How auctions work

Everything here must be done before auction day. No exceptions.

1. 1

   Finance pre-approval

   A written pre-approval letter with a confirmed borrowing amount. Not just a chat. Pre-approval typically lasts about 90 days (check your letter for the expiry). It is not a guarantee of final approval. Your lender will still need to value the property after you win. If your finance falls through after auction, you lose your deposit (typically 10% of the purchase price) and the vendor can sue you for further losses. This is the biggest financial risk at auction.

2. 2

   Building and pest inspection

   Costs $400 to $700. You may lose this money if you do not buy, but it is essential. Some agents offer a shared report. Consider getting your own independent one.

3. 3

   Strata report (if applicable)

   If buying a unit, townhouse, or anything with a body corporate, get a strata report ($200 to $350). It reveals the sinking fund balance, special levies, insurance, and any building disputes. Without it, you could be locked into tens of thousands in unexpected costs.

4. 4

   Conveyancer reviews the contract

   The contract of sale (and vendor statement, such as the Section 32 in Victoria) must be available before auction. Aim to have your conveyancer review it at least two weeks before. They check title, easements, covenants, planning overlays, and anything unusual. Disclosure requirements vary by state.

5. 5

   Deposit ready

   Typically 10% of the purchase price, as specified in the contract. This can sometimes be negotiated before the auction. Confirm the amount and accepted payment methods (bank cheque, direct transfer to trust account) with the agent beforehand.

6. 6

   Research comparable sales

   Check what similar properties have sold for recently in the area. Your maximum bid should be the lower of what you can afford and what the property is worth. Your conveyancer, a buyer's agent, or free tools like sold price databases can help.

7. 7

   Arrange building insurance from auction day

   Risk in the property passes to you when the contract is signed. At auction, that is the day you win. If the house burns down between auction and settlement, you are liable. Arrange building insurance to start from auction day, not settlement day. Call your insurer or go online the week before. This is not optional.

8. 8

   Register to bid

   Bidder registration is legally required in all Australian states and territories. You will need photo ID (driver's licence or passport). Arrive at least 30 minutes early to register.

This is the part where auctions get people into trouble. The adrenaline is real. You have been searching for months. This place feels right. Someone else wants it too.

Your maximum bid is not the same as your pre-approval amount. Here is how to calculate it:

Decide this number before you walk in. Do not change it during the auction. Not by $5,000. Not by $1,000. The auction floor is not the place to rethink a number you set with a clear head. Your comfortable limit should be below the absolute maximum your lender will approve.

Let them have it. You are not here to win an auction. You are here to buy the right home.

1. 1

   Watch 2 to 3 auctions first

   As an observer, not a bidder. The single best thing you can do for your nerves.

2. 2

   Bid confidently early

   Open at a credible figure below your estimate of the reserve. Quick bids signal strength and discourage hesitant competitors.

3. 3

   Use odd increments

   Instead of $10k jumps, try $7k or $3k. It breaks the auctioneer's rhythm. Note: the auctioneer can refuse bids they consider too small.

4. 4

   Slow down near your limit

   Drop to $1k or $500 increments. Signals you are close to your ceiling.

5. 5

   Ask: “Is it on the market?”

   In VIC, the auctioneer must announce when the reserve is reached. In other states, they should not mislead you. If it is not on the market, the vendor could still withdraw.

6. 6

   You can nominate someone to bid

   A friend, family member, or buyer's agent can bid on your behalf. Useful if you are anxious or emotional. Let the auctioneer know during registration.

7. 7

   Agree on a plan with your partner

   Who bids? When do you stop? Do not discuss this at the auction. Settle it before you leave the house.

8. 8

   Stay for the whole auction

   Even if it passes in. The highest bidder gets first right to negotiate. The second-highest bidder can negotiate if the first walks away.

A vendor bid is placed by the auctioneer on behalf of the seller to advance the price toward the reserve. It is not a real buyer bid. Vendor bids can only be made while the property is below reserve, and each one must be clearly announced.

If you hear “vendor bid,” no real buyer has bid at that level. You are not competing against anyone yet. That is useful information.

Settlement typically takes 30 to 90 days (as specified in the contract). During this time, your pre-approval must convert to formal (unconditional) loan approval.

The highest bidder gets first right to negotiate privately with the vendor and agent. You typically have 15 to 30 minutes before the agent opens it up to other interested parties. The second-highest bidder can also negotiate if the first walks away.

You can submit a written offer before auction day. If the vendor accepts, the auction is cancelled and you sign a contract. The agent is legally obligated to present all offers to the vendor.

Private sales only. Auctions have no cooling-off period in any state. Some states also exclude sales made shortly before or after an auction.

In QLD, cooling-off can be waived by signing a Form 32a. In NSW, a solicitor’s certificate (s 66W) can waive cooling-off. These periods and penalties may change. Confirm the current rules with your conveyancer.

Dummy bidding is when someone bids with no intention of buying, just to push the price up. It is illegal in every Australian state and territory. Significant penalties apply, varying by state and regularly updated.

Mandatory bidder registration (photo ID required) is the main safeguard. If you suspect dummy bidding, report it to your state’s fair trading or consumer affairs body.

1. 1

   Bidding without formal finance pre-approval. If you win and your loan falls through, you may lose your deposit and the vendor can sue for further damages.

2. 2

   Skipping the building or pest inspection because “it looked fine.”

3. 3

   Not having your conveyancer review the contract at least two weeks before auction day.

4. 4

   Not getting a strata report for a unit or townhouse. Special levies of $20k to $50k can be buried in the minutes.

5. 5

   Going above your limit because “it was only another $5,000.” That $5,000 becomes $15,000+ with interest over 30 years.

6. 6

   Not attending any auctions as practice first.

7. 7

   Confusing pre-approval with formal approval. Your lender can still decline after their valuation.

8. 8

   Forgetting to include stamp duty, LMI, and other costs when calculating your maximum bid.

9. 9

   Not arranging insurance from auction day. Risk in the property passes when the contract is signed.

10. 10

    Not researching comparable sales. You might be bidding more than the property is worth.