Purchasing a Property at Auction

If you are a Purchaser considering purchasing a property at an auction, it is important to have an understanding of how auctions work before you start bidding, and the legal implications of purchasing property at auction.

An auction refers to the process whereby a property is offered up for sale at a designated date, time and place, prospective buyers bid to purchase the property, and the property is sold to the highest bidder subject to whether the Vendor’s minimum price has been reached. Auctions in each state are subject to rules and regulations to prevent anti-competitive and collusive behaviour that interferes with the free and open competition at auction (Property, Stock and Business Agents Act 2002).

If you are a Purchaser considering purchasing a property at an auction, it is important to have an understanding of how auctions work before you start bidding, and the legal implications of purchasing property at auction.

Before Auction

Ideally, you should engage a Solicitor prior to the auction to review the marketing Contract before making a bid, to make sure you understand the nature of the property you are purchasing (e.g. strata, community, or deposited plan) and are comfortable with the Contract’s terms.

It is possible to negotiate amendments to a Contract for property before the auction, however, any such amendments should be agreed to in writing. For example, this could include negotiating how much the deposit is and the timing for payment of the deposit.
As Contracts for Sale are often drafted to minimise risk to the Vendor during and after the transaction, it is still recommended a Purchaser undertake as much due diligence as they can before purchasing the property . This includes obtaining professional inspection reports and thoroughly inspecting the property yourself prior to the auction.

Note, you should not rely on any building or pest inspection report provided to you by a Real Estate Agent where the report has been prepared on another party’s instructions. This is because the inspector who has prepared the report does not owe any contractual liability or duty of care to you and, therefore, would not be liable to you if the report was inaccurate.

If you are obtaining finance for your purchase, it is highly recommended that you have at least pre-approval prior to attending the auction. Whilst pre-approval is not a guarantee that you will receive final or unconditional approval after exchange, it at least will give you an indication of the price range for properties to start inspecting.

During Auction

As noted above, auctions are strictly regulated by state-based rules. The conditions of the particular auction you are attending should be on display so you can read them before the auction commences. You should also receive a copy of NSW Fair Trading’s Bidders Guide.

You should have your deposit ready, whether it is in cheque form or the ability to transfer to the Agent’s Trust Account, as you will be required to pay this if you are the successful bidder. As noted, above, you can negotiate the deposit amount and timing of any payment required before the auction.


  • You must register with the Vendor’s Agent to be able to bid at an auction, either prior to the day of the auction or on the day. The details of your registration are noted down in a document called the Bidders Record.
  • If you register, there is no obligation to bid, but you are not able to place a bid without being registered.
  • If you have nominated an agent or representative to bid on your behalf, that person must register for bidding and provide evidence of your authority to the Vendor’s Agent.
  • If you are intending to buy the property through a company, you will need a letter of authority on company letterhead and the company’s identifying number (either ACN or ABN) will be recorded on the Bidder’s Record.
  • At the time of registration, you will also be required to provide identification that confirms your name and address, such as a Drivers Licence.

Once registered, you will be provided with a physical bidding number which you raise during the course of the auction. Whenever you wish to make a bid, you should hold it up high where the auctioneer/assistant recording the bids can see and you can be properly identified. You can say the amount you wish to bid or otherwise accept the suggestion of the auctioneer.

You should consider the price guide or range for the property (if one has been provided) prior to making a bid. The auctioneer is allowed to refuse unreasonable offers and suggest their own if they determine your offer is not genuine or otherwise in accordance with the projected sale of the property.

The Vendor (or the auctioneer on behalf of the Vendor) is also allowed to make a bid (called a Vendor’s bid), but they can only do this once during the course of the auction and the auctioneer must disclose that it is the Vendor’s bid at the time of making it. A Vendor’s bid is usually used to start the process or where bidding has stalled.

Reserve price and ‘passing in’:

  • In most cases, the Vendor will set a reserve price, which is the minimum price that the property can be sold for without the auctioneer requiring the Vendor’s approval.
  • The reserve price is usually set privately between the Vendor(s) and their Agent and the auctioneer, and is not information disclosed to auction attendees.
  • In circumstances where bidding fails to reach the reserve price, the Vendor can either approve the sale of the property for a lower price, withdraw the property from auction, or ‘pass in’ the property.
  • If the property ‘passes in’, the highest bidder at the time will have the option of negotiating the purchase with the Vendor, similar to a private sale. However, purchasers need to be aware that, similar to an auction, properties purchased after a passing-in are not subject to a cooling-off period.’

It is illegal for a Purchaser to make dummy bids, or to otherwise collude with a Vendor to make a false bid to drive up the purchase price of the property. If you are caught making a dummy bid, or colluding with another party to make a dummy bid, all parties involved can be fined up to $55,000.00 each.

After Auction

If you are the successful bidder, you will be bound to purchase the property from the moment the auction ends, regardless of the fact that you have not yet signed a Contract. This means that if you are not able to complete the purchase after being successful at auction, you will lose your deposit and can be liable for damages to the Vendor.

You are required to pay the deposit to the Agent (usually 10% unless re-negotiated prior to auction) and sign and exchange the Contract with the Vendor. The auctioneer or Vendor’s Agent will assist with this.

As noted above, there is no cooling-off period if you purchase a property at auction.
After exchange of Contracts, your matter will revert to your Solicitor or Conveyancer to carry out the ordinary searches and enquiries as part of your transaction, and settlement will occur in accordance with the terms of the Contract.

Purchasing property at an auction can be an exciting albeit stressful time. It is important as a Purchaser to do your research about the property and the Contract, as well as know your financial and legal limits and obligations, before committing to a bid at auction.

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The information in this article is not legal advice and is intended to provide commentary and general information only. It should not be relied upon or used as a definitive or complete statement of the relevant law. You should obtain formal legal advice specific to your particular circumstance. Liability limited by a scheme approved under Professional Standards Legislation.