How to bid at auction without losing your head

Lots of people tell us auctions make them nervous, and that is a sensible reaction. You are making a huge decision, in public, in a few minutes. The good news is that most of an auction is won or lost before it starts.

Know what makes an auction different

In both Queensland and New South Wales, there is no cooling-off period at auction. If you are the winning bidder when the property sells, you sign the contract and pay the deposit that day. You generally cannot add conditions for finance or a building report.

So everything you would usually check after an offer needs to be finished before you raise your hand.

The rules are set by each state, and they are worth reading for yourself: buying at auction in Queensland and buying at auction in New South Wales.

Before auction day

1. Go to a few auctions first. Watch how the auctioneer works and how quickly it moves.
2. Have your finance properly in place. Ask your broker or lender whether your approval covers buying at auction, and whether the lender will accept this property. Check how much deposit you can pay on the day, and how.
3. Get the contract to your solicitor or conveyancer early. Ask about the settlement date, the deposit and any special conditions, and whether anything can be changed before the day.
4. Do your due diligence. Building and pest, title, flood, planning and body corporate records if it is a unit. Our guide on what to check before you commit goes through this. In Queensland, the seller's disclosure statement must be given or made available before the hammer falls, so ask for it early and read it, knowing it has limits.
5. Work out what it is worth. Look at what truly comparable homes have sold for recently.
6. Write down your walk away number. Decide it with everyone involved in the purchase, and before you are standing on the lawn. We set ours in writing with every client, because the number you choose on a calm day is usually better than the one you choose with your heart racing.

Reports and legal reviews cost money, and you may pay for them and not win. So save this for homes you are serious about.

Registering

You need to register with the auctioneer or agent before you bid. You will be asked for your details and identification, and given a bidder number or paddle. Bring photo ID, in its original form, and check the requirements with the agent beforehand.

If someone is bidding for you, such as a family member or a buyer's agent, they will need written authority. Ask the agent for the right form well before the day, and let your solicitor see it.

Sort out in advance whose name goes on the contract.

On the day

Get there early. Check for any late changes to the contract, and ask any last questions before bidding starts. The auctioneer will read the conditions. Listen to them.

Stand where you can see the other bidders. Make sure the auctioneer can see you clearly too.

Know what a vendor bid is. The seller may be allowed to have a bid made on their behalf, and this is where the states differ:

• In Queensland, vendor bids are allowed up to the reserve price and must be announced as vendor bids. Once the reserve is reached, any further seller bid is an illegal false bid.
• In New South Wales, only one vendor bid is allowed at a residential auction, and it must be announced as a vendor bid.

So a vendor bid tells you something: the bidding has not reached where the seller wants to be.

Bid clearly and calmly. Some people open early and some wait to see who else is in. What helps most is not letting the auctioneer's rhythm set your pace. You can take a moment, and you can offer a smaller rise than the one being asked for, though it may not be accepted.

Listen for "on the market". Once the reserve has been reached, or if there is no reserve, the property will sell to the highest bidder. The auctioneer can tell you whether there is a reserve, but not how much it is.

Watch your number. When the bidding reaches it, you have a decision to make, and you made it days ago.

If the home is passed in

If bidding stops below the reserve, the property is passed in, and negotiations usually begin with the highest bidder. Being the highest bidder often means getting the first chance to talk, which is one reason to stay involved near the end.

Be careful, because you may not have your protections back:

• In Queensland, a contract signed within two business days of an unsuccessful auction has no cooling-off, and registered bidders at that auction do not get it either.
• In New South Wales, there is no cooling-off if you exchange on the same day as a passed-in auction.

Ask your solicitor before you sign, including whether you can negotiate any conditions.

If you win

You will sign the contract and pay the deposit straight away. How much depends on the contract, and in New South Wales it is usually 10% unless agreed otherwise. Ask well before the day. Then call your broker, your solicitor and your insurer.

If you lose

It stings. But if you bid to your limit and someone paid more, you did it right.

If you would rather not stand on the lawn yourself, bidding for clients is a regular part of what we do. Have a chat with us, and we can talk through whether it would help on your next one.