Process of Buying a House at Auction

1. Get your finances ready 

You should know your borrowing capacity before actively looking for a property to buy at auction or through private sale. There’s no point bidding at an auction that you have no realistic chance of winning. 

Work with your lender to determine how much you can afford to borrow. Once you’ve provided the relevant information, your lender can pre-approve you to bid up to a certain amount. That way, you at least know what properties to look for within a specific price range. 

Additionally, you’ll need to arrange a facility with your lender. That will allow you to pay the deposit and exchange contracts on the spot if you are a successful bidder.  

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2. Find and inspect the property

You can browse countless property websites and local print publications to find your dream property. You could also consult an expert, such as a mortgage broker or buyer’s agent, to help in your search. 

Once you’ve found a property you’re interested in, regardless of whether you’re buying a property at auction or via a private sale, you’ll need to conduct inspections to check its condition. The selling agent must hand over any building and pest inspection reports conducted on the property. If there are no recent ones, you may need to organise them before the auction. 

You can also request a strata report if the property is part of an apartment block. Though, the selling agent should provide before the auction. Ask your solicitor to check over the contract of sale to ensure no hidden expenses are involved.

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3. Know the rules of buying a house at auction

Auctions are governed by strict rules and conditions, so you should understand how they operate before you register to bid. 

The best starting point is the Bidders guide. This is something the selling agent is legally obliged to provide to bidders when they register. This guide should contain information about the paperwork required for successfully bidding for the property, any privacy laws or other auction regulations, and the settlement date. 

Typical rules

States and Territories have slightly different regulations regarding auctions. Generally, however, the points below apply nationwide, so you should familiarise yourself with the basics. These include:

• The highest bidder wins the right to buy the property. At the conclusion of the auction, the bidder is expected to pay the deposit and sign the contract.
• If the reserve is not reached, the seller can ‘pass in’ the property and is free to negotiate with the highest bidder. 
• The auctioneer can make one bid on behalf of the seller but must announce beforehand that they intend to do so. 
• The auctioneer is not permitted to take a late bid.
• The auctioneer is the sole arbiter of disputes that may arise over a bid.
• The minimum bid allowed will be at the auctioneer’s discretion 
• The auctioneer should be given the successful bidder’s details immediately at the auction’s conclusion.
• If nobody bids at the auction, the property is automatically passed in, and the selling agent may negotiate with anyone registered who may be interested in making an offer.  

4. Register to bid

Before you can bid at an auction, you need to register with the selling agent. This straightforward process can be done before the auction begins, either on the day itself or earlier at an inspection. 

To register, give the agent your name and address with proof of identification. This proof could include a driver’s licence, council rates notice, passport, Medicare card or credit card. Depending on the selling agent, they may require just one or a combination. 

The agent will then record your name in a Bidders Record and give you a bidding number. If you have pre-registered, they should then be able to provide you with a bidding number so you can place a bid immediately. 

A few things that are important to know: 

• Registering does not require you to bid, but you can’t do so without registering. 
• If you are bidding as part of a couple, only one person has to register. 
• If you are bidding on behalf of someone else, you will need to show the agent an authority from that person to bid on their behalf. 
• If you arrive at the auction late, you may still be able to register if you can find the selling agent and provide the necessary proof of identification. 

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5. Set your strategy

Before you place a bid, consider your auction strategy. Knowing when to bid and how big the increments should be should give you an advantage, especially if you are up against other first home buyers. 

You can also engage a buyer’s agent to bid for you. Help from a pro could take a lot of stress out of the whole process — and make it harder for you to get caught up in the bidding war. 

6. Understand the process and make your first bid 

Once you’ve registered with the agent, arrived at the auction and are eagerly awaiting the bidding following the auctioneer’s initial spiel, there are a few things to know about the opening bid. 

The auctioneer may receive an opening bid that is extremely low but high enough to get the ball rolling. That’s normal, as the opening bid is not especially relevant.  That’s because the property for auction will have a reserve price, which is the minimum amount the seller is willing to sell for. The selling agent and the auctioneer are not allowed by law to disclose the reserve, so the bidding may continue for some time before hitting this amount.

When you’re ready to place a bid, either hold up a card with your number on it or call out, as long as you get the auctioneer’s attention.   

7. Ignore the bidding war 

Bidding at auctions can also be frenetic, with a number of parties pushing the price higher and higher, hence the term bidding war. The property you want may be in very high demand due to its fabulous location, or you might be in the middle of a red-hot property market. 

Either way, you need to be highly disciplined to avoid getting caught up. Focus more on avoiding going over your limit and less on ‘winning’ the war with a bid you can’t afford.

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8. Prepare for potential outcomes 

The property will either be sold at the fall of the hammer or passed in because the bidding did not reach the reserve price. 

If you are the highest bidder when the property is passed in, you have the right to negotiate with the seller to see if you can come to an agreement on the price. If they are amenable to your offer, the sale will proceed in the same way as if you had won the auction. 

» Need to negotiate? Here’s how to make an offer on a house

9. Watch for the fall of the hammer 

Before the hammer falls on the successful bid, the auctioneer will look around and ask for other bids. The selling agent will also usually have representatives walking amongst the bidders, attempting to cajole them into going a few thousand dollars higher to keep pushing the price up. 

While this can be a drawn-out process, it’s typically exciting. Expect to see plenty of negotiations with the seller’s agent and buyers hurriedly chatting to partners or other family members on the phone.  

At some point, the auctioneer will finally utter the famous line, ‘going once, going twice, going a third and final time — sold to…’ and bang the hammer. 

10. Plan your next steps

If others outbid you, you obviously can’t buy the property after the auction. You can, however, ask the selling agent to contact you if, for whatever reason, the sale falls through before settlement. 

If your final bid is successful, you must sign the contract of sale, a legally binding document, and pay the deposit, which is usually 10% for auctions but may vary. The Bidder’s guide should specify the deposit amount and the settlement date, generally between 30 days and six weeks after the exchange of contracts. 

On settlement day, you pay for the remainder of the property, receive the title deeds, get the keys and move in. Any charges on the property, such as rates, will be adjusted so the new owner starts paying them on settlement day.

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