An auction is the term given to a public selling of a property. Purchasers who are interested ‘bid’ for the property and subject to a reserve, the highest price is accepted. The main objective point of an auction is to foster competition between bidders to drive the price up.
Contracts are exchanged once a bid is accepted and the transaction proceeds through the normal conveyancing process with the exception of no cooling off periods being waived.
Parties to the contract need to be aware of the strict rules that govern auctions. The agent must conduct the auction according to the regulations and maintain specific regulations. If you are a purchaser wishing to bid at an auction, you need to register your intention with the vendor’s agent, and you will be provided with a bidding number.
The property is usually open for inspection for a short time prior to the auction however, it is best that you organise an inspection with the agent prior.
The auctioneer then sets the reserve at the minimum price the vendor is willing to sell property. The auctioneer will commence the bidding and continue to call for bids. Once the auctioneer deems there will be no further buds, the hammer falls and the bidding must end with the highest bid over the reserve price receiving the sale. It is important to note that an auctioneer can refuse a bid that is not in the vendors interest however, they are prohibited from accepting a bid after the fall of the hammer.
If the reserve price is not met at the auction, the property is ‘passed in’ to the highest bidder who then has the first option to negotiate a price with the vendor. All participates at an auction must not engage in deceptive or collusive behaviour. This behaviour includes making ‘dummy bids’ on behalf of a vendor. This behaviour has strict penalties.
If you are the successful bidder at an option, you must be in a position to exchange contracts and pay the agreed deposit amount. A purchase at an auction results in an unconditional exchange of contracts that are legally binding. This means that the contract is not subject to a cooling-off period and if the sale falls through at the purchaser’s expense, the deposit will be forfeited.
Contact Carter O’Neill Legal today if you are interested in a property and we may review and advise on the marketing contract with you. It may be appropriate that additional searches are conducted on the property prior to auction to ensure that the property is right for you. Once your finances are in order and you are informed about the property, you are in a competitive position to bid an at auction.
When you’re ready you can give us a call! Call our Property lawyers in Mona Vale on 02 9151 7339 or call our Property lawyers in Gosford on 02 4308 8892.