How House Auctions Work in Australia
House auctions have become a popular way of buying and selling property in Australia. Unlike the traditional method of buyers and sellers negotiating prices, auctions involve bidding in a public forum. This can be exciting, nerve-wracking, and fast-paced, with the outcome determined in a matter of minutes. For those unfamiliar with the auction process, it can be confusing.
In this article, we will explore how house auctions work in Australia, including the roles of the auctioneer, the seller, and the buyer, as well as some tips for those considering buying or selling at auctions.
1. Understanding the Auction Process: How Do House Auctions Work?
For many first-time buyers, the auction process can seem confusing and overwhelming. But knowing what to expect can help reduce anxiety and improve your chances of success. Here is the breakdown of how house auctions work:
- The auction is facilitated by an auctioneer hired by the vendor or their real estate agent.
- Registration with the auctioneer is necessary to participate in the auction.
- The auctioneer assigns bidders a unique bidder’s number.
- The auctioneer oversees the bidding process as buyers compete by increasing their offers.
- The property is sold to the highest bidder.
- The seller sets a reserve price, the minimum price they are willing to sell the property.
- If the reserve price is met, the property is considered “on the market” and sold to the highest bidder.
- If the reserve price is not reached, the property is either “passed in” or “withdrawn from auction.”
- The highest bidder, in this case, has the opportunity to negotiate a private sale with the seller.
- The successful bidder must immediately deposit 5% to 10% of the purchase price.
- The deposit is usually paid by cheque.
- The remaining balance of the purchase price is paid at settlement.
- Settlement occurs when the buyer and seller have signed the contract and all relevant payments have been made.
Property auction terms
When participating in a property auction, it’s essential to familiarise yourself with various terms and concepts used in the auction process. Here are some standard terms you may come across:
- Reserve Price Auctions: The most common type of auction in Australia, reserve price auctions have a predetermined minimum price set by the seller. If the highest bid doesn’t meet or exceed the reserve price, the vendor can reject the offer or negotiate with the highest bidder.
- Bids: Bidders compete against each other to buy the property, with the auctioneer overseeing the proceedings. Bids can be made by raising a hand, calling out a figure, or using prearranged signals. Each bid must be higher than the previous one, with the auctioneer determining the increments.
- Vendor Does Not Arrive at Auction: If the vendor fails to arrive, the auction may be postponed or cancelled. If the property is sold on a bank’s behalf, a representative will typically be present to oversee the proceedings.
- Police Auctions QLD: These are unique auctions where the Queensland Police sell unclaimed, forfeited, or seized properties. They can be an opportunity to secure a property at a lower price, but it’s essential to research and inspect the property thoroughly before bidding.
- Auctioneer’s Hammer: The auctioneer will use a hammer (or similar instrument) to indicate the acceptance of the highest bid. This action signifies the sale of the property to the winning bidder.
- Vendor Bid: In some auctions, the seller (vendor) may bid on their property. This bid is known as a vendor bid and is used to encourage other bidders to increase their offers.
- Bidder Guide: The bidder guide is a document provided before the auction, which offers essential information regarding the registration process, required documentation, auction rules and regulations, and the privacy laws governing the auction.
- Passed In: When the bids at an auction do not meet the reserve price set by the seller, the auction is considered “passed in.” In such cases, the highest bidder can negotiate with the seller to reach a mutually agreed-upon sale.
2. Know Your Financial Limits: How to Buy a House at Auction with a Mortgage
Before attending an auction, you must secure pre-approval for a home loan. This will give you a clear understanding of your budget and ensure you can bid confidently within your financial limits.
- Contact a mortgage broker: Odin Mortgage can help you find the best loan product for your situation, especially if you’re an Australian expat or foreign buyer. Contact us today.
- Deposit and settlement: Be prepared to pay a deposit (usually 10% of the purchase price) on the auction day if you’re the successful bidder. Ensure you’re aware of the settlement period, which is typically 30-90 days.
3. No Cash? No Problem: How to Buy a House at Auction without Cash
If you don’t have the cash required for a deposit, you may still be able to participate in an auction by obtaining a deposit bond. This is a guarantee that you’ll pay the deposit if you’re the successful bidder.
Speak with our mortgage broker about the suitability of a deposit bond for your situation.
Get a free Australian mortgage assessment today.
4. Why Auction a House Instead of Selling? The Benefits of Auctions for Sellers
Auctions offer several advantages to sellers, including:
- Competitive bidding: Auctions can generate higher sale prices due to buyer competition.
- Fixed timeline: Auctions provide a definitive date for the sale, allowing sellers to plan accordingly.
- Unconditional contracts: Auction sales typically don’t have cooling-off periods or subject-to-finance clauses, giving sellers certainty.
5. When Your Home Is on the Line: My House Is Being Auctioned - What Can I Do?
If your home is being auctioned due to financial difficulties or foreclosure, there are a few steps you can take to protect your interests:
- Communicate with your lender: Discuss your situation with your lender to explore possible options, such as refinancing, repayment plans, or loan modifications.
- Seek legal advice: Consult with a legal professional to understand your rights and obligations and explore any available alternatives to the auction process.
- Sell before the auction: Consider selling your home before the auction date to achieve a higher price and avoid the stigma associated with foreclosure auctions.
6. Time to Move: If Your House Is Sold at Auction, How Long Do You Have to Move?
After a successful auction, the settlement period begins, typically lasting 30-90 days. This is when you must vacate the property and finalise all legal and financial aspects of the sale.
It’s essential to know the settlement period and plan your move accordingly.
7. Embracing Technology: How Do Online Auctions Work for Houses?
Online auctions offer a convenient alternative to traditional, in-person auctions, particularly for expats and foreign buyers.
Here’s how they work:
- Registration: Prospective bidders must register with the online auction platform, providing identification and proof of financial capacity.
- Bidding: Bidders can place bids online through a live-streamed auction event or a timed bidding process.
- Winning bidder: If you’re the highest bidder at the end of the auction, you’ll receive a notification, and the auctioneer will contact you to finalise the purchase.
Helping You With The Auction Process
Understanding how house auctions work in Australia is crucial for expatriates living overseas and foreign buyers looking to secure a property. By following these essential tips and familiarising yourself with the auction process, you’ll be well-equipped to navigate the complexities of the property market and increase your chances of success.
At Odin Mortgage, our team of experienced mortgage brokers can assist you in obtaining the necessary financing for your purchase and guide you through the house auction process from start to finish.
Don’t miss out on the opportunity to secure your dream home at auction – reach out to Odin Mortgage now for a free assessment.
Get a free Australian mortgage assessment today.
Frequently asked questions
Yes, first-time buyers can purchase properties at auction. However, it’s essential to understand the auction process, secure pre-approval for a home loan, and research the property thoroughly before bidding.
Inspect the property, research the local market, understand the auction terms and conditions, and set a clear budget before participating in an auction. Consult with professionals, such as real estate agents, mortgage brokers, and solicitors, to guide you through the process.
Upcoming auctions can be found on real estate websites, local newspapers, and through real estate agents. Keep an eye on these sources to stay updated on upcoming auction opportunities.
If a house doesn’t sell at auction, the seller can negotiate with the highest bidder or withdraw the property. They may also relist the property for private sale or schedule another auction.