Buying Property at Auction in NSW | The Complete Buyer’s Guide

Are you looking at purchasing a property in New South Wales at an auction? This buyers guide provides a comprehensive summary of the auction process and what you should be looking out for throughout the process. It has been prepared based on our extensive experience and noting the guidance provided by NSW Fair Trading.

What is an auction?

An auction is where potential buyers gather to publicly bid for a property. It is usually organised and conducted by an estate agent, acting as an auctioneer and is governed by strict rules that are mandated by NSW Fair Trading.

Buying property at an auction is very different from other methods of buying property. The bidding is public, and if you are the highest bidder when the auctioneer’s hammer falls:

• you must immediately sign the contract, and
• you are not entitled to a cooling off period – that is, you effectively must proceed with the purchase.

Therefore, it is crucial to ensure you are bidding on a property you are prepared to purchase.

This article sets out some key points to consider before participating in an auction.

Auction language

You should ensure that you understand each of the following key phrases, which are used at auctions:

• Reserve Price: This is the minimum price set by the seller before the auction. If bidding does not reach this price, the auctioneer may ask the seller privately if they are willing to accept a lower offer
• Passed In: If bids do not meet the reserve price, the auctioneer will seek further bids. If the reserve is still not met, the property may be ‘passed in’ or withdrawn, giving the highest bidder the first opportunity to negotiate with the seller
• Fall of the Hammer: At the auction’s conclusion, the auctioneer will call for final bids. Once no more bids are made, the auctioneer will signal the end of the auction with the ‘fall of the hammer,’ after which the highest bidder must sign and exchange contracts

How does an auction work?

To bid at an auction, potential buyers must register with the vendor’s agent and receive a bidder’s number. The auctioneer manages the bidding, taking offers from potential buyers and tracking the current bid price. The seller sets a reserve price, usually undisclosed. If bidding surpasses this price, the property is sold when the hammer falls. The successful bidder must sign the sale contract and pay a deposit, typically 10% of the purchase price, immediately.

What is the difference between an auction and private sale?

Auctions differ from private sales as there is no cooling-off period after contracts are exchanged, either on the auction day or if the property is passed in. Bidders must be ready to exchange contracts and complete the sale, or risk losing their deposit and facing potential damages claims from the vendor.

Pre-auction offers

Sellers may consider pre-auction offers. These are made through an agent before the auction, similar to private sales, but often require waiving the cooling-off period.

Auction day

On auction day, the property may be open for inspection. This is a chance to review the property, contract, and auction rules. Agents must provide potential bidders with the NSW Fair Trading Bidder’s Guide, detailing registration and identification requirements. Auction conditions must be clearly visible, including the highest bidder being the buyer (subject to reserve price), the auctioneer’s right to make one vendor bid, and the prohibition of late bids.

Agents are also required by law to have a list of the following auction conditions clearly visible for all potential bidders:

• the highest bidder is the buyer, subject to any reserve price
• the auctioneer is entitled to make one bid only on behalf of the seller
• before the auction, the auctioneer must announce that the auctioneer is permitted to make one bid on behalf of the seller
• the auctioneer must announce immediately before, or in the process of making the bid, that he/she is making a vendor bid
• the auctioneer can refuse a bid that is not in the interest of the seller
• the auctioneer has no authority to accept a late bid (a bid after the fall of the hammer)
• if there is a disputed bid, the auctioneer is the sole arbitrator and makes the final decision
• the successful buyer’s name must be given to the auctioneer as soon as possible.

Do I need to register to bid at an auction?

To bid at a residential property auction in NSW, you must provide your name, address, and proof of identity to the selling agent, who records these details in the Bidders Record and issues a bidder’s number.

Registering for an auction does not mean you must bid. Registering simply gives you the right to bid.

Who needs to register?

When bidding jointly with another person, such as a spouse or partner, only one individual needs to complete the registration process. However, if you are placing bids on behalf of another person or a company, registration is mandatory, and you must provide the agent with a letter of authority from the person or entity you represent. This requirement also applies if you are bidding over the phone for someone else. The letter should include the individual’s name, address, and a proof of identity number, like a driver’s licence. For company bids, the letter must be on official company letterhead, and the Australian Business Number (ABN) will serve as proof of identity.

Proof of identity

To register, you must present a document or card issued by a government or financial institution that displays your name and address, such as a driver’s licence or a council rates notice. If you lack such a document, you can use two separate documents that together confirm your name and address. One document must show your name and be issued by a government or financial institution, such as a passport or Medicare card. The other must show your address, like a utility bill or rental agreement. Certified copies are not acceptable. Proof of identity documents can be submitted electronically if the agent agrees, but not through audio-visual methods like Zoom.

When to register

You can register with the selling agent at any point before the auction, whether during a property inspection or on the auction day itself.

If you pre-register, you will still need to present proof of identity on the auction day to receive your bidder’s number.

What happens at registration

During registration, the agent will document your name, address, and proof of identity in the Bidders Record.

If you are bidding for someone else or a company, their details will also be recorded. You will be issued a bidder’s number, which must be displayed when you place bids.

What if I am late to the auction?

If you arrive after the auction has started and wish to bid, you should quickly find the agent to register or show your proof of identity if you have pre-registered. If you need to bid immediately, signal to the auctioneer. Once you have your bidder’s number, the auctioneer can accept your bids. Be sure to return your bidder’s number after the auction concludes.

Your privacy

The agent is prohibited from showing the Bidders Record to anyone, including the property owner. Only an authorised person from NSW Fair Trading can access it. The agent must keep the record secure and cannot use it for any other purpose.

Successful bidder

If you win the auction, you must sign the sale contract and pay a deposit, usually ten per cent of the purchase price, immediately. There is no cooling-off period. After the contract is exchanged, your solicitor will perform property searches. Your solicitor and the seller’s representative will then arrange the settlement, at which time you must pay the remaining purchase price.

Dummy bidding and collusion

Making dummy bids at an auction is illegal. The seller is allowed one bid on their behalf by the auctioneer, which must be announced as a vendor bid. Engaging in dummy bidding can result in fines up to $55,000. Colluding to interfere with competition at the auction is also an offence, with a maximum fine of $55,000.

What are some of the things I should consider when preparing for an auction?

Before bidding at an auction, you should consider each of the following:

• Market knowledge: Research similar properties and recent sales to anticipate likely sale prices and avoid unnecessary upfront costs.
• Property type: Understand the differences between owning a house and a strata or community scheme property, including ongoing costs and obligations.
• Readiness to purchase: If you are the highest bidder, you must sign the contract and you will not have a cooling-off period. If you subsequently cannot complete the contract, you will lose your deposit and may be liable for further losses. Accordingly, before you bid at an auction, ensure you have:
  • confirmed with your lender and/or broker the maximum amount you can borrow
  • thoroughly inspected the property and know the property’s condition. This includes obtaining professional building inspection and pest reports and reviewing any strata reports (if the property is in a strata scheme)
  • reviewed the contract with your lawyer/licensed conveyancer and are comfortable with its terms. Your lawyer will generally negotiate changes to the contract prior to the auction. Accordingly, it is important that you engage a lawyer at least a few days before the auction so they have enough time to review the contract, provide you with advice and then negotiate with the seller’s lawyer regarding the terms of the contract
• Maximum purchase price: Know your budget to avoid exceeding it and incurring additional costs like lender’s mortgage insurance. Remember – if you are the highest bidder at an auction, you are obliged to purchase the property and will not have a cooling off period. Because of this, it is critical for you to know your limits. Tip: Before the auction, write down what your absolute maximum bid will be. You do not want to be making these decisions during an auction. If you are prepared and know your limit, this can make it a lot easier for you to make a decision in the spur of the moment (rather than, making a decision in a pressurised auction environment).
• Property suitability: Ensure the property meets your needs and is affordable, considering location, condition, and space requirements.

Need help buying property at auction?

If you need a lawyer to act for you in relation to the purchase of property at an auction, please check out our Buying a Property Information Centre, where you can get more information about our conveyancing services and get an instant quote.

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