A Guide to ‘Passing In’ at a Property Auction

For first-time home-buyers, property auctions can be a minefield of confusing terms and unfamiliar processes. One example of this is “passing in”, which is a term you may come across during your auction experience.

Let’s take a look at what’s involved with passing in and what you can do in this event, to help you maximise your chances of success and secure the property you’re hoping for

What does “passing in” mean?

At a property auction, passing in means that the highest bid did not meet the seller’s reserve price – which is the minimum price the seller is willing to accept. 

As a result, the property does not get sold during the auction.

Why would a property be passed in?

There are multiple reasons why a property might be passed in.

One is that the reserve price set by the seller might be above what buyers are prepared to pay. This could be due to a mismatch between the seller’s expectations and the actual market value of the property.

Other reasons include low attendance at the auction or a lack of competition among bidders resulting in bids not reaching the reserve price.

What happens if a property is passed in at auction?

When a property is passed in, the highest bidder usually gets the first opportunity to negotiate with the seller.

This usually takes place straight after the auction with the aim to reach a sale price that both parties are agreeable to.

If these negotiations are successful, the sale can proceed; however, if an agreement is not reached, the property may remain on the market for sale by other means.

Opportunities for buyers

If you’re the highest bidder on a passed-in property, you may find yourself in a strong negotiating position.

Without the pressure and competition of the auction environment, you’ll often have more flexibility to discuss terms and price.

Passed in properties: strategies for success

If you're interested in a property that's been passed in, here are some strategies to increase your chances of successful negotiation:

• Know your limit: Before auction day, set a maximum budget and be sure to stick to it during negotiations to avoid getting caught up in the moment and offering more than you can comfortably afford.

• Do your research: Get to know the local property market and comparable sales in the area, so you can negotiate with confidence and make a realistic offer that reflects the property’s market value.

• Be ready to act: Obtain your conditional approval in advance and have your solicitor or conveyancer on standby. Showing the seller that you’re prepared and serious about the purchase can work in your favour during negotiations.

• Understand the reason for sale: If possible, try to find out why the seller is moving, as this can help to guide your negotiation strategy and determine whether a quick sale is desirable.

While a property being passed in at auction might initially seem like a setback, it can often open the door to potential opportunities for buyers.

By understanding the passing in process and knowing how to handle the next steps, you can negotiate your way to a successful property purchase.

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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