Buying at auction in NSW: what to do before auction day

Why auction is different

At a private sale, you usually have 5 business days after exchange to withdraw.

At auction, you do not. Once the hammer falls and you are the highest bidder, you are bound to sign and exchange.

The same applies if the property is passed in and you exchange with the seller on the same day.

If you then cannot complete the purchase, you may lose your deposit and may be liable for the seller's losses.

Review the contract before you bid

The contract must be ready before the property is advertised. Ask the agent for it as soon as you are interested.

Have your solicitor review it well before auction day, so there is time to ask the seller's solicitor for changes.

Any change, such as a lower deposit or a different settlement date, must be agreed before the auction.

On auction day, take a final look at the contract to confirm nothing has changed.

Finance and the deposit

1. Confirm with your lender the most you can borrow, including transfer duty and other costs.
2. Have the approvals in place before you bid.
3. Have the deposit ready to pay on the day. It is usually 10% of the price, unless a lower amount or a deposit bond was agreed before the auction.

Set your own limit before the auction starts, and keep to it.

Inspections and reports

Obtain your building and pest reports before auction day.

For a unit or townhouse, obtain the strata report as well.

Ask the agent whether any earlier inspection reports exist. When you ask for the contract, the agent must tell you about earlier reports it knows of.

Check for land tax owing, and ask for the land tax clearance certificate.

Registering to bid

To bid, you must register with the seller's agent and receive a bidder's number.

You can register before the auction or on the day. You must show proof of identity on auction day, even if you registered earlier.

If you bid for another person or a company, you must give the agent a letter of authority.

Joint buyers need only one person to register.

On the day

1. Read the conditions of sale, which must be on display.
2. The auctioneer may make one bid for the seller. It must be announced as a vendor bid.
3. Dummy bidding is illegal.
4. If bidding does not reach the reserve, the property may be passed in. The highest bidder generally has the first chance to negotiate.

If you negotiate after a pass-in and exchange the same day, there is still no cooling-off period.

Where buyers get caught

Bidding before the contract is reviewed.

After the hammer falls, it is too late to change the contract.

Bidding with pre-approval only.

You are bound on the day. If your loan is later refused, you are still bound to complete.

Leaving inspections until after the auction.

A bad report after the auction gives you no right to withdraw.

Not having the deposit ready.

The deposit is paid on the spot. A lower amount must be agreed before the auction.

Common questions