Buying at Auction
Auction comes from the Greek word “aucto” meaning - “to increase”.
An auction is a public sales process that allows people to make offers (known as bids) for a property. Auction proceedings are governed by law and REIWA Auction Code of Practice. There is a set time and date of sale and all terms and conditions are outlined in advance. The auction contract is cash unconditional and both buyer and seller are bound to the transaction terms and conditions.
How do I prepare myself for the auction?
If required, organise finance from a lending authority or a bank prior to auction day.
Settlement date will be disclosed by the Agent and is traditionally 30-60 days. A personal cheque or a bank cheque/Bank Bond is fine. A transfer of funds on the following Monday is not acceptable; neither is a large cash deposit. Auctions are a straightforward process. Ensure that you are able to provide 5% - 10% deposit or, alternatively, Vendors are now favouring $50,000-$100,000 flat fee deposit on the “fall of the hammer”
You may want to seek independent advice on the potential value of a property. This gives you a feel as to how the process works and the type of bidding that can occur. It will also make you more comfortable when it comes to bidding for your dream home.
Do I need to pre-register?
We recommend that if you have any interest in bidding on the day of Auction that you Complete a First National Genesis Bidding Registration form. This will ensure that your First National Genesis Agent and Auctioneer keep you informed of any and all relevant details leading up to and on the Auction Day.
We recommend as part of your due diligence that you have a copy of the Auction Particulars and Conditions of sale and Joint form of General Conditions of Sale 2011 and the REIWA Auction Code of Conduct. It is recommended you advise the agent of any special conditions or any variations you may require (in writing) prior to bidding.
On the day of the auction, the Agent will look to confirm your details and any variations signed off by the vendor. It is at this time you may be offered a First National Genesis numbered Bidding Paddle. The Bidding Paddles assist the agent and auctioneer to spot prospective bidders easily and the number is easy to read for recording the bids.
We will have First National Genesis representatives present on the day to ensure you are aware of what’s happening as all times.
How does the Auction Day process work?
On Auction day the Auctioneer will usually;
A. describe the auction contract and the terms of auction (copies available on day of auction).
B. summarise the benefits of ownership
C. call for an opening bid
D. sell the property, at or above the reserve price
Bidding
You need to bid in order to buy. Only bidding will indicate your interest in the property. Once the auctioneer has announced the property is ‘to be sold’, the highest bidder at or beyond will be the winner on or past the reserve price.
The Auctioneer will start with an opening bid. To bid, simply attract the attention of the Auctioneer by raising your hand, paddle or calling out a figure, or nodding your head when you make eye contact with the auctioneer. The auctioneer is there to encourage and assist you in bidding, and usually nominates the incremental amount to be advanced. Please feel welcome to ask the Auctioneer or the Agent, any questions about the proceedings, prior to the auction commencing.
Some buyers prefer to bid quickly to indicate they wish to dominate the bidding. This strategy often works. Others will hold back and only come in later in the proceedings – there is no right or wrong approach. If you are going to wait, then don’t wait until a second or third call, as some people have missed out by doing this.
Once the reserve price is met, the property is on “the market” and the highest bid therefore buys the property. Not all Auctioneers will state the reserve is met, so once you hear the “First call, second call” be sure to bid!
What is the reserve price and how do I know the property is about to sell?
A reserve is a nominated price under which the vendor will not sell. The vendor sets the reserve price with the auctioneer and it is generally established using price feedback throughout the campaign together with the most recent comparable sales. The reserve is not disclosed to the bidders. When bidding reaches the reserve, the property is then to be sold with the auctioneer clearly indicating this using phrases such as ‘it’s on the market’ or ‘we are selling now’ or similar. The Auctioneer will announce “First call, second call, third and FINAL call …. SOLD!
What is vendor bidding? – First National Genesis Transparent Auctions
The Auctioneer has the discretionary right to place bids on behalf of the vendor. This may occur if you and other bidders choose not to bid. If required, vendor bidding will only take place under a figure that the vendor is willing to accept. The Auctioneer is the only person allowed to bid on behalf of the vendor and all vendor bids will be declared and clearly announced as such. All First National Genesis vendors have given a written undertaking that they will not bid or have another party bid on their behalf at the auction. So you can participate with total confidence!
Buying on behalf of another person
If you are acting as a buyer’s representative and/or nominee, you will be required to produce a signed agency form (along with valid identification) notifying you as thebuyer’s nominee. If you don’t have this it is assumed you are buying the property in your own right. Your agent can also pre-arrange for a telephone bidding form should you not be able to be at the auction onsite and choose to bid by telephone. To always protect yourself, it is wise to have the relevant First National Genesis forms signed off in advance and in turn they will advise the seller and Auctioneer.
“Unless Sold Prior” versus “Will not be Sold prior” - What does this mean?
In some instances, due to the nature of the property and based on Vendor, Public Trust, Solicitor instructions, the property will be advertised: “Will not be sold prior to Auction” day. This means it will track through to Auction Day. Nobody can submit a Pre-Auction offer.
In most cases, the Auction campaign does allow for the property to indicate “Unless Sold Prior to Auction”. This means a purchaser can offer a pre-auction offer prior to auction day. The Agent is duty bound to call ALL interested parties on the property so make sure you have already registered your interest and provided contact details. The Vendor reserves the right to sell prior or proceed to Auction Day.
What if the property does not sell at Auction?
If the highest bid offered to the seller at auction is not accepted then the property will be “set aside” and the auction concluded. Traditionally, the Auctioneer (and Agent) will “treat” with the highest bidder who will be given the chance to negotiate for the property just after the auction. This ensures that the highest bidder is given the opportunity to buy before the property is opened up to buyers on other terms that may or may not contain conditions. In this case, the transparent nature of the auction is lost.
It is generally accepted that bidding confidently gives a person the best chance of winning the auction. Go to the auction with a price in mind but allow a certain ‘flexibility’ should it be required at the business end of proceedings.
What contract do I sign?
You will be signing an Auction Particulars and Conditions of Sale Contract and General Conditions of Sale 2011. You should always examine the contract prior to attending the auction. In addition, there will be copies on display prior to the commencement of the auction. All terms and conditions are outlined, such as warranties (if any), deposit, chattels, and settlement date, mostly included in this memorandum.
First National Real Estate Genesis Auctioneer is available to talk to if you need any further clarification. Otherwise, if you have any questions please don’t hesitate to call your First National Genesis Sales Consultant.