What do I need to know on auction day?

Attending your first auction as a potential buyer can be a little overwhelming.

There’s a lot of money riding on the result and you don’t want to be caught in an uncomfortable position because you’re not sure of the rules and procedures that govern auction day.

Here are the important things you need to be across.

Know the rules

As a potential bidder and buyer at an auction, it’s critical that you’re well versed on the rules.

Auctioneers will always read the terms under which the auction will be conducted, prior to taking bids, but good luck trying to remember all of them the first time you hear them. So do your homework beforehand.

Preparing for auction day:

Managing director and auctioneer at Jellis Craig’s Armadale branch, Andrew McCann, says that in particular, people need to be aware of the implications if a property is below, or has moved past, its reserve price.

“I think that the important thing is to understand the actual rules for the auction itself and the nature of whether you’re bidding for the property, or the right to negotiate below the reserve price,” he says.

“Once the reserve price has been reached and announced, the buyer should understand that any bid from that point on means ownership of the property. Don’t be caught out holding back and allowing the property to be sold to someone else because you haven’t quite understood the mechanics of the decision and the language around being ‘on the market’, or ‘past reserve’, ‘for unreserved sale’, or ‘playing for keeps’, which are all terms that auctioneers can use.”

Know the process

If a property fails to meet its reserve price and is passed in, that doesn’t mean it won’t be sold.

But if you want the first opportunity to negotiate with the vendor, you need to ensure you’re the highest bidder.

How to negotiate a property price:

“If an auction starts and the vendor’s reserve is $1.2 million, the auction starts at $1 million and two people fight it out and it gets to $1.1 million and then stops, the highest bidder won’t be buying the property at that point in time. But under the guidelines the highest bidder gets the first chance to negotiate with the vendors at their reserve price. The negotiation will be handled by the agent,” McCann says.

Should the highest bidder reject the vendor’s price after the auction, they lose the exclusive right to negotiate, and other buyers may become involved.

Do you need to register?

The legislation regarding whether buyers are required to register before making a bid varies from state to state.

In Victoria and Western Australia, there’s no requirement for you to make yourself known to the auctioneers before sticking your hand in the air, while in New South Wales, Queensland and South Australia, legally you need to register beforehand in order to be able to bid.

You’ll need your deposit

McCann points out that should you be the successful bidder, you must pay the required deposit then and there.

“You need to be aware of that the fact that if you are looking to bid at an auction, you have a legal obligation to pay a deposit for the home, and more often than not that deposit is 10%,” he says.

“There can be times when buyers turn up without a cheque book or without an ability to make that cash transfer, and that does put them at risk of contracting a sale outside of the terms and conditions and can put their sale at threat. Being prepared with your deposit terms is a really important thing.”

Stick to your strategy and be in it to win it

McCann says while each bidder will have their own auction strategy, auctioneers are more likely to engage with and reward you later in the auction if you’re clearly involved in the bidding.

Look up auction results in your area.

“I always encourage people that if you’re interested, it’s really important that you do bid for a property at auction,” he says.

“Being a bidder and putting your hand up at a level that you’re comfortable at is a really sensible strategy, and it’s an important one because more often than not an agent will reward and support the people that are involving themselves in the auction. It gives the vendor confidence that there’s interest and that there’s a point at which they can negotiate from.”

Mitch and Mandy share their auction strategies: