Complete Guide to Buying at Auction: Part 2 of 3

*the following information pertains to bidding at property auction in NSW specifically. For auction bidding in other states, please consult local rules and legislation.

In part one of this three part series, we discussed the steps you should take to prepare for auction. In this article, we discuss the auction itself.

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PART 2: THE AUCTION

1. Know the Auction Rules

Before you dive into property auctions, familiarise yourself with the specific rules and regulations in NSW.

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•Auction Conditions: When a property goes to auction, there is no cooling-off period, which means that once the hammer falls with you as the highest bidder, you're legally obligated to complete the purchase. Unlike private sales, you can’t back out without serious financial penalties. Even if you try to run, the auctioneer is legally able (and mandated) to sign the contract on your behalf!

•The Reserve Price: The seller sets a reserve price, which is the minimum amount they are willing to accept. This price is usually not disclosed to bidders before the auction but serves as the threshold for the sale to proceed. If the bidding doesn’t reach the reserve, the property may be “passed in,” meaning it didn’t sell at the auction. There are various other outcomes, such as reserve adjustment on the floor, or one-on-one negotiation with the highest bidder on the auction floor (our personal favourite!).

•Pre-Auction Offers: Some sellers may accept offers before the auction date. If you are highly interested in the property, you can make a pre-auction offer, but you’ll need to act fast, as competition can be fierce. Beware though, this does not mean you’re securing the property at a good price. In fact, often it can mean paying too much so you must understand the intrinsic value of the property, and have an excellent grasp on market conditions and how that particular sales campaign has progressed.

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2. Your Budget

•Stick to Your Limit: On auction day, be disciplined. It’s easy to get caught up in a bidding war, but sticking to your predetermined budget will help prevent buyer’s remorse or financial strain. A strong tip is to write this down and put it in your pocket, look at it prior and memorise it as having a written limit can make a big difference if you are not represented by an objective bidder.

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3. Understand the Bidding Process

On auction day, the atmosphere can be electric, and the bidding process moves quickly. Understanding the flow will help you feel more confident and in control.

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•Register to Bid: In NSW, you must register if you intend to bid. Bring identification such as a driver’s license or passport. You’ll be given a bidder’s card, which you’ll need to display when making a bid. Most agents will allow you to pre-register, which is recommended in case you are delayed or forget key documents on the day. There would be nothing worse than turning up and being unable to register to bid for your dream property and watch it sell to someone else!

•Opening Bid and Increments: The auctioneer will call for an opening bid, and the bidding will typically rise in set increments. Some buyers prefer to jump in early, while others wait until bidding slows down.

•Reserve Price and Negotiation: If the bidding doesn’t reach the reserve price, the highest bidder often gets the first right to negotiate directly with the seller after the auction. Be prepared for this possibility and have a strategy in place. Note, this is not a legal requirement, but often granted as first right of refusal to the higher bidder on the floor. If you play hard ball or negotiate poorly, there is nothing stopping the agent/vendor moving on to the next bidder (or anyone) and selling the property.

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4. Bidding Tactics

Successful bidding is part preparation, part strategy, part money. Here are a few tactics that can help you win without overpaying:

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•Be Assertive: Place confident and quick bids to show that you mean business. This can sometimes deter other bidders from continuing.

•Bid Early vs. Late: Some buyers prefer to make early, bold bids to assert dominance, while others hold back and wait to see how the competition unfolds. Decide which strategy suits you best based on your comfort level.

•Knock out bids: Some buyers wait until later and enter with a knock out bid in an attempt to deflate other bidders. This can work, but usually only against those who aren’t prepared and don’t have their own strategy in place.

•Stay Calm: Auctions can be intense, but try to remain calm and focused. If the price exceeds your budget, don’t get emotional—be ready to walk away. Never argue with other bidders or the auctioneer as this will just weaken your approach.

•Nothing beats hard dollar amounts: No matter how much you prepare and strategise, sometimes people will have or be willing to spend more money than you. This is ok, and it happens to everyone. The trick is not to get carried away and overpay as once the dust has settled and excitement winds down, the buyer is the one left with the property.

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In part 3, we will discuss what happens if you are the highest bidder and secure the property. Stay tuned.

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