You can tell a hot market by the number of auctions versus private sales. If you have been looking for property this year you would have noticed the Southern Highlands real estate market has more and more properties being offered for auction.
So, it’s important to know how this all works in NSW as different states are slightly different in their procedures. You can always check with the Office of Fair Trading about the auction rules as an auction has a unique was of selling compared to private sales (treaty).
An auction is sold by a licenced auctioneer and is deemed sold once the reserve price is met and the auctioneer declares the property ‘sold’.
Before even thinking of putting your hand up on the day, have the contract of sale checked by a solicitor. The contract will have all the terms and conditions of the sale, but also any easements, covernments, right of way or any other thing that may affect the property that you would need to know.
On the day and prior to the auction the conditions of the sale and the contract of sale are at the premises for you to read. The auctioneer will also read out the terms and conditions before he/she ask for bids and these may be:
Before the auction starts, you’re entitled to ask the auctioneer any reasonable questions about the property.
The reserve price is the vendor’s insurance policy that the auctioneer won’t sell their property for less than they want during the auction. In short, it’s the minimum price that the vendor will sell their property for. Once the bidding starts, the property isn’t really for sale until the reserve has been met.
If the bidding doesn’t reach reserve then the auction has failed and the property is passed in. At this point, the vendor usually starts negotiating with the highest bidder as a courtesy – it doesn’t mean that other bidders can’t negotiate as well. However it is always best to be the last person with your hand up, even if it doesn’t get sold to you at the time. The agent will usually go to you first, however, yes, if there are other interested unsuccessful bidders you could be part of a after auction bidding war and end up paying more then than you would have at the real auction. It’s human nature not to lose, and a good example of this is eBay. How often do we spend more for the product than we had anticipated until it looks as though we are losing the item?
If the bidding reaches the reserve, then the property is truly on the market for sale and the highest bidder will buy the property. Remember, there’s no cooling off period or chance to change your mind which is why you must understand the conditions of sale well before this point. When the hammer falls to the highest bidder – the property is sold!