Auction Rules for Buying or Selling Property in NSW
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Buying a Property at Auction
Real estate agents love auctions. But an auction is often not the best option for either the vendor or the buyer.
A property auction is a public sale where a property is sold to the highest bidder once the reserve price is met. In NSW, auctions are governed by the Property and Stock Agents Act 2002 and the Conditions of Auction set by NSW Fair Trading.
These rules have been developed by Carolyn Deigan, Principal of CLS Legal, over many years of advising buyers and vendors through the NSW property market.
CLS Legal has been advising property buyers and vendors in NSW since 2010.
1. Get your solicitor to review the contract before auction day
Always have your solicitor review the contract and make any necessary preliminary enquiries before the auction. Once the hammer falls, you are bound — there is no cooling-off period for properties purchased at auction in NSW.
2. Do not bid until the property has reached the reserve
If you are bidding at auction, never bid until the property has reached the reserve price. Bids made before the reserve is reached do not bind the vendor to sell, and you risk being used to drive the price up for the benefit of other bidders.
3. Do not let the agent pressure you into an early bid
Do not let the agent convince you to put in a bid for the purpose of having the property passed in your favour. If the agent is pressing for a bid before the reserve is reached, tell them clearly that you will only bid when the property is on the market — and that they would be better off spending their time convincing the vendor to reduce the reserve.
4. If the property is passed in, identify yourself
If the property is passed in without being sold under the hammer, identify yourself to the agent as an interested buyer. The agent is obliged to submit all offers to the vendor, so you can negotiate from there.
5. Be cautious about dummy bidding
Do not assume that because dummy bidding has been legislated against in NSW that it does not happen. Until the property has reached the reserve, you cannot be certain that any other bid is genuine.
If you are unsure about your rights at auction, or suspect irregular conduct, contact CLS Legal on (02) 9279 0919 for immediate guidance.
6. Set a non-round maximum bid
Do not set a round-figure limit. If you are prepared to pay around $1,000,000 for a property, set your maximum at something like $1,025,000. This lets you top any competing buyer whose ceiling is exactly $1,000,000.
7. Bid decisively once the reserve is reached
Once the property has reached the reserve, bid strongly and quickly in smaller increments than the auctioneer had been accepting up to that point. If bids are well within your budget and strong, quick bids have not slowed down a competing bidder, increase the increment. You need to signal to other bidders that you are there to win.
8. Keep your strategy to yourself
Never tell anyone in the auction room which property you are bidding on or the amount you are prepared to bid. It may seem obvious, but many buyers have given their position away by talking too freely before or during the auction.
Understanding How Auctions Work — and Who They Benefit
Auctions are designed to make the agent’s job as easy as possible:
- The vendor pays for the agent’s advertising — advertising that often promotes the agent’s brand as much as the property itself.
- An auction can be used to create uncertainty and fear in the vendor, a process known as “conditioning,” to soften the vendor’s reserve expectations.
- The same pressure is applied to buyers, creating urgency and fear of missing out.
Knowing this going in puts you in a far stronger position.
Selling a Property at Auction
1. Only auction if your property has genuine broad appeal
Do not auction your property unless it has something unique about it — its location, character, scarcity, or demand — that will guarantee several genuinely interested, motivated buyers in the room. Without competitive interest, an auction rarely achieves the best price.
2. Private treaty often produces better negotiation
Buyers are generally more willing to negotiate genuinely in a private treaty sale than at auction. A property that is passed in without a bid, or with only a low offer, does affect how future buyers perceive its value and desirability.
3. Prepare a complete Contract for Sale
Make sure your Contract for Sale is complete and makes it easy for prospective buyers to make an informed decision. A well-prepared contract reduces delays and builds buyer confidence.
Consider including:
- A survey
- A Building Certificate if you have carried out work on the property
- Home Owners Warranty documentation if you have carried out residential building work in the past six years
- A building and pest report for a freestanding dwelling
- A Strata Inspection Report for a strata property
Note: If you have carried out any residential building work within the past six years, you are required to have a copy of the Home Owners Warranty attached to the contract. Failure to provide this can expose you to significant liability. Speak to CLS Legal on (02) 9279 0919 if you are unsure what documentation applies to your property.
Auction Rules
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Contact
- Suite 6.05, Level 6, 12 O'Connell Street, Sydney
- info@clslegal.com.au
- (02) 9279 0919
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Get Legal Advice Before You Bid
Whether you are buying or selling at auction, having the right legal advice before auction day can protect you from costly mistakes. CLS Legal assists NSW property clients with:
- Pre-auction contract review and preliminary enquiries
- Advice on your rights and obligations as a vendor or buyer
- Preparation and review of the Contract for Sale
- Post-auction negotiations and exchange
Buying or selling property is one of the largest financial decisions you will make. Getting the legal side right before auction day gives you the best chance of a clean, successful transaction.
Call (02) 9279 0919 or request a consultation.
