It’s no secret – auctions can be incredibly fast paced, with bids flying everywhere and large groups of budding buyers competing for their target property. As a result, it can be easy to get caught up in the atmosphere and get left behind – especially if you don’t know the terms that are being used. As a result, if you want to maximise your chances of securing the property of your dreams at auction, you need to understand these key terms:
The Bidders Guide is a document that the selling agent should give to bidders before the auction commences. It gives bidders information on how to register for the auction, as well as what paperwork will be required from them and any privacy laws and rules and regulations applying to the auction. If you want to set a serious plan for your bidding, make sure you get your hands on one of these.
This usually kicks off about 30 minutes before the auction, and it’s much more than just a final chance to see the property. It’s an opportunity to review any relevant documents related to the home, such as terms of settlement, as you won’t be able to change these if you win at auction.
This is one of the most important terms in an auction, as it determines when an auction becomes fully live. If the bids don’t peak beyond the set reserve price, then the property doesn’t sell. However, once a bid does go over the reserve, that bid is legally binding, so don’t get carried away – if you make a bid, be willing to commit that amount to the purchase of the property.
Advances and Rises
This is the increment at which bids increase during the auction, an amount usually determined by the auctioneer. These could be $100 or $10,000 and don’t always have to be followed strictly, but if you place another bid outside of these parameters, the auctioneer has the ability to reject your bid.
Vendor and Dummy Bids
There’s a clear difference between vendor bids and dummy bids, and it’s important you understand it.
A vendor bid is a single bid that’s made on behalf of the vendor by the auctioneer to push the property towards the reserve price. This bid can be made once by the auctioneer.
Conversely, a dummy bid is a bid made on behalf of the vendor by a non-genuine buyer. These are designed to help boost the property sales price but are illegal and can see the vendor hit by significant penalties. The agent can also find themselves in trouble if it’s proven that the bid was a dummy bid.
Passed in and On the Market
At any point during the auction, the auctioneer has the power to stop and seek advice from the vendor, giving them time to discuss the progress of the auction and current bidding.
For example, if the property has gone higher than the reserve price, the auctioneer might ask the vendor if they’re happy to settle on the highest sales price. If they are, the auctioneer will announce to the bidders that the property is “on the market”, or ready to be sold to the highest bidder.
If the property doesn’t reach its reserve price, the vendor has the option to negotiate a sale with the current highest bidder. This is known as the property being “passed in”.
The information and links provided on this website are for general information only and should not be taken as constituting professional advice. This information does not take into account the financial situation or particular needs of individual readers. Before making any decisions about matters discussed on this website, you should consider whether it is suitable for you in light of your own circumstances, and seek appropriate advice.