney. Firstly, you can’t just walk into an auction and make a bid. So, let’s walk you through it.
Before the auction
- Inspect the property and research the market – this is a crucial part of any home buying process and applies to homes for auction as well. Similarly, it’s always good to do research on the market, auction results as well as the suburb and properties you’re interested in. This can help you make a more sound investment in the long run.
- Attend an auction – to avoid getting rookie jitters, you should go to other auctions to see how the process unfolds.
- Do a building and pest inspection – if you like the property, the next step is to hire professionals to conduct a building and pest inspection. While the home may appear well maintained visually, the only way to assess its true condition is to do an inspection by experts.
The selling agent may already have one, otherwise you’ll have to pay for this yourself. Residential and commercial property inspection cost in Sydney can vary.
1. Register your bid
Bidders in NSW must register themselves before the auction. You must give the selling agent your details and show a proof of identity. You will then be put into the Bidders Record and given a number. You can do this when you inspect the property or on the day of the auction itself.
2. Get your finances in order
Speak to your lender about your situation to get your finances pre-approved. You’ll also need to be able to write a cheque for the 10% deposit if you are the winning bidder.
3. Speak to a solicitor or conveyancer
Let your solicitor or conveyancer see the contract of sale and discuss anything that might be a point of concern.
What to expect at the auction
In competitive areas, especially in cities like Sydney and Melbourne, expect to compete with over 10 bidders. But don’t let yourself be swayed by their bids, set yourself a budget and stick to it. Keep focused and avoid letting your emotions get the best of you.
1. The auctioneer will give out documentation
By law, auctioneers must hand out documentation at least 30 minutes before the auction begins. This usually includes brochures about the property.
Now is the time to have a look through the home and ensure it is still in good condition.
2. The auctioneer will lay out the auction rules
This is when you should listen carefully. Some rules can includes refusing bids after the hammer falls, how to settle disputes and refusing unregistered bids.
3. The auctioneer will invite the opening bid
Once the final property detailing has been conducted by the auctioneer, they will invite people to make the opening bids. Bidding will then continue until the property is sold or passed in (not sold).
4.1 The bidding may go above the reserve price
This depends on the auction, of course. The reserve price is the minimum amount set by the. seller and the agent.
Once bidding goes above the reserve price, the auction is then live and on the market. This is when bidding can get heated. The auctioneer may pause the auction at times to talk to the seller.
If the bidding gets close to the reserve price, the agent may ask the seller if they’re willing to sell it to the highest bidder from that point. If they are, the auctioneer will announce that the sale will then go to the highest bidder.
4.2 Or the auction may be passed in
When an auction is passed in, this means that the bidding did not go past the reserve price or a price the seller is content with.
In this case, the highest bidder has the chance to negotiate a price with the seller. They can come to a settlement that day or over a period of a few days.
After the auction
If your bid is successful, congratulations on buying your home at auction! You will have to immediately sign the contract and hand a cheque over for the 10% deposit.
Again, there is no cooling-off period so you cannot back out of the contract.
If the property was passed in but you were the highest bidder, this will give you the opportunity to negotiate with the seller. They are not required to sell their property to you at that point so be realistic with your offer as other bidders can also come in if the vendor isn’t happy with your offer.
Important real estate auction terms
Bidder guide: this contains documentation like how to register, required paperwork from the buyer’s end, rules, regulations and auction privacy laws.
Reserve price: this is the minimum selling price the vendor will accept.
Passed in: when the bidding doesn’t reach the reserve price, the auction is passed in and the highest bidder is given first right to negotiate with the seller.
Hammer falls: towards the end of the auction, the auctioneer will announce the ‘fall of the hammer’ which call for last bids. Once the hammer falls, no more bids are accepted.
Vendor bid: to help the bidding reach the reserve price, one bid will be made by the auctioneer on behalf of the seller.
Dummy bids: these are fake bids from false bidders usually hired by the seller. This is an illegal practice but still happens to this day.
What should you not do at an auction?
The general rule is to be respectful at auctions. This means to avoid talking on the phone or to friends/family during the bidding.
Don’t attract too much attention to yourself or allow your physical gestures to give away your motives.
How do I make sure I win at auction?
Experts offer several tips on how to better your chances at an auction. These include:
- Waiting to bid, so allowing other bidders to go first.
- Bidding with round figures that are well researched and reflective of the current market.
- Being confident.
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Remember that auction bidding can be nerve-wracking so if you’re not feeling secure, you can always pay a buyer’s agent to bid on your behalf.
Auctions are a popular way to buy property but they’re not for everyone. Just make sure that if you do feel secure, to use our guide to ensure better chances of winning.
