The Auction Process
The auctioneer is responsible for running a smooth auction on behalf of the vendor.
At the commencement of an auction, the auctioneer should describe the property and go through the sales contract and any conditions of the auction. This is to ensure everyone in the room understands the process and what they are bidding on.
If you are considering bidding, you will need to register as a bidder with the agent prior to the auction commencing.
The auctioneer will then ask for an opening bid. Quite often the room will go quiet for a while and it will feel llike no one is going to bid. In most cases, a bid will be called out from somewhere in the room. If not, the auctioneer may place the opening bid.
The auctioneer will aim to reach the vendor's reserve price as quickly as possible and so will prompt for large increments at first. He doesn't want to have to go from an opening bid of $500,000 to a reserve of $600,000 in $1,000 increments - he will never get there!!
Any bidder can call out an amount that is less or more than the increment the auctioneer is asking for. It is up to the auctioneer whether he will accept the bid. If your bid is less than he wants, he will try to get you up to his increment.
A good auctioneer is able to read the room and get a good idea who is a serious bidder, who is bidding with emotion and hence can be pushed. If he is close to the reserve and no bids are forth coming, he may try to get you to increase your bid by mentioning the sale could happen today with a higher bid. It could be yours!!
When the last bid is under reserve.
If the reserve is not reached, the auctioneer will seek instructions from the vendor. The vendor has the choice to lower the reserve and therefore sell the property or not lower the reserve and have the property passed in.
Quite often, the auctioneer will offer the highest bidder the right to negotiate a purchase price with the vendor. At the end of the day, the vendor wants the highest price and really won't be too worried about whether the highest bid comes from the last bidder from the auction process or not.
If you want the property, put in an offer irrespective of whether you were the last bidder.
If a sale price is agreed within a short time after the auction, the sale will still fall under the auction rules that were explained by the auctioneer prior to the auction and the rules that you familiaried yourself with before the auction. A good place to find some more information about this is www.fairtrading.gov.au.
When the reserve price has been reached
The auctioneer will say something that will tell bidders that the property will be sold. You will hear something like "the property will be sold today" or "this home is now on the market".
If you want to buy this property, you will have to be the highest bidder at the end of the auction as the hammer will fall. You should have a strategy in place so you know what you are doing and don't push the price up unnescessarily, pay too much or miss out if that was not your intention.
Once the auctioneer can not get anymore bids from the serious bidders, he will try a few more tactics to get a further bid and then end the auction. He will make it very clear that the property is sold and who the successful bidder was.
At this point the successful bidder will sign the contact of sale and pay a predetermined deposit - normally 10% of the purchase price. This is all done at the auction site.
The property passes to the successful bidder at settlement.
Part of the auction rules - there is no cooling off period.
At the fall of the hammer, the contract will be exchanged and no cooling off period exists. This means that you can't change your mind.
Vendor Bid
The vendor has the right to place one bid at the auction. If the vendor chooses to exercise his right, it will be to entice the last bidder to place there final bid above reserve or to set the price that the property will be marketed at post auction. A vendor does not want the last offer advertised if it is very low as potential buyers may think that is what the property is worth.
