Don’t let auction season spring a surprise on you

We’ve put together a run down of auction day, the rules of engagement, so you know what to expect when the bidding starts.

Spring is traditionally auction season, and many properties go under the hammer at this time of year.

There’s more to bidding successfully than winning on the day.

Here are some important tips to help you make the right move, and know where you’re protected – and where you’re on your own.

Be sure before you bid

There is usually no cooling-off period if you buy a property at auction (this varies state to state).

The estate agent or auctioneer will ask the successful bidder to sign the contract of sale and pay a deposit – usually 10 per cent of the purchase price – unless the seller agrees otherwise. Check the deposit amount specified in the contract of sale before the auction. The law does not say how much this should be.

Things to do before the big day

If you are interested in a property, ask for a copy of the vendor’s statement and the contract of sale. Study them carefully and give them to your legal representative or conveyancer, if you have one.

Consider having the building inspected by qualified experts well before the auction day. You should also arrange any finance, such as a mortgage, that you require.

Find out whether the property is part of an owners corporation. If so, learn about its rules, fees and any planned or proposed expenditure.

Buying before the auction

Even if the seller has chosen to sell by auction, they may consider prior offers. You would make your offer via the estate agent, usually with a signed contract. There may be a process of negotiation, as with buying through a private sale.

Keep in mind that if you make an offer less than three clear business days before the auction date, you do not get a cooling-off period. You cannot change your mind.

Auction rules

The auctioneer, and everyone attending the auction, must obey certain rules. For example, it is illegal to disrupt an auction. Penalties apply.

The rules must be displayed at the place where the auction will take place, for at least 30 minutes before it begins.

Before taking the first bid, the auctioneer must announce:

• The auction will be conducted according to the auction rules.

• The rules prohibit bids being accepted after the fall of the hammer.

• Bidders will be identified on request.

• It is against the law to make a false bid, hinder another bidder, or in any way intentionally disrupt an auction.

• Substantial fines apply to anyone who engages in illegal auction conduct.

• Whether or not there will be vendor or co-owner bids.

• Any additional conditions that apply to the auction.

During the auction, the auctioneer may:

• Refuse a bid at any time, including when the auction hammer is falling.

• If there is a dispute over a bid, resume the auction at the last undisputed bid or start the bidding again.

• Refer a bid to the seller at any time before the conclusion of the auction.

• Withdraw the property from sale at any time.

Your bids

Make sure you set yourself a clear bidding limit.

It is the auctioneer’s job to achieve the highest possible price. To do this, they usually try to encourage as many people as possible to bid. They can set the amount by which bids increase, but you can also offer any alternative amount.

The auctioneer will choose whether to accept or reject a bid of an alternative amount. Generally, the size of the bids decreases as the auction draws to a close.

Expect these expenses

If you make the winning bid, there are many expenses to cover, on top of the purchase price. Make sure you will have enough funds to cover costs such as:

• Government charges such as stamp duty and GST, if applicable.

• Building and contents insurance.

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