A Beginner’s Guide to Auctions: Everything You Need to Know About Auction Day

From the moment the bidding starts, property auctions are a surefire way to get your adrenalin pumping! And while they can be exciting, auctions can also be daunting - especially for first-timers.

As with anything in life, being prepared for an auction can help in ensuring you feel calm, confident and ready to get the most out of your auction experience. 

With that in mind, we’ve put together a beginner’s guide to auction day, so you can be prepared before the bidding begins!

‍Before Auction Day‍

• Get some auction experience

Prior to auction day, it’s a good idea to attend a few auctions as an observer, to get a feel for the atmosphere and the bidding process. This will help you become more comfortable and less intimidated when it’s your turn to bid.

• Obtain conditional approval

Make sure you have your finances in order well before auction day. This means getting conditional approval so you know exactly how much you can afford to spend. Remember, if you’re the winning bidder, you’ll be required to pay a deposit on the spot.

• Arrange your inspections

Conduct a thorough inspection of the property you’re interested in, including a professional building and pest inspection report. This will help you bid with confidence, knowing exactly what you’re buying.

• Understand the auction terms

Familiarise yourself with the terms and conditions of the auction, which you can usually get from the selling agent before auction day. These will include legalities around the deposit, settlement dates, and any other conditions of sale.

On Auction Day

• Arrive early

Upon arrival, you’ll need to register as a bidder, which will mean showing your identification in order to receive a bidder’s number. Being early also gives you a chance to secure a good spot that allows you to see the auctioneer and other bidders clearly.

• Know your limits

Set yourself a strict limit based on your pre-approval amount and stick to it. In the heat of the moment, it’s all too easy to get caught up in the excitement and bid beyond what you can afford, so having a clear limit in mind is crucial.

• Watch the crowd

Keep an eye on the crowd and the auctioneer. Seasoned bidders can use body language and bidding tactics to their advantage. By observing these interactions, you can learn when to bid and when to wait, potentially giving you an edge over less experienced bidders.

The Bidding Process

• The auctioneer will start the auction by announcing the terms of sale, and will then call for an opening bid. 

• Bids typically increase in increments set by the auctioneer, who will guide the process towards the reserve price (the minimum price the seller is willing to accept).

• If the reserve price is reached or exceeded, the property is declared ‘on the market’ and will be sold to the highest bidder. 

• If bids fall short of the reserve, the property may be passed in*, and the highest bidder usually has the first opportunity to negotiate with the seller.

*If a property is "passed in", it means that the highest bid did not meet the seller's reserve price and therefore it doesn’t sell.

Winning The Auction

Placed the highest bid and the property reached its reserve price? Congratulations – you’ve just bought a property!

You’ll be asked to sign the contract and pay the deposit immediately after the auction concludes.

Remember, there’s no cooling-off period with an auction - so when the hammer falls, you’re legally bound to purchase the property. This is why it’s so important to be fully prepared, stick to your limits, and be certain about your decision to bid.

If The Property Is Passed In

If the property is passed in, don’t lose hope, as this scenario may give you the opportunity to negotiate directly with the seller.

In some cases, these negotiations will result in a sale at a price that’s acceptable to both parties.

Auction day can be a rollercoaster of emotions, but with the right preparation and mindset, it can also be an incredibly rewarding experience.

Understanding the process, knowing your limits, and staying focused are all key to making informed decisions and, hopefully, securing your dream property. Best of luck and happy bidding!

Looking to learn more about the home-buying process? Check out our series of buy a home articles. 

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This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.

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