On TV, auctions look simple. A fast-talking auctioneer stands in front of a property and takes bids from eager would-be buyers, before the hammer drops and it’s sold amid a flurry of waving hands and pointed fingers.
In the real world though, it’s more complicated. And it’s in the best interest of all sellers to understand the popular sale method, from marketing to reserve prices and everything else in between.
Industry expert, WBP Group executive chairman Greville Pabst, explains the auction process and what sellers need to know.
It’s in the best interest of all sellers to understand the popular sale method. Picture: Getty Images
Before auction day
A lot of the hard work of selling a home goes into planning the strategy. Here’s what will occur before the auction
1. The marketing campaign
“The agent will run a marketing campaign, usually for four to five weeks, before the auction date,” Pabst says. This involves advertising and showing the property, liaising with potential buyers and providing contracts.
2. Decide on price expectation
Then, the day before the auction, the agent and vendor talk numbers. “This is a conversation around expectations on price. The feedback received during the campaign will be an important part of this,” he says.
3. The agent will run through the auction process
“The agent will run through the process for the auction day too, so the seller is fully informed,” Pabst says. An auction can either be held onsite at the property or in another location, like a boardroom.
On auction day
There are strict rules about how auctions are run and rules differ from state to state, Pabst explains.
1. Final public showing
Usually, the home will have its final Open For Inspection immediately before the auction.
At least 30 minutes before the auction commences, the agent is required to display certain documentation about the property and verbally provide set information to potential buyers.
2. The auctioneer will undertake legal disclosure of information
In Victoria, for example, the auctioneer must tell bidders:
- the auction will be run according to the auction rule
In most states, potential buyers must register before the auction starts to get a bidder’s number.
It’s now time for the action to begin. The auctioneer will invite an opening bid to start the auction and then accept subsequent bids.
Pabst says the auctioneer can “set the tone for increments”, but bidders are able to seek other amounts. A vendor’s bid can be used to encourage bidding from buyers, he adds.
Dummy bidding – false bidding made by a non-genuine buyer – is against the law, Pabst says.
The auctioneer can “set the tone for increments”, but bidders are able to seek other amounts. Picture: Mark Cranitch
Reaching reserve and going ‘on the market’
Once the reserve price has been reached, the property is considered to be “on the market” and is sold to the highest bidder.
A 10% deposit is normally paid, with the rest due on settlement.
If the property gets passed in
Pabst says if the bidding doesn’t reach the reserve, the property is passed in. The highest bidder is usually given a chance to negotiate with the seller, but this is not law. “Let the agent work for the money,” he says.